A bad day for Russell 2000
The Russell 2000 (NYSE: IWM) fell today as economic worries and concerns about the U.S. housing sector took to the forefront. The small-cap index dropped 14.87 points, or 1.97%, to 739.06. The Dow Jones Industrial Average (INDU) let go 172.65 points, or 1.29%, to 13,167.20.
On a year-to-date basis, the Russell 2000 is down 6.14%, while the Dow has gained 5.55% and the S&P 500 has advanced 2.07%.
The U.S. housing sector continues to agonize financial institutions with bets on securities backed by subprime mortgages and will probably continue reporting losses; the overall economic situation is not rosy.
That’s what we found out today, so it’s no doubt the bears dominated trading.
Stocks fell out of the opening on news that Citigroup Inc. (NYSE: C) announced has lowered its ratings on nine U.S. banks. The New York-based company, the largest U.S. bank, said that it expects those banks to see more losses stemming from the purchase of securities backed by subprime mortgage loans.
Home prices began to stagnate in the second half of 2006, leading to a wave of foreclosures and delinquencies as cash-strapped borrowers were unable to pay their mortgages. The squeeze was hardest on those with poor credit histories who took advantage of lax lending standards and secured loans that quickly overwhelmed their ability to make payments.
The housing situation is not getting any better.
The National Association of Homebuilders reported that builder confidence in the market for new single-family homes remained at a record low for a third consecutive month in December. The NAHB/Wells Fargo Housing Market Index stayed at 19 this month, its lowest level since the measure was introduced in 1985.
Readings below 50 indicate that more builders view market conditions as poor rather than favorable.
“Builders continue to look for signs of improvement in the ongoing mortgage market crisis that is weighing on housing and the overall economy,” said NAHB President Brian Catalde in a statement.
Builders are preparing for the slow winter months and waiting until market conditions can support an increase in building actibity — probably in the second half of 2008, according to David Seiders, the organization’s chief economist.
Former Federal Reserve Chairman Alan Greenspan added to the sour mood with comments on Sunday that the U.S. economy is showing early signs of stagflation, which is a combination of higher prices and slow-to-no growth.
With all that, it’s not surprising that investors, and the bulls, paid little attention to a report from the U.S. Commerce Department that third-quarter current account deficit fell to $178.5 billion from a downwardly revised $188.9 billion in the second quarter. Economists were expecting a smaller decline to $184 billion.
Here are the day’s biggest percentage gainers and losers, along with top volume leaders, among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• IBT Bancorp, Inc. (IRW), up 45% to $27.80 on news that it will be acquired by S&T Bancorp Inc. (SBTA).
• Cost Plus, Inc. (CPWM), up 16% to $5.10 on news a Danish entrepreneur bought a stake in the company.
• KongZhong Corp. (KONG), up 16% to $6.29 on news of improved fourth-quarter revenue guidance.
Biggest percentage losers:
• Esmark Inc. (ESMK), down 22% to $9.28 on news that it will not be able to purchase a steel mill from industry giant Mittal Steel Co.
• American Dairy, Inc. (ADY) down 20% to $11.15 on news of a negative article about the company.
• ACI Worldwide Inc. (ACIW), down 17% to $19.63 on news of a decline in fourth-quarter revenue.
Volume leaders:
• Force Protection, Inc. (FRPT) 11,208,300 shares traded on concerns about weak orders of mine-resistant vehicles.
• Dendreon Corp. (DNDN) 7,250,900 shares traded on news of an analyst downgrade.
• KongZhong Corp. (KONG) 6,923,700 shares traded.
The day saw 194 small-cap stocks set 52-week lows, while five small caps established 52-week highs.
