Small caps rise on rate cut hopes
The Russell 2000 (NYSE: IWM) is posting strong gains as investors speculate that the U.S. Federal Reserve will lower interest rates in December.
At 10:50 a.m. ET, the small-cap index had added 8.95 points, or 1.17%, to 775.01. The Dow Jones Industrial Average (INDU) was up 110.55 points, or 0.83%, to 13,422.28.
The bulls are dominating Wall Street as investors speculate that the U.S. Federal Reserve will cut its target interest rate when it meets on Dec. 11. Fueling the speculation is a speech by Chairman Ben Bernanke after the close on Thursday, during which he told the Charlotte Chamber of Commerce that economic uncertainty has increased due to turbulence in financial markets and the Fed must remain alert.
On Oct. 31, the Fed lowered the federal funds rate, the rate at which commercial banks make overnight loans to each other, to 4.50% from 4.75%.
In economic news, the U.S. Commerce Department reported that consumption increased 0.2% in October. Economists were projecting a rise of 0.3%, the same as September’s increase.
With consumption making up about 70% of gross domestic product, a slowdown would spell trouble for the economy. Many observers have been predicting that American consumers will pull back in the face of higher energy prices, tighter credit and the seemingly never ending slump in the housing sector.
Personal income also disappointed, adding 0.2% at an annual rate, below the 0.4% rise in September.
Elsewhere, the U.S. Census Bureau announced that construction spending for October fell a greater-than-expected 0.8%. Residential construction led the way down, dropping 2% from the level in September and 15.8% from the level a year ago.
Construction spending added 0.3% and economists had forecasted a decline of 0.3% in October.
Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• SeaChange International Inc. (SEAC), up 35% on news it swung to a third-quarter profit.
• Security Capital Assurance Ltd. (SCA), up 18%. A company spokesperson said the company does not comment on its stock movement.
• Clean Diesel Technologies, Inc. (CDTI), up 13%.
Biggest percentage losers:
• Dolan Media Co. (DM), down 8%.
• Sirtris Pharmaceuticals, Inc. (SIRT) down 9%.
• Pacific Ethanol, Inc. (PEIX), down 8% a day after ethanol producers rose on news that VeraSun Energy Corp. (VSE) agreed to buy rival US BioEnergy Corp. (USBE).
