Small caps fall on more credit fears
The Russell 2000 (NYSE: IWM) and the other major U.S. indices fell today as credit worries resurfaced following news of losses at Citigroup. The small-cap index fell 7.34 points, or 0.92%, to 790.44. The Dow Jones Industrial Average (INDU) lost 51.70 points, or 0.38%, to 13,543.40.
On a year-to-date basis, the Russell 2000 has increased 0.38%, while the Dow has added 8.57% and the S&P 500 has gained 6.04%.
The bears dominated trading today following news that Citigroup Inc. (NYSE: C), the largest U.S. bank, expects to incur additional losses of up to $11 billion after already suffering $6.5 billion in credit-related losses in the third quarter.
Analysts forecast that the credit problems will negatively affect Citibank in the fourth-quarter and lead to a net loss.
That was enough to scare investors, who had been hoping that this summer’s credit problems were in the past. Wall Street will now keep a watchful eye on other banks and brokerages for signs of additional losses stemming from the recession in the U.S. housing sector.
Many financial institutions bought securities backed by subprime mortgages that have become worthless in the wake of falling home prices and a wave of foreclosures by cash-strapped homeowners. No one knows for certain the extent to which the subprime debacle will damage the financial sector.
The Russell 2000 fell out of the gate and stayed in the red throughout the session, while the Dow managed to briefly rise into positive territory shortly before the close but fell again and closed down.
There was little in the way of economic news, except a report by the Institute for Supply Management showing that growth in the U.S. services industry slowed in October. The index of non-manufacturing businesses fell to 54 from 54.8 in September, the group said after the start of trading. The decline was expected by economists. A reading over 50 indicates growth.
Here are the day’s biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• Multi-Fineline Electronix Inc. (MFLX), up 21% to $17.80 on news of a higher fourth-quarter profit.
• BioSphere Medical, Inc. (BSMD), up 21% to $5.57 following news that its president and CEO will speak at an investment conference on Wednesday.
• Xinhua Finance Media Ltd. (XFML), up 16% to $8.54. A company representative attributed the rise to “market activity.”
Biggest percentage losers:
• Gevity HR Inc. (GVHR), down 34% to $6.18 on news of a lower third-quarter profit and a disappointing fourth-quarter guidance.
• Somaxon Pharmaceuticals Inc. (SOMX) down 29% to $5.75. An investor relations representative could not be reached for comment.
• China Precision Steel Inc. (CPSL), down 18% to $5.14. A company representative could not be reached for comment.
Volume leaders:
• Trident Microsystems Inc. (TRID) 5,249,300 shares traded.
• Radian Group Inc. (RDN) 5,114,500 shares traded.
• Horizon Offshore Inc. (HOFF) 4,332,500 shares traded.
The day saw 142 small-cap stocks set 52-week lows, while 19 small caps established 52-week highs.
