Russell 2000 sinks deeper
The Russell 2000 (NYSE: IWM) and the other major U.S. indices are hurting as investors react to Bernanke’s testimony. At 1:19 p.m. ET, the small-cap index was down 8.62 points, or 1.23%, to 691.29. The Dow Jones Industrial Average (INDU) had dropped 125.51 points, or 1.01%, to 12,340.65.
“The baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced,” U.S. Federal Reserve chairman Ben Bernanke told lawmakers on Capitol Hill today.
That spooked investors and small-cap stocks, which were already trading below the flat line, extended their declines.
The Fed chief painted a bleak picture of the current state of the U.S. economy, saying that labor market conditions in December were “disappointing” while investment in equipment and software has slowed.
What needs to be done?
“I agree that fiscal action could be helpful in principle,” Bernanke said. “Fiscal and monetary stimulus together may provide broader support for the economy than monetary policy actions alone.”
But he was careful not to endorse any specific stimulus package and emphasized that the measures should come into force quickly if they are to have a positive effect on the economy.
Bernanke did not talk much about the Fed’s policy meeting on Jan. 29 and 30, but hinted at a possible interest rate cut.
“He stands ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks,” said the central banker.
The federal funds rate, the rate at which commercial banks make overnight loans to each other, currently stands at 4.25%. The rate affects interest levels on credit card debt, home equity lines of credit, auto loans and others.
Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• Stoneridge, Inc. (SRI), up 31% on news that it raised its full-year 2007 earnings guidance.
• Avatar Holdings Inc. (AVTR), up 14%.
• XTENT, Inc. (XTNT), up 15%.
Biggest percentage losers:
• Ambac Financial Group, Inc. (ABK), down 54% on news of a possible analyst downgrade.
• Radian Group Inc. (RDN), down 20%.
• Deerfield Capital Corp. (DFR), down 16% on news on Wednesday that has identified impairment charges related to certain available-for-sale residential mortgage-backed securities.
