Economy lifts small caps
The Russell 2000 (NYSE: IWM) opened with modest gains this morning following news of stronger-than-expected economic growth in the third quarter.
At 10:29 a.m. ET, the small-cap index had added 1.70 points, or 0.21%, to 817.85. The Dow Jones Industrial Average (INDU) was up 51.46 points, or 0.37%, to 13,843.93.
Gross domestic product rose at a seasonally adjusted annual rate of 3.9% during the third quarter, the U.S. Commerce Department reported. That beats projections of an increase of 3.2%.
The increase of 3.9% represents the economy’s strongest performance since the first three months of 2006, when GDP added 4.8%. Helping the economy grow more than expected and overcome the drag from the ailing housing sector were a rise in exports, an increase in consumer spending and business investment.
In other economic news, a report from business outsourcing solutions provider Automatic Data Processing, Inc. (NYSE: ADP) estimated that private employers added 106,000 jobs in October.
Elsewhere, the U.S. Federal Reserve continues its two-day policy meeting, with a decision on the target interest rate expected to be announced at 2:10 p.m. ET. The Fed is expected to either cut the federal funds rate 0.25% or leave it unchanged. That’s higher than average private-sector employment growth during the last three months.
The federal funds rate, the rate at which commercial banks make overnight loans to each other, currently stands at 4.75%, after the Fed voted on Sept. 18 to lower it from 5.25%.
However, the surprising jump in GDP and a tight labor market indicate that the economy is handling well the downturn in the U.S. housing sector and may not need a monetary policy boost in order to get through the rough patch.
Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• First Consulting Group, Inc. (FCGI), up 27% on news it’s being purchased by Computer Sciences Corp. (CSC).
• Polypore International Inc. (PPO), up 24% on news of a rise in third-quarter profit.
• Pericom Semiconductor Corp. (PSEM), up 22% on news of a strong fiscal first quarter.
Biggest percentage losers:
• FARO Technologies Inc. (FARO), down 27% on news of a third-quarter loss.
• Buffalo Wild Wings Inc. (BWLD), down 23% on news that third-quarter earnings missed Wall Street’s expectations.
• Stratasys Inc. (SSYS), down 16% on news of a lower fiscal 2007 earnings forecast.
