Credit woes down small caps
The Russell 2000 (NYSE: IWM) fell today on news that reminded investors of the fallout from the subprime mortgage mess. The small-cap index retreated 7.91 points, or 1.04%, to 752.06. The Dow Jones Industrial Average (INDU) was off 65.84 points, or 0.49%, to 13,248.73.
On a year-to-date basis, the Russell 2000 has dropped 4.49%, while the Dow has advanced 6.21% and the S&P 500 has gained 3.26%.
Only the bears showed up today following news that financial services giant JPMorgan Chase & Co. (NYSE: JPM) downgraded fellow industry players Bear Stearns (NYSE: BSC), Goldman Sachs Group, Inc. (NYSE: GS) and Lehman Brothers Holdings Inc. (NYSE: LEH) to “sell” from “market perform.”
The news spooked investors who worried that a stagnating U.S. housing market could continue to plague banks and financial institutions and cause more economic malaise, possibly even triggering a recession.
All three New York-based financial services companies had invested in securities backed by subprime mortgages and took a hit during the third-quarter, declaring billions in write-downs on mortgage and other credit assets.
Economists worry that the ongoing slump in the U.S. housing sector and a credit squeeze will combine to significantly drag down U.S. economic growth in the fourth quarter of 2007 and into 2008.
Many observers are now expecting that the U.S. Federal Reserve will move to lower the federal funds rate, the rate at which commercial banks make overnight loans to each other, when it next meets on Dec. 11.
On Oct. 31, the Fed lowered its target interest rate to 4.50% from 4.75%.
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:
• CMGI Inc. (CMGI), up 29% to $13.33 on news that fiscal first-quarter net income exceeded projections.
• Hoku Scientific, Inc. (HOKU), up 25% to $9.80. A company representative could not be reached for comment.
• China Shenghuo Pharmaceutical Holdings, Inc. (KUN), up 19% to $5.93. A company representative could not be reached for comment.
Biggest percentage losers:
• Clean Diesel Technologies, Inc. (CDTI), down 13% to $26.00. A company representative was not available for comment.
• Molecular Insight Pharmaceuticals, Inc. (MIPI) down 12% to $7.96.
• IndyMac Bancorp, Inc. (IMB), down 11% to 8.49.
Volume leaders:
• Canadian Solar Inc. (CSIQ) 7,959,400 shares traded on news of an annual solar cell supply contract with long-term supplier Gintech Energy Corp. of Taiwan.
• China Sunergy Co., Ltd. (CSUN) 6,321,500 shares traded.
• Force Protection, Inc. (FRPT) 5,369,300 shares traded.
The day saw 123 small-cap stocks set 52-week lows, while 12 small caps established 52-week highs.
