Small caps like homeowner relief
The Russell 2000 (NYSE: IWM) is posting strong gains as investors react to the U.S. government’s plan to provide help to homeowners. At 2:39 p.m. ET, the small-cap index had added 17.16 points, or 2.24%, to 782.80. The Dow Jones Industrial Average (INDU) was up 107.87 points, or 0.80%, to 13,552.83.
The U.S. government and the lending industry have agreed to freeze the rates on some subprime mortgages to help cash-strapped borrowers and alleviate the prolonged slump in the housing sector. Some borrowers will be allowed to move to more favorable Federal Housing Administration mortgages.
The plan will affect borrowers with adjustable rate loans that are set to shift to higher rates, forcing many homeowners into foreclosure.
The relief comes just in time: the Mortgage Bankers Association reported today that 5.59% borrowers are now at least 30 days late making their mortgage payments, the highest percentage in more than 20 years. The trade group also said that the foreclosure process has been on 0.78% of mortgages in the three months ended Sept. 30, more than twice the rate a year ago.
Home prices began to stagnate in the second half of 2006 and the slump shows no signs of slowing down. The subsequent wave of foreclosures swelled the inventory of unsold homes, feeding the vicious cycle.
Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• Methode Electronics, Inc. (MEI), up 31% on news that fiscal second-quarter profit beat expectations.
• Fleetwood Enterprises, Inc. (FLE), up 23% on news of a narrower fiscal second-quarter loss.
• Hoku Scientific, Inc. (HOKU), up 26% on news it will borrow up to $185 million for the construction of a polysilicon production plant.
Biggest percentage losers:
• Innovative Solutions and Support, Inc. (ISSC) down 20% on news of a wider fiscal fourth-quarter loss.
• Zumiez Inc. (ZUMZ) down 13% on news of an analyst downgrade.
• China Natural Resources Inc. (CHNR), down 12%.
