Small caps lead way down
The Russell 2000 (NYSE: IWM) led the way down as the major U.S. indices fell on news of Merrill Lynch’s third-quarter loss and a sharp drop in sales of existing U.S. homes. The small-cap index lost 7.68 points, or 0.94%, to 810.85. The Dow Jones Industrial Average (INDU) let go 0.98 points, or 0.01%, to 13,675.25.
On a year-to-date basis, the Russell 2000 has increased 2.98%, while the Dow has added 9.63% and the S&P 500 has advanced 7.01%.
Small-cap futures were pointing lower and stocks fell out of the gate on news that Merrill Lynch & Co Inc. (NYSE: MER) suffered its first quarterly loss in six years due to $7.9 billion in write-downs.
The world’s largest brokerage house reported a third-quarter net loss of $2.24 billion, or $2.82 per share, below its previous forecast and analysts’ projections. Merrill Lynch blamed the dismal result on being overly exposed to securities backed by subprime mortgages.
The news came as a nasty reminder of the far-reaching effects of the subprime meltdown, which came about as a result of the ongoing slump in the U.S. housing sector. Many mortgage lenders nationwide went bankrupt in the past months following a wave of foreclosures by cash-strapped homeowners.
And the housing sector continues to agonize, at least according to numbers released today by the National Association of Realtors.
The trade association reported that sales of existing U.S. homes fell 8% in September to an annual pace of 5.04 million. That’s the lowest level since the measure was introduced in 1999. The pace of sales in August was a downwardly revised 5.48 million.
The median price of an existing home was $211,700 in September, a decline of 4.2% from a year earlier.
Signs of demand slowing due to the credit squeeze can also be found in the inventory data, which show that the supply of available homes rose 0.4% in September, compared with August.
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:
• Transmeta Corp. (TMTA), up 233% to $13.93 on news it settled a legal dispute with Intel Corp. (INTC).
• Citizens Inc. (CIA), up 19% to $8.43 on news it cancelled its proposed public offering of up to 6.5 million shares.
• China Yuchai International Ltd. (CYD), up 18% to $11.99 after news of a new CFO.
Biggest percentage losers:
• Hanmi Financial Corp. (HAFC), down 23% to $11.37 on news of a lower third-quarter profit.
• Hythiam Inc. (HYTM), down 18% to $7.00.
• Wavecom S.A. (WVCM), down 16% to $23.08 on news of a decrease in third-quarter sales.
Volume leaders:
• Transmeta Corp. (TMTA) 9,635,000 shares traded.
• Blockbuster Inc. (BBI) 4,279,500 shares traded on news of an analyst downgrade.
• Origin Agritech Ltd. (SEED) 3,890,300 shares traded on news it is opening a new production facility.
The day saw 69 small-cap stocks set 52-week lows, while 26 small caps established 52-week highs.
