Russell 2000 jumps on late rally
The Russell 2000 (NYSE: IWM) went through the roof today as a late rally in financial shares lifted all the major U.S. indices. The small-cap index advanced 21.86 points, or 3.26%, to 693.43. The Dow Jones Industrial Average (INDU) gained 298.98 points, or 2.50%, to 12,270.17.
On a year-to-date basis, the Russell 2000 has lost 9.48%, while the Dow has let go 7.50% and the S&P 500 is missing 8.84%.
Small-cap stocks outpaced their larger brothers today as speculation of more rate cuts fueled the late-session rally.
February fed funds futures overwhelmingly suggest that the U.S. Federal Reserve will vote to lower its target for the federal funds 0.75% during its two-day meeting starting Jan. 29. A reduction of at least 0.50% is seen as a sure bet.
On Tuesday, the Fed lowered the federal funds rate, the rate at which commercial banks make overnight loans to each other, to 3.50% from 4.25%.
Shares representing the financial sector were invigorated and freed themselves of the bears’ grasp. Among the few exceptions was consumer financial services provider First Cash Financial Services, Inc. (Nasdaq: FCFS), which issued a 2008 earnings guidance below analysts’ projections.
The Russell 2000 started rising sharply at about 3 p.m. ET, gaining more than 30 points from its session low of below 650. Before that, the index spent the majority of the session in the red, except for a brief spike at around 10:30 a.m. ET.
The earlier part of the session was dominated by earnings news, which was generally positive except for two tech sector heavyweights.
Apple Inc. (Nasdaq: AAPL) said that sales growth will slow to 29% in the second quarter, down from a pace of 35% growth seen in the first quarter. That scared investors, who saw the forecast as a sign that the American consumer is planning on reining in spending.
Otherwise, the Cupertino, Calif.-based company reported that its first-quarter profit was above projections.
The bearish opening mood was also due to Motorola Inc. (NYSE: MOT), which forecasted that it will swing to a loss in the current quarter due to a decline in sales of its mobile devices. Analysts were expecting to see a profit.
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:
Biggest percentage gainers:
• Georgia Gulf Corp. (GGC), up 38% to $5.78.
• CompuCredit Corp. (CCRT), up 35% to $10.86.
• PRIMEDIA Inc. (PRM), up 32% to $8.46.
• First Cash Financial Services, Inc. (FCFS), down 34% to $9.28 on news it has lowered its full-year earnings forecast.
• Supertex, Inc. (SUPX), down 16% to $17.70 on news on Tuesday of a decline in fiscal third-quarter earnings.
• VanceInfo Technologies Inc. (VIT), down 14% to $5.16
Volume leaders:
• The PMI Group, Inc. (PMI) 9,108,600 shares traded.
• Hovnanian Enterprises, Inc. (HOV) 8,406,700 shares traded following news that mortgage applications for the week ended Jan. 18 increased 8.3%.
• Radian Group Inc. (RDN) 6,168,000 shares traded.
The day saw 56 small-cap stocks set 52-week lows, while two small caps established a 52-week high.
