Russell 2000 falling fast
The Russell 2000 (NYSE: IWM) and the other major U.S. indices are posting significant declines less than an hour before the close. At 3:15 p.m. ET, the small-cap index was down 16.67 points, or 2.44%, to 667.07. The Dow Jones Industrial Average (INDU) had retreated 178.29 points, or 1.45%, to 12,076.70.
The bears are running the show on news that residential mortgage lender Thornburg Mortgage Inc. (NYSE: TMA) and investment company Carlyle Capital Corp. Ltd., which has made residential mortgage-backed securities, have failed to meet margins calls.
A “margin call” is when banks call in their loans to investors, who are in turn forced to sell off assets to raise cash, leading to a reduction in the price of those assets and more margin calls and losses.
The subprime mortgage sector started to implode after U.S. home prices began declining in the second half of 2006.
Underscoring the dire state of the housing sector, the Mortgage Bankers Association reported after the start of trading that U.S. home foreclosures rose to a record level during the fourth quarter of 2007.
Bucking the bearish trend is Steinway Musical Instruments, Inc. (NYSE: LVB). Shares of the Waltham, Mass.-based maker of musical products are rising on news after the close on Wednesday that adjusted fourth-quarter earnings jumped about 700%.
On the other hand, STEC Inc. (Nasdaq: STEC) is trading in the red. The developer of Flash memory solutions forecasted on Wednesday after the close that its first-quarter adjusted income will be below analysts’ expectations.
Shares of retailer Coldwater Creek Inc. (Nasdaq: CWTR) are also lower following news before the opening that the Sandpoint, Idaho-based company swung to a fourth-quarter loss.
