Russell swoons 1% on credit jitters
Small caps kicked off the second half of the year sharply lower in morning trading and remained in the red midday after the credit crunch’s aftershocks resurfaced and gripped the market.
At 12:27 p.m. ET, the Russell 2000 (NYSE:IWM) had sold off 8.46, or 1.13%, at 739.82, while the Dow is down 150.95, or 1.19%, to 12,487.37.
Small caps saw a broad sell-off Monday as major financial firms disclosed unsettling management shifts. Wachovia (NYSE:WB) said this morning that it is replacing CEO Ken Thompson with Chairman Lanty Smith on an interim basis, while Washington Mutual (NYSE:WM) reported that Kerry Killinger will leave his post as chairman, but will retain his position as CEO of the bank and home lender. Shares of Wachovia plunged to their lowest level since 1995.
Across the pond, Britain’s largest mortgage lender to residential rental units Bradford & Bingley (LON:BB) said that the housing market was getting worse and that it will slash the amount of cash it was initially expected to raise through a rights issue. Private equity firm TPG is expected to take a 20% stake in the hard hit lender.
Economic news out today added to market jitters, painting an austere macro picture. Construction spending sputtered to 0.4% in the month of April, below the 0.5% economists were expecting.
The ISM Manufacturing Survey for May, which came out this morning, was better-than-expected, but nevertheless signaled contraction. The measure of domestic manufacturing activity clocked in at 49.6, above the forecasted 48.5 and up from last month’s 48.6, but below 50—the benchmark for expansion.
After gushing lower earlier in the session, crude oil futures changed course and rallied $1.05 to $128.4 midday. The greenback was mixed against the euro and the yen, while gold gained $8.30 to roughly $900 per troy ounce midday.
Among the broader sell off, retail, hotels and consumer financial services were the sectors under the most pressure midday, while coal and oil and gas operations were among the few industry groups treading in the green.
Community Bankers Acquisition Corp. (Amex:BTC) crumbled 18% midday, while
Kohlberg Capital Corp. (Nasdaq:KCAP) slumped 12%, as financials sold off. Shares of Nexstar Broadcasting Group, Inc. (Nasdaq:NXST) slipped 12.5% midday after the television broadcasting company said this morning it named Adrian Giuhat for the position of Senior Vice President and Chief Technology Officer, a new position at the firm.
On the upside, Avant Immunotherapeutics, Inc. (Nasdaq:AVAN) spiked 32% mid-session after researchers found that the biopharmaceutical company’s vaccine doubled the survival time for people with the most common type of brain tumors. American Electric Technologies, Inc. (Nasdaq:AETI) is up 22% midday after the supplier of custom-designed power distribution for alternative energy industries formally announced its entry into the wind power market this morning.
Shares of oil exploration and production company Mexco Energy Corp. (Amex:MXC) also saw upside, spiking 19.4% midday, as the oil and gas sector continued to reign as one of the only sectors in the green midday.
