Russell 2000 dropping
The Russell 2000 (NYSE: IWM) and the other major U.S. indices have fallen deep into negative territory as economic concerns take center stage. At 2:46 p.m. ET, the small-cap index was down 9.55 points, or 1.35%, to 695.31. The Dow Jones Industrial Average (INDU) had lost 27.56 points, or 0.22%, to 12,561.51.
The U.S. economy will experience a recession this year and the Federal Reserve will respond with aggressive rate cuts, according to Goldman Sachs Group Inc. (NYSE: GS). The New York-based investment bank wrote in a note to its clients that it expects gross domestic product to contract in the second and third quarters, prompting the Fed to lower the federal funds rate to 2.5%.
The federal funds rate, the rate at which commercial banks make overnight loans to each other, was lowered on Dec. 11 to 4.25% from 4.50%. On Jan. 29, the Fed begins a two-day meeting, with most economists currently expecting that it will not move to cut interest rates before then.
However, William Poole, president of the Federal Reserve Bank of St. Louis, does not see a recession.
“Will housing sector problems push the economy into recession?” Poole asked the Financial Planning Association of Missouri and Southern Illinois in a speech earlier today. “It is too early to tell right now.”
“The current financial turmoil will take awhile to play itself out,” he said, adding that the fundamentals of the economy remain strong and that he expects to see growth in 2008.
Elsewhere, the price of oil is down $0.74 to $95.59 per barrel, despite news of a report from the U.S. Energy Information Administration that oil inventories for the week ended Jan. 4 surprisingly declined to their lowest level since October 2004.
Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• California First National Bancorp (CFNB), up 17%.
• ICF International, Inc. (ICFI), up 16% on news of an analyst upgrade.
• Tredegar Corp. (TG), up 13%.
Biggest percentage losers:
• Spectrum Control, Inc. (SPEC), down 37% on news that an analyst has reduced the stock’s target price.
• LSI Industries Inc. (LYTS), down 29% on news the company expects sales for the fiscal second quarter to be below Wall Street’s projections.
• Premier Exhibitions, Inc. (PRXI), down 29% on news it expects fiscal 2008 earnings to be below expectations.
