Russell 2000 rises despite economic problems
The Russell 2000 (NYSE: IWM) gained despite news of government reports and minutes from the U.S. Federal Reserve that showed economic problems. The small-cap index added 7.68 points, or 1.09%, to 710.02. The Dow Jones Industrial Average (INDU) advanced 90.04 points, or 0.73%, to 12,427.26.
On a year-to-date basis, the Russell 2000 has declined 7.31%, while the Dow is down 6.31% and the S&P 500 has shed 7.38%.
Small-cap stocks moved up for the second consecutive session but began the day in negative territory following news that the consumer price index added 0.4% in January, above the expected 0.3%.
The U.S. Labor Department also reported that core consumer prices, which exclude the costs of food and energy, increased 0.3%, above the projected 0.2%.
Core prices have added 2.5% on a year-over-year basis, which is beyond the U.S. Federal Reserve’s preferred range of between 1% and 2%. Worse, annual consumer prices growth has accelerated from 2.4% in December 2007.
The rise in inflation makes it more difficult for the U.S. Federal Reserve to stimulate the economy by cutting its target federal funds rate, the rate at which commercial banks make overnight loans to each other.
The Russell 2000 hit its session lows shortly after 10 a.m. ET, when it slumped to a level below 696 points. But from there, the index started rising, moving into the green at about 12 p.m. ET.
There was no apparent reason for the surprise jump and stocks held on to their gains even after the Fed released the minutes from its Jan. 29 and 30 policy meeting.
The central bank lowered its estimate for economic growth for 2008 and added that it expects a rise in inflation and unemployment. The jobless rate is projected at between 5.2% and 5.3%, up from the current level of 5%.
Today’s numbers point to an increasingly cloudy economic outlook and raise the odds of a recession.
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:
• Meritage Homes Corp. (MTH), up 18% to $15.53 on news of an analyst upgrade.
• Cyberonics, Inc. (CYBX), up 17% to $11.41 on news that its fiscal third-quarter loss narrowed.
• LaBranche & Co. Inc. (LAB), up 15% to $5.69.
• NutriSystem Inc. (NTRI), down 30% to $16.69 on news that the company expects revenue to decline in 2008.
• The Spectranetics Corp. (SPNC), down 29% to $9.07 on news that fourth-quarter earnings missed analysts’ projections.
• A.C. Moore Arts & Crafts, Inc. (ACMR), down 22% to $9.49 on news of a decline in fourth-quarter same-store sales.
• NutriSystem Inc. (NTRI) 11,107,300 shares traded.
• Texas Roadhouse, Inc. (TXRH) 5,425,500 shares traded.
• North American Palladium Ltd. (PAL) 4,919,700 shares traded.
The day saw 22 small-cap stocks set 52-week lows, while 12 small caps established a 52-week high.
