Rebound lifts all but Russell 2000
The Russell 2000 (NYSE: IWM) closed in the red while the other major U.S. indices rose on news of a plan to help bond insurers. The small-cap index fell 0.85 points, or 0.12%, to 695.43. The Dow Jones Industrial Average (INDU) gained 96.72 points, or 0.79%, to 12,381.02.
On a year-to-date basis, the Russell 2000 has declined 9.22%, while the Dow is down 6.66% and the S&P 500 has retreated 7.85%.
Bond insurers were the story today, first causing steep declines and then becoming the catalyst of a breathtaking rebound that lifted all but the small-cap index.
Stocks small and large spent the majority of the session deep in negative territory on speculation that rating agencies Moody’s, Standard & Poor’s and Fitch will move to downgrade major bond insurers MBIA Inc. (NYSE: MBI) and Ambac Financial Group, Inc. (NYSE: ABK).
That will create problems for banks that hold bonds insured by MBIA and Ambac, possibly leading to billions in writedowns and sending shockwaves throughout the financial system.
The Russell 2000 had bottomed out at below 685, down more than 1%, when a surprise rally in the last half hour of trading saw it climb to within a hair of the flat line. The Dow easily moved into the green.
The jump was due to news that a consortium of leading banks is working on a deal to help Ambac keep its Triple-A rating. The insurers’ rating is a seal of approval for investors looking for safe investments.
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:
• TranS1 Inc. (TSON), up 24% to $13.50 on news of a rise in fourth-quarter sales.
• Universal Electronics Inc. (UEIC), up 14% to $21.44 on news that fourth-quarter earnings beat expectations.
• Innovative Solutions and Support, Inc. (ISSC), up 13% to $8.78 on news that it will buy back up to 1 million shares of its common stock.
• Orthofix International N.V. (OFIX), down 29% to $38.18 on news of a fourth-quarter loss.
• Cbeyond, Inc. (CBEY), down 20% to $18.76 on news of a disappointing revenue guidance for 2008.
• Aventine Renewable Energy Holdings, Inc. (AVR), down 18% to $6.94 on news that it may have liquidity problems.
• Cbeyond, Inc. (CBEY) 12,697,600 shares traded.
• North American Palladium Ltd. (PAL) 5,693,400 shares traded.
• Corinthian Colleges, Inc. (COCO) 4,583,200 shares traded.
The day saw 66 small-cap stocks set 52-week lows, while three small caps established a 52-week high.
