Financials drag down Russell 2000
The Russell 2000 (NYSE: IWM) is falling on news of worse-than-expected earnings forecasts from major financial players. At 1:26 p.m. ET, the small-cap index had retreated 8.53 points, or 1.18%, to 711.68. The Dow Jones Industrial Average (INDU) was down 207.20 points, or 1.61%, to 12,645.89.
The bears are dominating trading as stocks small and large are losing ground on news that the strain from the problems in the subprime mortgage sector has spread.
Merrill Lynch & Co., Inc. (NYSE: MER), the world’s largest brokerage house, reported before the start of trading that it may incur $15 billion in losses from investments in securities backed by mortgage loans.
That’s more than twice what the New York-based company had initially projected and an indicator that the problems stemming from the stagnation in the U.S. housing market continue to ripple through financial markets.
More bearish news came from luxury jewelry seller Tiffany & Co. (NYSE: TIF), which lowered its guidance for the fiscal year, and credit card issuer American Express Co. (NYSE: AXP), which announced a fourth-quarter pretax charge of about $440 million due to slower spending by card members and an increase in delinquencies.
The American consumer is still spending money, but retail sales have slackened due to high energy costs.
The rising cost of oil helped widen the U.S. trade deficit to a greater-than-expected $63.1 billion in November as exports and imports both increased to record levels, the Commerce Department reported before the start of trading. The trade deficit was $57.8 billion in October.
However, exports have increased more than imports during the first 11 months of 2007, a development largely explained by the weak dollar. Rising exports have helped soften the negative economic impact of the slump in the U.S. housing sector and the subsequent tightening of credit.
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 29% on news an informal inquiry by the U.S. Securities and Exchange Commission has ended with no action.
• Georgia Gulf Corp. (GGC), up 24% on news it has reduced its term debt by $71.5 million during the fourth quarter.
Biggest percentage losers:
• Cadence Pharmaceuticals, Inc. (CADX), down 64% on news a clinical trial did not meet its primary endpoint.
• CryoLife, Inc. (CRY), down 18% on news it gave a knee surgery patient an infected tissue implant.
• Interactive Intelligence, Inc. (ININ), down 17% on news the company expects fourth-quarter revenues to fall short of analysts’ estimates.
