US SMALL/MIDCAPS-Green Mountain lifts consumer staples

NEW YORK, March 20 Wed Mar 21, 2012 5:07pm EDT

NEW YORK, March 20 (Reuters) - Green Mountain shares boosted the mid-cap consumer staples sector on Wednesday, with the company moving to defend its dominant position in the competitive single-cup coffee market.

Green Mountain Coffee Roasters Inc said Starbucks Corp-branded coffee will be available on its new line of brewers. The move eased concerns the company would end its relationship with Starbucks, which has announced plans to launch its own single-cup coffee and espresso machine.

Green Mountain's shares jumped 10 percent to $55.79. The move helped to lift the S&P mid-cap consumer discretionary sector 1.5 percent, a stand out in an otherwise flat market.

Consumer staple stocks are trailing the overall market this year, with economically sensitive equities in the consumer discretionary and materials sectors generally doing better, a pattern consistent with an improving economic outlook.

So far this year the mid-cap consumer staples sector is up about 9 percent compared to 14 percent for the S&P 400 mid-cap sector and 17 percent for the mid-cap consumer discretionary sector.

Bank of America Merrill Lynch said Wednesday that optimism over an improving economy may lift small-caps and mid-caps to new highs this year, a factor likely to favor cyclical sectors.

But they said expected slower economic growth in the second half of the year is clouding the outlook.

"We may reach new highs in small caps, but the question of sustainability weighs on our return forecast in 2012," the analysts said in a research note published on Wednesday.

The overall market was lackluster. The S&P MidCap 400 index fell 0.1 percent, while the S&P SmallCap 600 index rose 0.04 percent. In comparison, the benchmark S&P 500 fell 0.2 percent.

Elsewhere, shares of Ruby Tuesday Inc rose 10.3 percent to $8.80. Raymond James raised its rating on the company to "outperform," saying the dining chain will benefit from favorable weather and advertising in the current quarter, while recent cost-cutting efforts will help boost its earnings.

On Assignment Inc shares rose by as much as a third on Wednesday after the staffing provider said it would buy privately held Apex Systems Inc for $600 million. The stock gained 26.6 pct to $17.32.

Credit rating agency Moody's Investor Service placed the bond insurer Assured Guaranty Ltd's debt ratings under review for a possible downgrade. The shares lost 13.4 percent to $16.30.