Buffett lifts small caps
The Russell 2000 (NYSE: IWM) closed in the green following news that Warren Buffet has offered to help bond insurers. The small-cap index advanced 5.73 points, or 0.82%, to 705.48. The Dow Jones Industrial Average (INDU) added 133.40 points, or 1.09%, to 12,373.41.
On a year-to-date basis, the Russell 2000 has declined 7.90%, while the Dow has retreated 6.72% and the S&P 500 has lost 8.14%.
The bulls completely dominated trading today as small-cap stocks opened higher and stayed positive throughout the session following news that billionaire investor Warren Buffett has offered to have his company, Berkshire Hathaway, assume responsibility for $800 billion of municipal bonds guaranteed by bond insurers MBIA Inc. (NYSE: MBI), Ambac Financial Group Inc. (NYSE: ABK) and Financial Guaranty Insurance Co.
There have been concerns recently that the three companies could be downgraded due to write-downs from insuring subprime debt. The bond insurers would welcome relief for their entire portfolio, but Buffett is only offering help for their relatively safe municipal bond holdings.
Nevertheless, investors were in a buying mood, which was also bolstered by news that ailing carmaker General Motors Corp. (NYSE: GM) swung to a fourth-quarter net loss that was not as severe as analysts had forecasted.
Also helping the bulls was news after the start of trading that St. Louis Federal Reserve Bank President William Poole thinks the U.S. economy will likely avoid recession.
Small-cap stocks touched their peak of the session at about 2 p.m. ET before easing to their close level.
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:
• Smith & Wesson Holding Corp. (SWHC), up 23% to $5.67.
• Diamond Management & Technology Consultants Inc. (DTPI), up 22% to $5.72 on news it has commenced a tender offer for up to 5 million common shares.
• Veeco Instruments Inc. (VECO), up 18% to $16.05.
Biggest percentage losers:
• Dycom Industries, Inc. (DY), down 34% to $15.30 on news it has lowered its second-quarter earnings forecast.
• NxStage Medical, Inc. (NXTM), down 33% to $8.49 on news that its fourth-quarter loss has widened.
• MasTec, Inc. (MTZ), down 16% to $7.12 on news of an analyst downgrade.
Volume leaders:
• IndyMac Bancorp, Inc. (IMB) 8,034,500 shares traded.
• Dycom Industries, Inc. (DY) 5,770,100 shares traded.
• SiRF Technology Holdings, Inc. (SIRF) 4,896,400 shares traded.
The day saw 37 small-cap stocks set 52-week lows, while 13 small caps established a 52-week high.
