Russell 2000 stays down
Two hours before the close the Russell 2000 (NYSE: IWM) is in the red while the Dow is posting solid gains. At 2:12 p.m. the small-cap index had shed 1.14 points, or 0.15%, to 754.28. The Dow Jones Industrial Average (INDU) was up 90.80 points, or 0.69%, to 13,272.71.
Small cap stocks are bobbing up and down, only briefly venturing into positive territory before submerging again. Larger-cap indices are generally trading above the flat line on news of an improvement in the outlook of major financial firms.
Financial services heavyweight UBS upgraded brokerage house Merrill Lynch & Co., Inc. (NYSE: MER) to “buy” from “neutral” saying that the stock price is low and buying makes sense.
The analysts claim that the major brokerage houses are strong enough to handle credit losses caused by the subprime meltdown.
However, Bear, Stearns & Co. (NYSE: BSC) appears to be an exception.
Warren Spector, co-president and co-chief operating officer, resigned on Sunday, Aug. 5, two days after rating agency Standard & Poor’s warned that it could cut the New York-based firm’s debt rating of losses from bonds backed by residential mortgages.
Bear Stearns is the second-largest U.S. underwriter of mortgage-backed securities and has been hit hard by the meltdown in the subprime mortgage sector. In late June, two of its hedge funds, which had made bets on sub-prime mortgage bonds, went belly-up and lost practically all their value.
Spector was responsible for the company’s asset management.
Elsewhere, the price of oil has plummeted about $2.80 to $72.60 a barrel.
