Russell 2000 tanks as services drop
The Russell 2000 (IWM) and the other major U.S. indices lost big today as news of a steep decline in the services sector led to recession fears. The small-cap index let go 21.88 points, or 3.02%, to 701.58. The Dow Jones Industrial Average (INDU) was off 370.03 points, or 2.93%, to 12,265.13.
On a year-to-date basis, the Russell 2000 has shed 8.41%, while the Dow has retreated 7.54% and the S&P 500 has shed 8.97%.
The bears ran the show today as news of an unexpectedly deep drop in U.S. services in January sparked a sell-off.
The Institute for Supply Management said that its index of non-manufacturing dropped to 41.9 in January from 54.4 in December. The result is far worse than the one expected by economists. A reading above 50 is a sign of growth.
Services comprise about 75% of U.S. gross domestic product and a decline would surely throw off an economy already beset with a slump in the housing sector, a credit squeeze and a pullback of consumer spending into recession.
Or maybe a recession has already started.
Either way, investors reacted to news of the biggest one-month decline in services in seven years by selling everything in sight. The makers of construction and raw materials suffered the most, follower by insurance companies and those manufacturing agricultural machinery. No single group of stocks posted a gain.
Separately, Banc of America Securities contributed to the bearish mood when it downgraded Yahoo! Inc. (Nasdaq: YHOO) to “neutral” from “buy.”
The Russell 2000 was trending down during the entire session, skidding to its lowest level at the close.
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:
• Yucheng Technologies Ltd. (YTEC), up 18% to $18.08 on news of a rise in fourth-quarter profit.
• Netscout Systems, Inc. (NTCT), up 18% to $11.27 on news that third-quarter net loss was not as bad as analysts expected.
• Globecomm Systems, Inc. (GCOM), up 12% to $10.31 on news that its CEO has been named a finalist for an industry award.
• SiRF Technology Holdings, Inc. (SIRF), down 55% to $7.36 on news of an analyst downgrade.
• Rochester Medical Corp. (ROCM), down 19% to $10.75 on news of a decline in first-quarter earnings.
• IndyMac Bancorp, Inc. (IMB), down 18% to $8.50.
• SiRF Technology Holdings, Inc. (SIRF) 62,683,700 shares traded.
• IndyMac Bancorp, Inc. (IMB) 5,936,200 shares traded.
• Hovnanian Enterprises, Inc. (HOV) 4,972,700 shares traded.
The day saw 28 small-cap stocks set 52-week lows, while four small-caps established a 52-week high.
