Small caps rally big
The Russell 2000 (NYSE:IWM) raced ahead on news that a manufacturing index declined less than expected. The small-cap index advanced 17.29 points, or 2.60%, to 681.42. The Dow Jones Industrial Average (INDU) climbed 261.66 points, or 2.16%, to 12,361.32.
On a year-to-date basis, the Russell 2000 has shed 11.05%, while the Dow is down 6.81% and the S&P 500 has retreated 9.46%.
Small-cap stocks opened with a modest rise but picked up steam after 10 a.m. ET, when the Philadelphia Federal Reserve reported that its index of regional manufacturing activity showed a reading of -17 in March, while economists had forecasted -20. The reading for February was -24.
The report is the most-watched regional manufacturing index, considered to be a barometer of manufacturing nationwide. Investors disregarded the fact that the data represent the longest period of contraction in five years and pushed stocks higher.
In other bullish news, an analyst said that mortgage purchases by Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) will help right the mortgage market. Today the federal government adopted changes that allow the two companies to invest more in mortgages and related securities.
Separately, the U.S. Labor Department reported before the opening that jobless claims for the week ended March 15 increased 22,000 to 378,000. Economists were expecting to see a much smaller increase.
“The jobless claims number is further evidence of a weakening economy,” said Arun Raha, vice president of economic research and consulting for the North American operations of reinsurance company Swiss Re, in an email. “As economic activity has weakened, the pace of layoffs is increasing.”
“The economy is most probably in recession, and if not, there is a 70% chance that it will be in one soon.” Raha concluded.
Shares of airline companies were the best-performing industry group, with small-cap Alaska Air Group, Inc. (NYSE:ALK) among them.
On the flip side, shares of golf and silver companies were the worst-performing industry group. Among them was small-cap gold mining company DRDGOLD Ltd. (Nasdaq:DROOY).
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:
• PC Mall Inc. (MALL), up 88% to $14.07.
• ValueVision Media, Inc. (VVTV), up 58% to $7.20.
• AbitibiBowater Inc. (ABH), up 36% to $9.77 despite news of a wider full-year 2007 net loss.
• Borders Group, Inc. (BGP), down 29% to $5.07 on news it might sell itself.
• Abaxis Inc. (ABAX), down 12% to $20.89.
• Power Medical Interventions, Inc. (PMII), down 11% to $6.99 following news its COO has resigned.
• Borders Group, Inc. (BGP) 26,078,800 shares traded.
• Hovnanian Enterprises, Inc. (HOV) 9,531,900 shares traded.
• Furniture Brands International, Inc. (FBN) 4,969,300 shares traded.
The day saw 34 small-cap stocks set 52-week lows, while six small caps established a 52-week high.
