June 18, 2012 / 8:51 PM / in 7 years

US SMALL/MIDCAPS-Stocks mixed as bearish outlook grows

NEW YORK, June 18 (Reuters) - Mid- and small-cap stocks rose on Monday, but a survey of fund managers showed highly split views about the outlook for the sector as well as a rise in bearishness that could be an early warning signal for the stock market next quarter.

The survey by Credit Suisse showed that although there was an almost even split over the direction of smaller cap stocks over the next three months, the level of bullishness has nearly fallen back to the low seen in the second quarter of 2011. Meanwhile, the level of bearishness has nearly risen to highs seen in the first and second quarters of last year.

As Credit Suisse noted, those views last year were prescient, coming ahead of heavy market losses.

“Though we continue to think that the current period of distress in equity markets is presenting a buying opportunity, this piece of our survey results does cast some doubt in our minds as to whether the Russell 2000 (small-cap index) has seen its lows for the year,” wrote Credit Suisse.

The survey was based on answers from 122 small and mid cap focused buy side and primarily long only investors on Credit Suisse’s client list.

There is plenty of scope for the bearish scenario. Trading was volatile on Monday after election results in Greece staved off immediate fears of Greece exiting the euro zone but did little to clam concerns about Europe’s debt crisis spreading.

On Monday the S&P MidCap 400 index gained 0.84 percent while the S&P SmallCap 600 index added 0.11 percent. In comparison, the benchmark S&P 500 rose 0.14 percent and the Russell 2000 index gained 0.16 percent.

Steel companies have been hit by the uncertain economic outlook. On Monday, AK Steel Holding Corp fell 2.8 percent to $5.17. The company forecast a second-quarter profit that fell short of analysts’ expectations and said it could not predict full-year earnings because of volatile market conditions and a drop in steel prices.

Body Central Corp, the woman’s retailer, slid almost 50 percent to $8.22 after it cut its second-quarter outlook as the company resorted to heavy discounting to clear out piled-up inventory.

On the upside, Ramtron International Corp rose 9.5 percent to $2.66. The chipmaker turned down rival Cypress Semiconductor Corp’s offer to buy the company for about $87.6 million, and said it would explore other options including a sale.

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