Tag - BBOX

Small-cap stocks opened lower and remained under pressure all day Friday, unable to shake off concerns about surging energy prices. The Russell 2000 (NYSE:IWM) shed 8.91, or 1.22%, to 724.10. For the week, small caps tumbled 17.07, the second-largest one-week point decline since the market bottomed early in early March.

Equities investors truly became fixated this week on the crude oil market, and with good reason. Earlier this week, crude oil futures charged past $135 dollars a barrel, and pump prices in some U.S. metropolitan areas pushed beyond $4 dollars a gallon, a sobering psychological benchmark in front of the summer holiday and driving season. Crude oil gained about 1% in value Friday, which kept equity bulls in hibernation.

Not only does the relentless rise in energy prices blunt consumer spending power, but it also raises input costs for many businesses and tightens margins. The airline industry is the current poster child for that vicious cycle, and many airline stocks were hammered again this week. The AMEX Airline Index closed out the week at new lows, and is trading just above $18, compared with a peak in January 2007 above $66. A powerful glimpse of that slide can be seen in small-cap stock US Airways (NYSE:LCC), which tumbled 18% Friday and is now a $4.25 stock, down from $16 in February, and a peak of almost $63 just a couple of years ago.

This morning’s existing home sales report appeared to serve up some needed good news when the headline figure came in at 4.89 million units sold, which topped the median forecast for a rise of 4.85 million units. However, the rosy headline figure came with hidden thorns, as the inventory of homes for sale swelled to record levels. “The stark inventory situation implies that additional price declines cannot be ruled . . .

Small-cap shares opened flat and then edged higher, underpinned by news of a big-cap energy acquisition, a firm tone in the dollar, and ideas that Wednesday’s post-FOMC minutes slide was overdone. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was up 2.46, or 0.34%, at 729.56.

News that NRG Energy (NYSE:NRG) tendered a bid to buy Calpine Corp. (NYSE:CPN) for a stock deal worth $11 billion injected some enthusiasm back into the M&A picture this morning, and played a supportive role in market psychology. Calpine shares were up 7.1% shortly after the opening on the news. If there are large-cap merger deals to be done, then there are certainly bargains to be had within small caps.

There are several apparel retailers coming out with earnings today, which could ripple through the markets. Children’s Place Retail Stores (Nasdaq:PLCE), which is right on the upper end of small-cap market capitalization, reported solid quarterly results this morning and the stock was up 6.2% right after the open.

Large caps in the news early today include Pfizer Inc. (NYSE:PFE), which tumbled 1% on the opening on news that its anti-smoking drug had serious side effects. Also, NetApp Inc. (Nasdaq:NTAP) tumbled 5.7% as the company’s forward projections disappointed.

Crude oil prices shot above $135 dollars a barrel overnight, and continue to be a drag on the both the consumer pocketbook and the cost structure for corporations (just ask the battered airline industry). Goldman Sachs technical analyst Kevin Edgeley said in a research report overnight that crude oil momentum and trend strength are pointing higher, and that there is a long-term channel extension target for crude at $142.90. If crude oil were to close lower today, and well off that $135 record overnight peak, it could generate a topping reversal on charts, and is worth . . .