Russell 2000 slips again
The Russell 2000 (NYSE: IWM) lost ground for the second day in a row as financial concerns extinguished an early rally. The small-cap index fell 4.12 points, or 0.59%, to 688.60. The Dow Jones Industrial Average (INDU) surrendered 171.44 points, or 1.38%, to 12,207.17.
On a year-to-date basis, the Russell 2000 has declined 10.02%, while the Dow has let go 7.97% and the S&P 500 has shed 9.38%.
Small-cap stocks began the day in the green but lost steam midway through the session as financial concerns spooked investors.
The bulls were poised to act following news after the close on Thursday that Microsoft Corp. (Nasdaq: MSFT) reported better-than-expected fiscal second-quarter results.
The Redmond, Wash.-based software maker saw its profit jump 79% to $4.71 billion, or $0.50 per share, compared with $2.63 billion, or $0.26 per share, a year earlier. Analysts were calling for earnings of $0.46 per share.
Similarly, Peoria, Ill.-based Caterpillar Inc. (NYSE: CAT) announced before the start of trading that its fourth-quarter earnings rose 11% to $975 million, or $1.50 per share, compared with a net income of $882 million, or $1.32 per share, a year earlier.
The maker of earth-moving equipment attributed the improvement to strong global economic growth, but warned that it expects domestic economic growth to be “anemic,” according to a statement by CEO Jim Owens.
The modestly upbeat mood on Wall Street lasted for about three hours before stocks changed direction.
The bears reacted to news that investment bank Goldman Sachs Group Inc. (NYSE: GS) may cut as many as 1,500 employees, or about 5% of its workforce. Likewise, financial services company Credit Suisse Group said that it will hand out pink slips to about 500 workers, mostly from its investment banking operations.
The two companies have been relatively unaffected by the subprime mortgage mess, which has bruised many of their competitors.
Stocks sputtered, with the Dow falling into negative territory at about 1 p.m. ET, while the Russell 2000 lasted a little longer before doing the same.
Fears of more credit losses contributed to the decline, following news that an analyst expects Fortis, the largest financial services company in Belgium, to suffer more writedowns from mortgage-related securities.
“I would encourage you to think back to last August where people thought the crisis would be confined to subprime markets and that it was not going to last long,” said Robert Webb, a professor of finance at the University of Virginia’s McIntire School of Commerce, in a phone interview. “It has turned out to be longer than expected.”
“This is a different kind of crisis,” Webb explained. “It’s a credit market crisis … right now it looks like we could be entering or have entered a more severe recession than normal that could translate negatively to corporate earnings.”
Investors will be looking to numbers on fourth-quarter U.S. gross domestic product, scheduled to be released on Jan. 30, and the government’s January labor report, to be released on Feb. 1, for more clues on the state of the economy.
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:
• China Finance Online Co. Ltd. (JRJC), up 20% to $18.00 on news it will join hands with China Telecom to provide financial information services through the Internet.
• CombinatoRx, Inc. (CRXX), up 17% to $5.15.
• Arkansas Best Corp. (ABFS), up 17% to $27.45 despite news that fourth-quarter profit fell.
• SunOpta Inc. (STKL), down 37% to $6.05 on news it has lowered its 2007 guidance.
• Synaptics Inc. (SYNA), down 23% to $24.07 on news that third-quarter revenue could miss analysts’ forecasts.
• Kelly Services, Inc. (KELYA), down 15% to $15.94.
Volume leaders:
• SunOpta Inc. (STKL) 11,450,500 shares traded.
• Anworth Mortgage Asset Corp. (ANH) 9,170,300 shares traded on news a public offering of 14.3 million common shares had been priced at $8.75 a share.
• Synaptics Inc. (SYNA) 8,078,800 shares traded.
The day saw 18 small-cap stocks set 52-week lows, while two small caps established a 52-week high.
Reporter Jennifer Schonberger contributed to this article.
