IBM lifts small caps
The Russell 2000 (NYSE: IWM) moved up as news of a stock buyback program by International Business Machines Corp. (Nasdaq: IBM) overshadowed worrisome economic reports. The small-cap index added 6.86 points, or 0.97%, to 717.32. The Dow Jones Industrial Average (INDU) gained 114.70 points, or 0.91%, to 12,684.92.
On a year-to-date basis, the Russell 2000 has declined 6.36%, while the Dow is down 4.37% and the S&P 500 has decreased 5.93%.
The major U.S. indices interrupted their early-session volatility to post gains on news that IBM has approved a $15 billion stock buyback. The Armonk, N.Y.-based tech giant said that the buyback will boost its 2008 profit.
The announcement came at around 11 a.m. ET, and immediately sent stocks small and large flying.
The U.S. Labor Department reported that producer prices increased 1% in January, more than the expected 0.4%.
The numbers tell us that inflation pressures remain a worry despite the slowing economy.
Meanwhile, the Conference Board announced that its index of consumer confidence fell to a five-year low of 75.0 in February, down from 87.3 in January. A pullback in consumption will spell trouble for the economy, because consumer spending is about 70% of U.S. gross domestic product.
But all that didn’t matter after IBM’s announcement, as the small-cap index closed higher for the second consecutive session.
Bucking the trend was K-Swiss Inc. (Nasdaq: KSWS). Shares of the athletic footwear maker took a misstep on news that the Westlake Village, Calif.-based company reported a 94% fall in fourth-quarter profit.
“While we believe that K-Swiss’s rebranding initiative is heading in the right direction, the progress is quite slow and we think that it will take until at least 2009 before tangible U.S. improvement is achieved,” wrote analyst David Meyer with investment bank Brean Murray, & Carret & Co. in a research released today.
Meyer, who has a “hold” rating on the stock, lowered his fiscal 2008 earnings estimate to $0.26 per share from $0.88 per share.
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:
• Prana Biotechnology Ltd. (PRAN), up 36% to $5.59 on news of a successful test of an Alzheimer’s drug.
• Omega Protein Corp. (OME), up 27% to $10.17.
• Ducommun Inc. (DCO), up 23% to $30.29 on news of fourth-quarter profit that beat Wall Street’s expectations.
• GTx, Inc. (GTXI), down 14% to $15.15 on news of a successful drug trial.
• China Shen Zhou Mining & Resources Inc. (SHZ), down 14% to $7.81.
• SXC Health Solutions Corp. (SXCI), down 9% to $14.44 on news that it will buy National Medical Health Card Systems Inc. (NMHC) for $143 million.
• CollaGenex Pharmaceuticals, Inc. (CGPI) 18,078,800 shares traded.
• China Techfaith Wireless Communication Technology Ltd. (CNTF) 4,266,100 shares traded.
• Hovnanian Enterprises, Inc. (HOV) 3,924,000 shares traded.
The day saw 11 small-cap stocks set 52-week lows, while 17 small caps established a 52-week high.
