Financial pain drops small caps
The Russell 2000 (NYSE: IWM) and the other major U.S. indices are falling on more news of financial trouble stemming from the subprime meltdown.
At 10:33 a.m. ET, the small-cap index had lost 9.64 points, or 1.34%, to 710.57. The Dow Jones Industrial Average (INDU) was off 184.12 points, or 1.43%, to 12,668.97.
Stocks opened in negative territory following news that Merrill Lynch & Co., Inc. (NYSE: MER) may suffer $15 billion in losses from investments in securities backed by mortgage loans.
The loss, which is twice what the New York-based investment bank had initially estimated, is an unpleasant reminder of how shockwaves from the stagnating U.S. housing market continue to ripple through financial markets.
There was more bearish news from the financial sector as credit card issuer American Express Co. (NYSE: AXP), announced that it will absorb a fourth-quarter pretax charge of about $440 million due to slower spending by card members and an increase in delinquencies. The company said that it now expects fourth-quarter earnings below the level a year earlier.
Many mortgage lenders nationwide have taken a hit and even declared bankruptcy as U.S. home prices have stagnated and many borrowers have defaulted on their loans and gone into foreclosure. Lenders frequently packaged loans and sold them as securities to financial companies, which have in turn also incurred billions in losses.
In economic news, the U.S. Labor Department reported that the import price index, which tracks the prices for foreign goods imported in the United States, was unchanged in December. The result was due to an increase in non-petroleum prices, which offset a decline in the price index for petroleum.
However, imports rose 10.9% for all of 2007. That’s the largest increase since the index was first introduced in 1982 and a sign that the U.S. could be importing inflation.
Meanwhile, U.S. export prices, the prices foreign countries pay for American goods, added 0.4% in December following a rise of 0.9% in November.
Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• AmCOMP Inc. (AMCP), up 38% on news it will be acquired by Employers Holdings, Inc. (EIG).
• USANA Health Sciences, Inc. (USNA), up 24% on news an informal inquiry by the U.S. Securities and Exchange Commission has ended with no action.
• SYNNEX Corp. (SNX), up 16% on news of fourth-quarter earnings that beat analysts’ estimates.
Biggest percentage losers:
• Cadence Pharmaceuticals, Inc. (CADX), down 61% on news a clinical trial did not meet its primary endpoint.
• Interactive Intelligence, Inc. (ININ), down 21% on news the company expects fourth-quarter revenues to fall short of analysts’ estimates.
• CryoLife, Inc. (CRY), down 21% on news it gave a knee surgery patient an infected tissue implant.
