Russell 2000: Thrice is not nice
The Russell 2000 (NYSE: IWM) fell for the third consecutive time today following news of a decline in industrial production and renewed fears of a credit squeeze. The Russell 2000 lost 2.10 points, or 0.27%, to 769.50. The Dow Jones Industrial Average (INDU) added 66.74 points, or 0.51%, to 13,176.79.
On a year-to-date basis, the Russell 2000 has retreated 2.28%, while the Dow has risen 5.63% and the S&P 500 has added 2.97%.
Industrial production unexpectedly fell 0.5% in October, the U.S. Federal Reserve reported before the opening. That’s the biggest decline since January, defying economists’ projections of a rise of 0.1%. Industrial production added 0.2% in September.
The decline was due primarily to a 1.6% drop in utilities, as well as smaller declines in mines, construction and consumer goods. Compared with October 2006, industrial production has increased 1.8%.
Capacity utilization for the total industry declined to 81.7% from 82.2% in September.
The data tell us that the U.S. economy is probably headed for a slowdown, as industrial production is about 20% of gross domestic product. On the plus side, factories have room to ramp up production without triggering inflation.
That news was enough to deflate stocks, as the Russell 2000 fell shortly after the opening. The Dow joined it in negative territory at about 10:30 a.m. ET.
But there was also positive news, coming in the form of analysts raising their recommendations for Hewlett-Packard Co. (Nasdaq: HPQ), the world’s largest maker of personal computers, and energy giant Chevron Corp. (NYSE: CVX).
Small-cap solar cell manufacturer Canadian Solar Inc. (Nasdaq: CSIQ) also contributed to the bullish per-market sentiment when it announced that it has signed a contract for new solar power station projects.
Nevertheless, the small-cap index was unable to get traction, only once raising its head above the flat line midway through the session and then going down again. The Dow spent most of the afternoon in the green.
A senior economist with investment bank Goldman Sachs Group, Inc. (NYSE: GS) issued a note today forecasting that banks might need to scale back their loans by as much as $2 trillion to deal with credit losses stemming from the slump in the U.S. housing sector.
Home prices started to sag in the second half of 2006, leading to a wave of foreclosures that damaged mortgage lenders nationwide and dented financial institutions that had purchased securities backed by subprime mortgage loans.
The news came as an unpleasant reminder of the subprime meltdown’s capacity to drag down economic growth.
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:
Biggest percentage gainers:
• Coley Pharmaceutical Group, Inc. (COLY) up 160% to $7.81 on news that it will be bought by Pfizer Inc. (PFE) for $164 million.
• U.S. Auto Parts Network (PRTS) up 25% to $9.27. A company representative was not available for comment.
• Canadian Solar Inc. (CSIQ), up 15% to $17.76 on news that is has signed a new contract to deliver solar power station projects in Spain.
Biggest percentage losers:
• Acacia Research-Acacia Technologies (ACTG), down 34% to $11.37 on news of a negative ruling in a patent infringement trial with Microsoft Corp. (MSFT).
• The9 Limited (NCTY), down 32% to $21.50 on news of an analyst downgrade and a decline in third-quarter net income.
• Chordiant Software Inc. (CHRD), down 20% to $9.26 on news that its fiscal 2008 profit guidance failed to impress analysts.
Volume leaders:
• Spansion Inc. (SPSN) 8,008,700 shares traded on news it will develop a new generation of memory solutions.
• Coley Pharmaceutical Group, Inc. (COLY) 7,834,000 shares traded on news that it will be bought by Pfizer Inc. (PFE) for $164 million.
• Virgin Mobile USA, Inc. (VM) 6,511,200 shares traded on news it is being investigated for possible securities and other legal violations.
The day saw 96 small-cap stocks set 52-week lows, while 9 small caps established 52-week highs.
