Small caps sag in afternoon trading
Small caps are taking a beating in Friday’s mid-session trading, as crude oil prices surged and credit jitters prompted a broad sell-off in the financial sector. At 12:04 p.m. ET, the Russell 2000 (NYSE:IWM) was down 10.85, or 1.47%, at 726.98.
Small-cap investors tried to rally in the third hour of trading but met resistance at the 730 notch. After the brief resurgence, the small-cap slide is continuing into the afternoon session.
Merrill Lynch (NYSE:MER) started off the selling frenzy after cutting its estimates for regional banks. Rival investment banks Goldman Sachs (NYSE:GS) and JP Morgan (NYSE:JPM) were both in the red in midday trading as well. MER is down 3.9%, GS has fallen about 1% and JPM is off 0.4%.
Crude oil futures have rebounded from the largest one-day decline in about three months. In recent trading, crude has climbed $3.29 to $135.22 a barrel. The rebound in crude prices was accompanied by a falling U.S. dollar, which is down against both the euro and the yen.
Broad market sectors attracting sellers today were airlines, computer storage devices, plastics and rubber, casinos, auto and truck manufacturers, audio and video equipment and computer peripherals. Sectors on the upside included school services, savings and loans banks, gold and silver and oil well services and equipment companies.
Among small-cap movers, the top losers included Banner Corp. (Nasdaq:BANR) after investment bank Howe Barnes Hoefer & Arnett reiterated a "sell" rating on the bank holding company and slashed its price target to $12 from $18. Ocwen Financial Corp. (NYSE:OCN) is down 11% after Fitch Ratings said it has been carefully tracking subprime transactions serviced by the West Palm Beach, Fla.-based finance company. Medis Technologies Ltd. (Nasdaq:MDTL) has plunged 27% on news that the firm was selling about $29 million in securities. MF Global (NYSE:MF) was down about 18%, and continues to reel in the wake of a 40% rout earlier this week amid sinking interest rate trading revenue. The company issued a statement that it viewed the shortfall as temporary, but investors weren’t buying.
Bucking the overall market downdraft, the biggest gainers in midday trading included First California Financial Group, Inc. (Nasdaq:FCAL), which has jumped 36% despite no announcements. Bank of the Ozarks, Inc. (Nasdaq:OZRK) was up about 12% after it reaffirmed guidance before the opening bell. The regional bank said it is on track for 2008, that it is “well capitalized” and has no present plans to raise additional equity capital. Trubion Pharmaceuticals (Nasdaq:TRBN) was up 10% mid-session on news that a research extension has been granted by Wyeth Pharmaceuticals (NYSE:WYE). Also, The Steak N Shake (NYSE:SNS) was up some 5% as the company announced a new board chairman.
