Russell 2000 zooms ahead
The Russell 2000 (NYSE:IWM) and the Dow are jumping on expectations of a rate cut and news that major investment banks beat quarterly profit expectations.
At 10:08 a.m. ET, the small-cap index had climbed 16.01 points, or 2.46%, to 666.49. The Dow Jones Industrial Average (INDU) was up 238.70 points, or 1.99%, to 12,210.95.
The bulls are roaring and stocks small and large are flying high following news before the opening that fiscal first-quarter profit at investment banking giant The Goldman Sachs Group, Inc. (NYSE:GS) fell 53% but beat Wall Street’s projections. Similarly, Lehman Brothers Holdings Inc. (NYSE:LEH) also beat expectations despite a decline in profit.
That’s good news for investors, who were looking to see if investment banks will be able to weather the financial turmoil, particularly after Bear Stearns’ (NYSE:BSC) spectacular demise.
Helping the bulls establish their dominance is anticipation that the U.S. Federal Reserve will lower its target federal funds rate at its regularly scheduled policy meeting. The market is pricing a full 1% cut in the federal funds rate, dropping it to 2% from the current 3%. A decision will be announced at about 2:10 p.m. ET.
The federal funds rate is the rate at which commercial banks make overnight loans to each other.
With small-cap stocks rising, shares of Allscripts Healthcare Solutions, Inc. (Nasdaq:MDRX) are among the biggest winners. The Chicago, Ill.-based provider of clinical software announced before the opening that it is being purchased by London-based Misys Healthcare for about $330 million in cash.
Elsewhere, industrial shipping company Ultrapetrol (Bahamas) Ltd. (Nasdaq:ULTR) said after the close on Monday that it has approved a share repurchase program for up to $50 million of common stock.
Meanwhile, Perry Ellis International Inc. (Nasdaq:PERY) reported after the close on Monday that its fourth-quarter profit fell to $9.86 million, or $0.65 per share, from $10.7 million, or $0.68 per share, a year earlier. However, analysts were expecting the Miami, Fla.-based apparel company to report earnings of just $0.63 per share. The stock is up about 20%.
