Russell 2000 the biggest loser
Of the major U.S. indices, the Russell 2000 fell the most on a day of seesaw trading that ended in the red on renewed concerns the troubles in the sub-prime mortgage market might spread. The Russell 2000 dropped 7.29 points, or 0.87%, to finish at 827.46. The Dow Jones Industrial Average shed 8.21 points, or 0.06%, to 13,352.05.
Stocks began the morning mixed on news that purchases of existing home sales declined 0.3% in May to an annual rate of 5.99 million, according to the National Association of Realtors. That’s the lowest level since June 2003. April sales were 6.01 million at an annualized rate.
The number of homes waiting to be sold increased 5% to 4.43 million. The median price of an existing home fell 2.1% to $223,700.
The bulls temporarily took center stage in the early afternoon after a fall in the yield on the 10-year U.S. Treasury note. The yield closed at 5.090%, below Friday’s level of 5.132%.
However, the bears quickly wrestled back control on renewed worries about the sub-prime mortgage market. On Friday, June 22, investment bank Bear, Stearns & Co. (NYSE: BSC) assumed the $3.2 billion loans to its hedge fund, which had made bets on sub-prime mortgage bonds. However, today word spread that the company may put up only $1.6 billion to bail out the troubled hedge fund.
Among specific small-cap companies:
Shares of U.S. Energy Systems Inc. (Nasdaq: USEY) stumbled hard, losing $1.00, or 44%, to $1.27, following news that financial difficulties may lead it to bankruptcy. A working capital shortfall of up to $3.2 million is projected for the year 2007, the New York-based energy company reported before the opening bell. U.S. Energy Systems said that it expects that a planned expansion of its operations in the United Kingdom will significantly exceed its capital expenditure budget. Without refinancing, the raising of additional capital, or the sale of certain assets, the company will be unable to meet operating requirements and certain contractual obligations as they become due starting August 2007.
True Religion Apparel Inc. (Nasdaq: TRLG) will launch a new line of swimwear for women, men, and boys and girls, the Vernon, Calif.-based company announced before the start of trading. True Religion will partner with beach and resort fashions supplier InGear Swimwear, LLC, which will design, produce, and distribute the clothing starting in November 2007. Shares moved up $1.98, or 10%, to close at $21.62.
Three shareholders who own 67% of Fuwei Films (Holding) Co., Ltd. (Nasdaq: FFHL) are being investigated by the Communist Party, the Chinese maker of high quality plastic films reported after the start of trading. The company said that it has not received written notification from government authorities concerning the proceedings of the investigation. Even though one of the three men in question was a director at Fuwei Films, none were involved in day-to-day operations. Shares fell $1.01, or 14%, to end the day at $6.14.
