Russell 2000 shrugs off economic worries
The Russell 2000 (NYSE: IWM) and the other major U.S. indices are rising despite news of mixed earnings and a decline in home sales
At 11:10 a.m. ET, the small-cap index had added 3.31 points, or 0.48%, to 691.91. The Dow Jones Industrial Average (INDU) is up 56.66 points, or 0.46%, to 12,263.83.
Small-cap stocks fell out of the gate but recovered and moved into positive territory at about 10:35 a.m. ET even though economic concerns again came to the forefront following news of disappointing corporate news from major players and more housing woes.
Fast food chain operator McDonald’s Corp. (NYSE: MCD) reported before the start of trading that sales at restaurants open at least 13 months were unchanged in December, while analysts were expecting a rise.
However, the Oak Brook, Ill.-based company also reported that its net income for the three months ended Dec. 31 increased to $1.27 billion, or $1.06 per share, compared with $1.24 billion, or $1 per share, a year earlier.
Similarly, Towson, Md.-based power tool maker The Black & Decker Corp. (NYSE: BDK) announced that fourth-quarter profit increased due to a one-time tax gain, but forecasted that its first-quarter profit will come in below analysts’ projections.
“Looking ahead, we recognize that the U.S. economy is slowing, and we do not expect a housing recovery in 2008,” said chairman and CEO Nolan Archibald in a statement.
Speaking of housing, the U.S. Census Bureau reported after the opening that new home sales in December fell 4.7% to an annual rate of 604,000. The rate in November was a downwardly revised 634,000.
The numbers came as an unpleasant surprise to economists, who were expecting to see a considerably smaller decline.
The December rate is the lowest in almost 13 years and a whopping 40.7% below the rate during the same month of 2006.
The slump in the housing sector, which began in the second half of 2006, is one of the main factors dragging down economic growth and the primary reason behind the subprime mortgage meltdown that is still sending shockwaves through the financial system.
Overseas, the United Kingdom’s FTSE index lost 2.1%, while Germany’s DAX Xetra Index fell 1.7%. In Asia, the Shanghai index dropped 7.2%, whereas shares in Hong Kong’s index let go 4.3. The main exchanges in Singapore, Indonesia and South Korea also fell.
