US SMALL/MIDCAPS-Stocks enter correction; commodities weigh

* Aluminum producers fall as production bounces

* Hot Topic Inc outlook disappoints

* S&P MidCap 400 down 3 pct, S&P SmallCap 600 down 3.7 pct

By Edward Krudy

NEW YORK, May 20 (BestGrowthStock) – Mid and small cap stocks fell
sharply on Thursday, entering a downward corrective phase, with
shares in aluminum producers coming under pressure as prices of
the industrial metal slumped due to oversupply concerns.

Declines in aluminum producers mirrored other natural
resource stocks as commodities tumbled on fears of economic
weakness. Shares in Century Aluminum Co (CENX.O: ) fell nearly 8
percent and Kaiser Aluminum Corp (KALU.O: ) fell 5 percent.

There were new troublesome signs in some retailers as Hot
Topic Inc (HOTT.O: ) forecast a second quarter loss that may be
wider than the market had expected, sending shares in the teen
retailer down 9 percent. For more on the story, see
[ID:nSGE64J0KC]

“If there is a concern about financing tightening up or the
economy being less strong it probably would effect small cap
stocks more,” said said Doug Cannon, president and chief
investment officer at Texas First Capital Management Co in
Houston.

The S&P MidCap 400 index (.MID: ) fell 3 percent while the
S&P SmallCap 600 index (.SML: ) lost 3.7 percent. In comparison,
the benchmark S&P 500 (.SPX: ) dropped 2.7 percent.

The S&P 500 has now entered a technical correction falling
more than 10 percent since its April 23 closing high and has
fallen below its 200 day moving average, a bearish signal for
markets.

Both the S&P MidCap 400 and the S&P SmallCap 600 are still
above their 200-day moving averages but have already passed
through their 50-day moving average and have been falling fast.
Both have dipped around 12 percent since April 23.

“Small caps have been signicantly ahead of large caps this
year, as of today they were 8 percent ahead of large caps,
which is a pretty big gap and so I would look for a correction
to hit those more,” said Cannon.

Commodity linked stocks were among the worst hit. Goldman
Sachs removed Alpha Natural Resources (ANR.N: ) from its
conviction buy list on concerns over conditions in European
credit markets and monetary tightening in China. The shares
fell 2.1 percent to $34.77.

“Near term volatility could remain high as investor
appetite for risk fluctuates with additional data points out of
Europe and China,” said Goldman Sachs in a research note.

Back in the retail sector, women’s apparel chain New York &
Co Inc (NWY.N: ) posted a first-quarter loss and forecast a
bigger loss for the second quarter, sending its shares down
19.6 percent to $4.26. [ID:nSGE64J0HR]

New York & Co and Hot Topic are the latest in a series of
retailers that have disappointed at a time when investors were
betting on a stronger U.S. recovery. The S&P small cap consumer
discretionary index (.6GSPD: ) fell 2.9 percent, while its mid
cap version (.4GSPD: ) fell 1.4 percent.

There were some bright spots in the form of corporate
earnings.

Shares of Advance Auto Parts Inc (AAP.N: ) rose 6.7 percent
to $49.17 a day after the auto parts retailer posted strong
first-quarter results and reaffirmed its full-year operating
earnings outlook. [ID:nSGE64J0JM]

Casual Male Retail Group Inc (CMRG.O: ) reported a quarterly
profit that beat expectations as it boosted margins through
tight cost controls, and the men’s apparel retailer raised its
earnings view for the current financial year. The shares rose
2.3 percent to $3.62. [ID:nSGE64J0GX]

Global aluminum production rose to a fresh record in April,
according to the latest data, risking adding to the current
market surplus and a time when the strength of demand is in
doubt. The price of aluminum fell to its lowest in since late
November.

Stock Investing

(Reporting by Edward Krudy; Editing by xx)

US SMALL/MIDCAPS-Stocks enter correction; commodities weigh