Morning MoneyBeat is the Journal’s pre-market primer packed with market updates, insights and must-read news links. Send us tips, suggestions and complaints: steven.russolillo@wsj.com
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MARKET SNAP: At 6:05 a.m. ET, S&P 500 futures down 0.04%. 10-Year Treasury yield lower at 2.58%. Nymex up 90 cents at $100.39. Gold 0.2% higher at $1311. In Europe, FTSE 100 down 0.4%, DAX down 0.1% and CAC 40 down 0.1%. In Asia, Nikkei 225 down 2.9% and Hang Seng down 1.1%.
WATCH FOR: First-Quarter Productivity (8:30 a.m. Eastern Time): seen -1.1%; previously +1.8%. First-Quarter Unit Labor Costs (8:30): seen +2.8%; previously -0.1%. March Consumer Credit (3:00): seen +$16.1 B; previously $16.5B. Allergan(AGN), AOL(AOL), Avis Budget(CAR), CenturyLink, Chesapeake Energy(CHK), CF Industries(CF), Devon Energy(DVN), Duke Energy(DUK), Dynergy, Hertz, Humana, Keurig Green Mountain(GMCR), Lamar Advertising(LAMR), Molson Coors/Miller, Mondelez, Prudential, SolarCity(SCTY), Sotheby's(BID), Tesla Motors(TSLA), Transocean and 21st Century Fox are among companies scheduled to report quarterly results.
THE BREAKFAST BRIEFINGSmall-cap stocks have lost their mojo, and that doesn't bode well for the broader market.
In recent weeks, investors have pulled back from the riskier corners of the stock market, and small-company stocks—which are typically more volatile than their larger brethren—have felt the brunt of the selling. Some market watchers see this as a worrisome development, fretting the broad market, at best, is stuck in neutral, or perhaps more concerning, could slump sharply if small caps don't regain their footing.
The small-cap Russell 2000 closed below its 200-day moving average on Tuesday for the first time since November 2012, snapping a streak of 363 trading days above the closely watched technical indicator, according to Bespoke Investment Group. That marked the index’s third longest streak dating back to its inception in 1978. The two prior streaks came in the mid-1990s.
Chart watchers use the 200-day moving average as a proxy to gauge a market's long-term trend. When a stock or index trades above the 200-day, it is in an uptrend. But when it falls below, it is in a downtrend that could lead to more declines.
In 11 prior instances when the Russell snapped a lengthy streak above its 200-day average, the index averaged a 1.1% drop over the following three months, according to Bespoke.
The Russell 2000 dropped 1.6% Tuesday to 1108.01. It's down 7.1% from the record high hit in March. As Dan Greenhaus of BTIG points out, about half of the Russell’s components are down 20% or more from their respective 52-high weeks. Some 80% of them are down at least 10% from their respective highs, showing how the declines across small-cap stocks have been broad and deep this year.
The broad S&P 500, meanwhile, remains stuck in a broad trading range. It finished Tuesday at 1867, up 1.1% for the year and 1.2% below its record high. Over the past several months it has traded roughly between 1820 and 1890.
"If small caps can finally right their collective ship, then the S&P 500 could very well have the support it needs to break through 1900,” said Frank Cappelleri, a sales trader at brokerage firm Instinet.
This year’s stagnant action is a far cry from 2013, when the S&P 500 surged 30% to record levels. The Russell 2000 fared even better last year, up 37%. But 2014 has been a different story, with the Russell down 4.8% on a year-to-date basis.
Until small caps start rallying again, be prepared for the market to continue to hover around current levels.
Morning MoneyBeat Daily Factoid: On this day in 1946, Masaru Ibuka formed a company out of his radio repair shop in Tokyo, calling it The Tokyo Telecommunications Engineering Corporation. It's better known today as Sony(6758.TO).
-By Steven Russolillo; follow him on Twitter @srussolillo.
STOCKS TO WATCHTesla Motors is projected to report first-quarter earnings of 8 cents a share, according to a consensus survey by FactSet. "We expect Tesla to meet deliveries guidance of 6,400 units, with potential first-quarter 2014 unit upside unlikely [to] exceed more than 100-200 units," analyst Craig Irwin at Wedbush said in a report released on Monday.
Keurig Green Mountain is forecast to post fiscal second-quarter earnings of 95 cents a share.
Allergan is expected to post first-quarter earnings of $1.13 a share. Valeant Pharmaceuticals International(VRX.T) teamed up with Bill Ackman's Pershing Square Capital Management to make a takeover bid for Allergan. In response, Allergan adopted a poison pill to fight off the unsolicited bid.
AOL is likely to report earnings of 45 cents a share in the first quarter.
MUST READS (LINKS)Alibaba Files IPO in the U.S.: “Chinese e-commerce company Alibaba filed plans to offer its shares in the U.S., valuing itself at more than $100 billion, and confirming its size and scale ahead of what is expected to be one of the largest stock listings in history.”
Alibaba's IPO Filing: Everything You Need to Know: “Alibaba Group Holding Ltd. has lifted the curtain on its plans to go public. MoneyBeat pored over the details.”
What Buyers of Alibaba Stock Should Consider: “Alibaba Group Holding Ltd. on Tuesday disclosed long-awaited plans for what could be the world’s largest initial public offering. Now investors must decide whether to buy the stock.”
As Lockup Expires, Twitter Holders Fly the Coop: “Twitter Inc.’s early investors and employees got their first, big chance to sell their stock on Tuesday since the social-media company went public in November. And they took it. A surge in selling pummeled the stock, sending it down 18% and wiping out $4 billion of market value.”
Heard on the Street: The Real Cost of Twitter’s Nose Dive: “Paying workers with shares may not involve cash. But as Twitter Inc. investors are learning, it comes at a real cost.”
HSBC Posts Fall in First-Quarter Profit: “HSBC Holdings on Wednesday reported a fall in first-quarter net profit to $5.2 billion, hurt by a steep decline in earnings from its Asian operations and investment bank.”
Thai Court Orders Ouster of Premier: “Thailand’s Constitutional Court on Wednesday ordered that Prime Minister Yingluck Shinawatra be removed from office immediately for abusing her power when she demoted the country’s top security adviser.”
Regulators Expand Bank-Hiring Probe: “U.S. regulators have expanded their investigation into large banks’ hiring practices in Asia, seeking more information from at least five U.S. and European firms, according to people close to the probe.”
Big Retailers Find it Hard Shopping for a CEO: “Target isn’t the only U.S. retailer looking for a new boss—and new ideas. J.C. Penney(JCP), American Eagle Outfitters(AEO) and a handful of others are also on the hunt for chief executives.”
Sotheby’s, Dan Loeb Begin to Make Nice: “Activist investor Daniel Loeb, one day after announcing a truce with Sotheby’s, kicked off a charm offensive, saying he was “excited” to join the auction house’s board and intends to stand by its chairman and CEO.”
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