Russell jumps as Dow sets record
The Russell 2000 (NYSE: IWM) is leading the bulls’ stampede, up more than 2%, while the Dow (INDU) is on record territory. At 2:20 p.m. ET, the small-cap index had added 19.01 points, or 2.36%%, to 824.46. The Dow Jones Industrial Average had gained 195.82 points, or 1.41%, to 14,091.45, above its close of 14,000.41 on July 19.
The bulls are dominating trading this afternoon as investors speculate that the worst is over for the subprime mortgage sector.
Homebuilders, which have been hit particularly hard by the ongoing slump in the U.S. housing sector, got a breath of fresh air today when Citi Investment Research advised buying shares of Lennar Corp. (NYSE: LEN), D.R. Horton, Inc. (NYSE: DHI), Pulte Homes, Inc. (NYSE: PHM), Centex Corp. (NYSE: CTX) and The Ryland Group, Inc. (NYSE: RYL).
Citi Investment Research, the research arm of financial services giant Citigroup Inc. (NYSE: C), said that shares of the builders may be poised for a rally.
Also seeing its fortunes rise is micro-cap company Tarragon Corp. (Nasdaq: TARR), following news before the opening that Fannie Mae will reinstate $79.6 million in loans to the New York-based homebuilder and real estate developer.
In economic news, activity in the manufacturing sector expanded in September for the eighth consecutive month, according to the Institute for Supply Management. The Tempe, Ariz.-based supply management association reported after the start of trading that its factory index fell to 52 from a level of 52.9 in August. A reading of 50 signifies an expansion.
Economists’ projections were all over the map, but the official numbers were below the level most had predicted. New orders declined and companies responded by reducing prices and inventories.
The data suggest that the economy is slowing down but not headed for a recession. Manufacturing makes up about 12% of U.S. gross domestic product.
Elsewhere, the price of oil has retreated $1.50 to $80.17 a barrel, as investors cash in on profits made during the run-up in late September.
