Late rally lifts small caps
The Russell 2000 (NYSE: IWM) posted solid gains as a rollercoaster day of trading ended with a sudden late rally. The small-cap index added 4.94 points, or 0.64%, to 780.90. The Dow Jones Industrial Average (INDU) lost 33.73 points, or 0.25%, to 13,266.29.
On a year-to-date basis, the Russell 2000 has lost 0.83%, while the Dow has advanced 6.35% and the S&P 500 has added 4.11%.
Futures were pointing up and stocks opened in positive territory following news that automaker Ford Motor Co. (NYSE: F) expects to break even in 2007 following a narrower third-quarter loss. The company beat Wall Street’s expectations by posting a loss of $380 million, compared with a loss of $5.2 billion a year earlier.
Helping the bulls in the early minutes of trading was news that British mining company Rio Tinto turned down a buyout offer from Australia’s BHP Billiton Ltd. The rejection led to speculation of more possible mergers and acquisition activity.
There was negative news as well, coming in the form of a second consecutive month of weak sales by U.S. retailers. Many retailers blamed their lackluster performance in October on warm weather, which is hurting sales of cold-weather items, and the higher price of gasoline, which is taking money out of consumers’ wallets.
Stocks bounced around in the morning, with the Russell 2000 generally staying in the green while the Dow was mostly in the red.
But the bears took over after 11 a.m. ET, when U.S. Federal Reserve Chairman Ben Bernanke predicted that U.S. economic growth will slow in the fourth quarter.
“Growth was seen as remaining sluggish during the first part of next year, then strengthening as the effects of tighter credit and the housing correction began to wane,” the Fed chief told members of the congressional Joint Economic Committee today. Bernanke said also that the slump in the U.S. housing sector is likely to intensify. Consumption is likely to slow as well, as Americans react to tighter lending standards and a rise in the price of oil.
But whether or not these developments will lead to another cut in the target interest rates is an open question. Bernanke said nothing other than that the U.S. central bank will act as needed to ensure low inflation and economic growth.
The major U.S. indices were languishing in the red until a late surge in financial stocks helped offset some of the losses and pushed the Russell 2000 higher.
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:
• Restoration Hardware Inc. (RSTO), up 140% to $6.44 on news it is being acquired for $267 million.
• Spectrum Brands Inc. (SPC), up 25% to $5.04 on news of a narrower fiscal fourth-quarter loss.
• CompuCredit Corp. (CCRT), up 20% to $12.36. A company representative could not be reached for comment.
Biggest percentage losers:
• Kenexa Corp. (KNXA), down 40% to $16.62 on news that it cut its full-year earnings guidance to below Wall Street estimates.
• PRG-Schultz International Inc. (PRGX), down 32% to $10.95. A customer representative could not be reached for comment.
• ChemGenex Pharmaceuticals Ltd. (CXSP), down 26% to $12.06. A company representative could not be reached for comment.
Volume leaders:
• Restoration Hardware Inc. (RSTO) 12,288,400 shares traded on news it is being acquired for $267 million.
• Kenexa Corp. (KNXA) 8,276,600 shares traded on news that it cut its full-year earnings guidance to below Wall Street estimates.
• KEMET Corp. (KEM) 4,735,300 shares traded on news of a new product launch.
The day saw 130 small-cap stocks set 52-week lows, while 10 small caps established 52-week highs.
