Manufacturing sinks small caps
The Russell 2000 (NYSE: IWM) lost ground today following news of an unexpected downsizing in U.S. manufacturing in November. The small-cap index fell 12.48 points, or 1.63%, to 753.55. The Dow Jones Industrial Average (INDU) dropped 220.86 points, or 1.67%, to 13,043.96.
The first session of 2008 belonged to the bears following news that U.S. manufacturing unexpectedly shrank in December.
The Institute for Supply Management reported after that its manufacturing index fell to 47.7 in December, down from 50.8 in November and well below economists’ projections for a reading of 50.5. A level above 50 indicates an expansion.
The decline, which comes after 10 months of expansion, is due to a fall in new orders, production and exports. The data tell us that tighter lending conditions and the ongoing problems in the U.S. housing sector have taken their toll.
The numbers also renew fears that the slowing U.S. economy could tip into recession. Manufacturing comprises about 14% of gross domestic product.
Small-cap stocks started just above the flat line but dropped immediately after the report’s release at 10 a.m. ET.
Equities experience a short-lived bounce in the afternoon when the U.S. Federal Reserve released its minutes from the meeting on Dec. 11, when it decided to lower the target interest rate 0.25% to 4.25%.
The minutes show that the U.S. central bank worried that the credit squeeze could significantly slow down economic growth, a development which would require further interest rate cuts to remedy.
Elsewhere, the U.S. Census Bureau reported that construction spending in November surprisingly increased 0.1% to a seasonally adjusted annual rate of $1,165.1 billion. Economists were expecting to see a decline of 0.4% from the revised October estimate of $1,163.6 billion.
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:
• Akeena Solar, Inc. (AKNS), up 44% to $11.45 on news that its solar panel technology will be distributed in Europe.
• Mediacom Communications Corp. (MCCC), up 15% to $5.27 on news of an analyst upgrade.
• Golden Cycle Gold Corp. (GCGC), up 14% to $11.60.
Biggest percentage losers:
• Retalix Ltd. (RTLX), down 15% to $13.29 on news that its net income for 2007 will be below the range announced earlier this year.
• COMSYS IT Partners, Inc. (CITP), down 15% to $13.48 on news of an analyst downgrade.
• U.S. Auto Parts Network (PRTS), down 14% to $7.01.
Volume leaders:
• Akeena Solar, Inc. (AKNS) 15,612,800 shares traded.
• Salix Pharmaceuticals, Ltd. (SLXP) 6,945,800 shares traded on news that it has entered into a supply and distribution agreement with Watson Pharmaceuticals, Inc. (WPI)
• Force Protection, Inc. (FRPT) 5,435,500 shares traded on news that it broke its monthly vehicle production record in December.
