Small caps down
The Russell 2000 (NYSE: IWM) and the other major U.S. indices fell today on more financial problems and fears of a consumer slowdown. The small-cap index dropped 15.56 points, or 2.16%, to 704.65. The Dow Jones Industrial Average (INDU) retreated 246.79 points, or 1.92%, to 12,606.30.
On a year-to-date basis, the Russell 2000 has lost 8.01%, while the Dow is off 4.96% and the S&P 500 has shed 4.59%.
The bears were in the driver’s seat today as news of more pain at major financial firms sparked worries that the subprime mortgage mess could take its toll on the American consumer.
Small-cap stocks opened with a drop and never looked up on news that Merrill Lynch & Co., Inc. (NYSE: MER), the world’s largest brokerage house, may incur $15 billion in losses from investments in securities backed by mortgage loans.
Mortgage lenders nationwide frequently packaged loans and sold them as securities to financial companies, and as a result both parties have suffered billions in losses as U.S. home prices started to stagnate in the second half of 2006 and many borrowers defaulted on their loans and went into foreclosure.
Adding to the gloom was New York-based credit card issuer American Express Co. (NYSE: AXP), which announced that it will absorb a fourth-quarter pretax charge of about $440 million due to slower spending by card members and an increase in delinquencies.
That’s a sign that consumption could be slowing down, a development that spells trouble for the economy since consumption is about 70% of U.S. gross domestic product.
Investors got even more jittery when luxury jewelry seller Tiffany & Co. (NYSE: TIF) said that it is lowering its guidance for the fiscal year as same-store sales declined 2% during the November and December holiday period.
Conventional wisdom tells us that wealthy consumers should not be negatively affected by an economic slowdown, which is why news of Tiffany’s slower sales forecast was seen as a bearish signal by markets.
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:
• AmCOMP Inc. (AMCP), up 37% to $12.01 on news it will be acquired by Employers Holdings, Inc. (EIG).
• Titan Machinery Inc. (TITN), up 33% to $17 on news of a rise in third-quarter profit.
• Origin Agritech Ltd. (SEED), up 23% to $10.91.
Biggest percentage losers:
• Cadence Pharmaceuticals, Inc. (CADX), down 62% to $5.36 on news a clinical trial did not meet its primary endpoint.
• Commercial Vehicle Group, Inc. (CVGI), down 18% to $10 on news of an analyst downgrade.
• Interactive Intelligence, Inc. (ININ), down 17% on news the company expects fourth-quarter revenues to fall short of analysts’ estimates.
Volume leaders:
• Origin Agritech Ltd. (SEED) 7,461,400 shares traded.
• The Children’s Place Retail Stores, Inc. (PLCE) 5,573,800 shares traded.
• Cadence Pharmaceuticals, Inc. (CADX) 5,292,700 shares traded.
The day saw 118 small-cap stocks set 52-week lows, while one small cap established a 52-week high.
