Small caps feel housing heat
Small caps were unable to hold their own today in the wake of bad housing data, the unveiling of a $75 billion mortgage relief plan and Fed Chairman Ben Bernanke’s sharp growth-view cut for 2009.
At closing, the Russell 2000 (NYSE:IWM) was down 5.72, or 1.3%, to 423.18. The Dow and S&P 500 essentially closed flat. For the year, the Russell is down nearly 15.3%, with the Dow down 13.9% and the S&P 500 down 12.7%.
Before the opening bell this morning, the Commerce Department reported that construction of new homes and apartments fell to a record low annual rate of 466,000 in January — a 16.8% drop compared with analyst predictions of a mere 5% drop. Analysts were forecasting an annual rate of 530,000 units, down from 550,000 units in December.
Shortly after noon ET, President Obama took the podium in Mesa, Arizona, to unveil his mortgage relief plan, which is aiming to keep between 7 million and 9 million people from foreclosure. Of the nearly 52 million U.S. homeowners with a mortgage, about 27% owe more on their mortgage than their house is now worth, according to Moody's Economy.com. Obama’s plan would provide incentives to mortgage lenders in an effort to convince them to help up to 4 million borrowers on the verge of foreclosure, among other things. The plan did little to steer stocks higher, and the market continued to drag on later Fed news.
Fed Chairman Ben Bernanke spoke at the National Press Club in Washington, D.C. and discussed setting a target for inflation, on top of cutting his growth forecast for 2009, which did little to nudge stocks higher into the green.
