Russell 2000 falls sharply
The Russell 2000 (NYSE: IWM) futures are falling and the small-cap index will open with a drop despite an interest rate cut.
The U.S. Federal Reserve has decided to lower the target for the federal funds rate to 3.50% from 4.25% to calm jittery financial markets and keep the economy from falling into a recession.
“The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth,” the Fed said in a statement. “While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.”
The fact that the U.S. central bank has decided to lower the federal funds rate between its regularly scheduled meetings is a sign of the serious economic and financial problems we’re seeing.
The Fed has not moved to lower its target rate between meetings since September 2001, in the wake of the terrorist attacks. Its next regularly scheduled meeting is on Jan. 29 and 30.
Eight of the Federal Open Market Committee’s nine members voted for the decision.
Futures have trimmed some of their losses but are still down despite the interest rate cut.
Fueling the bearish sentiment is news that Bank of America Corp.’s (NYSE: BAC) fourth-quarter net income declined 95% to $0.05 per share from $1.16 per share a year earlier due to $5.28 billion in collateralized debt obligation write-downs.
Similarly, Wachovia Corp. (NYSE: WB) announced that its fourth-quarter profit slumped to $51 million, or $0.03 a share, compared with $1.20 a share a year earlier.
Here are the biggest percentage gainers and losers in pre-market trading among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• Pacific Sunwear of California, Inc. (PSUN), up 4%.
• Petmed Express, Inc. (PETS), up 4% on news of a rise in third-quarter earnings.
• Indevus Pharmaceuticals, Inc. (IDEV), up 4% on news of positive results from a trial of an injectable testosterone therapy.
Biggest percentage losers:
• Northstar Neuroscience, Inc. (NSTR), down 87% on news a trial of a treatment for patients with poor hand and arm functioning did not meet its primary endpoint.
• Salix Pharmaceuticals, Ltd. (SLXP), down 23%.
• PLX Technology, Inc. (PLXT), down 20%.
