Russell 2000 jumps on rating news
The Russell 2000 (NYSE: IWM) is posting big gains on news that a major bond insurer will maintain its rating. At 3:23 p.m. ET, the small-cap index was up10.61 points, or 1.53%, to 706.04. The Dow Jones Industrial Average (INDU) had advanced 132.61 points, or 1.07%, to 12,513.63.
Stocks small and large rose sharply shortly after 2 p.m. ET on news that rating agency Standard & Poor’s will maintain its triple-A rating on bond insurer MBIA Inc. (NYSE: MBIA).
The past couple of weeks had seen speculation that the Armonk, N.Y.-based company will be downgraded, a move that will create problems for banks that hold bonds insured by MBIA and probably lead to additional writedowns.
There were reports earlier today that several banks will put together a $3 billion bailout plan for rival bond insurer Ambac Financial Group, Inc. (NYSE: ABK), also with the intent of preventing a damaging downgrade.
Bond insurers made a mistake when they decided to insure subprime-mortgage debt.
Small-caps are up but shares of DivX, Inc. (Nasdaq: DIVX) are falling on news that the maker of video compression software will shut down one of its websites.
Similarly, Aliso Viejo, Calif.-based Smith Micro Software, Inc. (Nasdaq: SMSI) is seeing its stock decline in news the developer of wireless communications software products got downgraded by an analyst.
Elsewhere, shares of Shiloh Industries, Inc. (Nasdaq: SHLO) are flat on news the manufacturer of engineered products plans on sticking to its current business model in 2008.
“Moving forward, we continue to maintain our focus on cash flow optimization, capital asset utilization and debt reduction while we pursue opportunities for profitable growth,” CEO Theodore Zampeti said in a conference call.
