Tag - Okn

Small-cap stocks tumbled once again Thursday, unable to shrug off fears of an economic recession amid a global credit contagion. For the second consecutive session, the market also was unable to gain bullish traction on a promising morning rally. The Russell 2000 (NYSE:IWM) shed 47.36, or 8.67%, to 499.20, which marked the lowest daily close since Sept. 30, 2003. For the year, the Russell is now down 34.8%, while the Dow is off 35.3% and the S&P 500 is down 37.4%. The Russell has now closed lower seven consecutive sessions, and 9 of 10. In those 10 days, small caps have collapsed 29.2% in one of the most relentless and powerful bearish displays in market history.

Small-cap stocks continue to under perform the large-cap products through the teeth of this collapse. Just three weeks ago, the Russell 2000 was only down 1.6% for the year, while the Dow was down 14.1%, so the percentage loss spread between the two favored the Russell by 12.5%. Now, the difference is less than 1%. Clearly, the market has made a powerful statement that small caps are seen as more risky during a runaway bear market collapse. Small caps led the way up on the bull market move and they have been leading the way down the last 14 days of trading.

Normally, you can track money flow along asset lines. For example, the recent stock market crash has often sent money zinging into Treasury products, or gold funds for safe-haven status. Just how deep did the selling mentality run today? Stocks were down, Treasuries were down, crude oil was down, the CRB was down, even gold was down. There were no safe asset classes upon which to turn. It certainly was one of the few times one would ever see a huge decline in stocks along with a decline in Treasuries and commodities.

Once again, the market was unable to sustain buying interest despite more “good” news on the interest rate front. Overnight, several Asian central banks joined in on the rate cut frenzy, with Taiwan, South Korea and Hong Kong joining a move that saw coordinated central bank moves from the U.S., England, Eurozone, Sweden, Canada, Switzerland and even China the previous day. It didn’t save the market . . .

Small-cap stocks shot higher on the opening, drafting along with a strong tone in tech stocks following solid earnings from bellwether firm International Business Machines Corp. (NYSE:IBM), which provided a boost to the entire tech arena. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was up 8.80, or 1.61%, at 555.37.

IBM shares were up about 3.7% shortly after the open, while the tech-laden Nasdaq 100 was up 2.3%. Small-cap stocks have been more closely tracking tech stocks of late, not necessarily because the Russell is filled with tech stocks, but because if spending frees up to invest in technology, it would also be a good sign for small businesses.

After several head-fake intraday rallies this week, it will be interesting to see if the stock market can finally grab a bullish open and extend the move rather than see it all slip away. On the news front, several countries in Asia announced rate cuts overnight, joining the coordinated cuts produced Wednesday morning by central bankers in the United States, Eurozone, Switzerland, Sweden and China. European stocks were on the mend this morning after getting drubbed in recent days, helped not only by the rate cuts and by a 50-billion pound infusion into the banking sector, but also by news that the ECB would provide low-rate loans to banks. On the U.S. front, the Treasury Department said they were considering taking an ownership stake in several key U.S. banks, in yet another form of capital infusion designed to inspire confidence on the banking front and perhaps help thaw frozen inter-bank lending activity. Government officials in Italy this morning announced plans to buy up preferred stock in select banks.

Ahead of the opening today, weekly unemployment claims came in just above the forecast with a headline figure of 478,000, compared with the forecast of 475,000. In addition, last week’s figure was revised up slightly to 498,000. Continuing claims were at
3.6 million, which was the highest point since June 2003. In addition, the four-week moving average for claims was still the highest since October 2001. These are sobering figures on the jobless front, but they were basically in line . . .