Small caps sink
The Russell 2000 small cap index declined sharply as U.S. stocks erased early gains due to concerns that strong home sales will make a cut in interest rates unlikely. The Russell 2000 fell 12.74 points, or 1.52%, to 823.80. The Dow Jones Industrial Average lost 84.52 points, or 0.62%, to close at 13,441.13.
Shares of Wilmington, Del.-based Shiloh Industries, Inc. (Nasdaq: SHLO) fell on news of a sharp drop in profit. Net income for the second quarter ended April 30 was $2.0 million, or $0.12 per share, a 73% decline compared with a net income of $7.3 million, or $0.45 per share, in the second quarter of fiscal 2006, the manufacturer of equipment for the automotive industry said before the opening bell. Analysts were expecting earnings of $0.16 per share. Sales decreased 9.4% to $155.9 million, compared with $172.1 million a year earlier. Shiloh blamed the decrease on reduced production volumes experienced by the North American automotive and heavy truck industries, for which it supplies parts. The stock fell $1.13, or 11%, to close at $8.87.
Canada’s Descartes Systems Group Inc. (Nasdaq: DSGX), a provider of logistics technology solutions, reported a narrowing of its quarterly profit. Net income for the quarter ended April 30 was $1.1 million, compared with $1.2 million a year earlier, the company said before market open. That translates to earnings of $0.02 per share, compared with $0.03 in the first quarter of fiscal 2007. Wall Street was looking for net income of $0.05 per share. The stock lost $0.33, or 7%, to end the day at $4.23.
Shares of TurboChef Technologies, Inc. (Nasdaq: OVEN) dropped $1.12, or 8%, to $12.69, following news that the maker of food preparation technology continued losing money. The net loss of the quarter ended March 31 was $4.9 million, or $0.17 per share, the same as during the first three months of 2006, the Atlanta-based company said after Wednesday’s close. The 2007 first-quarter loss includes charges of $1.3 million, or about $0.04 per share, in marketing costs related to the launch of new residential oven products. Seven analysts polled by Thomson Financial had projected a net loss of $0.07 per share. TurboChef announced also that during the quarter it signed an agreement with restaurant chain Boston Market.
Trading started of on a bullish note when the U.S. Commerce Department said that sales of single-family homes jumped 16% in April. Lower prices and incentives introduced by builders eager to sell property led to the largest gain in 14 years, following four months of declines.
However, the bears returned on concerns that the larger-than-expected increase in home sales makes it less likely that the U.S. Federal Reserve will cut the federal funds rate any time soon.
In other economic news, orders for durable goods increased 0.6% in April, below economists’ median estimate of a rise of 1%.
Elsewhere, the number of American worker applying for jobless benefits increased 15,000 to a seasonally-adjusted level of 311,000 during the week ended May 19, the Labor Department said. Economists were expecting an increase of 17,000.
