Russell 2000 can't hold on
The Russell 2000 (NYSE: IWM) is the only major U.S. index in the red as investors await the release of the Fed’s minutes. At 1:57 p.m. ET, the small-cap index had lost 1.33 points, or 0.60%, to 838.81. The Dow Jones Industrial Average (INDU) was up 13.74 points, or 0.10%, to 14,057.47.
Investors are holding their breath ahead of the 2 p.m. ET release of the U.S. Federal Reserve’s minutes from its latest meeting. The Fed voted on Sept. 18 to lower its target interest rate to 4.75% from 5.25%. The minutes will be analyzed for clues about possible future rate cuts.
The session began on a bullish note following news that YUM! Brands, Inc. (NYSE: YUM) reported better-than-expected quarterly results.
The Louisville, Ky.-based operator of fast food restaurants KFC, Taco Bell, Pizza Hut and Long John Silver’s, said that net income increased to $270 million, or $0.50 per share, while 15 analysts polled by Thomson Financial were expecting earnings of $0.45 per share. A year earlier the company had a profit of $230 million, or $0.42 per share.
The profit increase was due to the strong performance of YUM!’s international divisions, particularly in China. Net income in the U.S. division improved a paltry 1%, while revenues fell 6%.
The Russell 2000 has been trading on both sides of the flat line today, but small caps have spent the majority of the day so far in negative territory.
Helping the bears is news that single-family residential mortgage lender Thornburg Mortgage Inc. (NYSE: TMA) has revised up is losses from the sale of mortgage-backed securities. The Santa Fe, N.M.-based provider of jumbo mortgages—those exceeding $417,000—projects losses from those sales will amount to $1.1 billion, compared with a previous forecast of $863 million.
Speaking of problems stemming from the ongoing slump in the U.S. housing sector, credit rating agency Standard and Poor’s said today that the crisis in the subprime mortgage sector will not peak until 2009 and could cause defaults of as much as $150 billion. However, strength in emerging markets will keep global economic growth strong.
Elsewhere, the price of oil has added $1.57 to $80.59 a barrel following news of a decline in European oil product inventories.
