Small caps take a beating
The Russell 2000 (NYSE: IWM) posted a major loss today following news of a record loss at automaker General Motors and more credit fears. The small-cap index fell 25.81 points, or 3.22%, to 775.96. The Dow Jones Industrial Average (INDU) was down 360.92 points, or 2.64%, to 13,300.02.
On a year-to-date basis, the Russell 2000 has fallen 1.46%, while the Dow has added 6.62% and the S&P 500 has gained 4.17%.
The bearish tone was set before the start of trading, when General Motors Corp. (NYSE: GM) announced a stunning third-quarter net loss of $39 billion, or $68.85 per share, compared with a loss of $147 million, or $0.26 per share a year earlier. The Detroit-based automaker explained that its record loss was due to a one-time charge against deferred tax assets.
The small-cap futures were pointing down, and the Russell 2000 and the other major U.S. indices began the day in negative territory, with the sell-off picking up steam during the session.
Investors largely disregarded positive economic news, which came in the form of a surprise jump in productivity. The U.S. Labor Department announced that third-quarter productivity increased 4.9%, the fastest rate of growth in the last four years. Economists were expecting an increase of 2.5% following a downwardly revised rise of 2.2% in the second quarter.
The same report showed that unit labor costs, which are a key measure of inflation, declined 0.2% in the second quarter. That also defied economists, who were forecasting a rise of 0.8%.
Overall, manufacturing activity increased 4.6% in the third quarter, compared with a growth of 2.4% in the second quarter. Manufacturing is about 15% of the U.S. economy.
But Wall Street did not seem impressed.
Instead, the bears gained strength following news that New York Attorney General Andrew Cuomo has sent subpoenas to Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). The attorney general wants to investigate whether the government-backed mortgage lenders purchased loans that were made on homes whose prices were overvalued.
That move raised more fears about the size of the fallout from the subprime credit meltdown this summer. Lenders, such as small-cap American Mortgage Acceptance Company (AMEX: AMC), have taken a hit due to stagnating home prices and a wave of foreclosures.
Speaking of the housing sector, the Mortgage Bankers Association reported today that mortgage applications for the week ending Nov. 2 decreased 1.6%. However, the more stable four-week moving average is up 0.7%.
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:
Biggest percentage gainers:
• CRM Holdings Ltd. (CRMH), up 21% to $8.20 on news that third-quarter profit increased.
• PC Biotech AG (GPCB), up 19% to $6.90 on news that it won a licensing dispute with Spectrum Pharmaceuticals Inc. (SPPI).
• Website Pros Inc. (WSPI), up 16% to $11.68 on news of a rise in third-quarter revenue.
Biggest percentage losers:
• Nastech Pharmaceutical Company Inc. (NSTK), down 38% to $8.62 on news it has re-acquired teriparatide nasal spray for treatment of osteoporosis from its collaboration partner, Procter & Gamble Pharmaceuticals Inc. (PG).
• MasTec Inc. (MTZ) down 28% to $10.18 on news that fourth-quarter guidance missed expectations.
• CompuCredit Corp. (CCRT), down 27% to $10.27 on news of a decline in third-quarter earnings.
Volume leaders:
• CompuCredit Corp. (CCRT) 4,805,400 shares traded on news of a decline in third-quarter earnings.
• Internap Network Services Corp. (INAP) 3,943,500 shares traded on news of higher third-quarter earnings.
• Novatel Wireless Inc. (NVTL) 3,681,400 shares traded.
The day saw 241 small-cap stocks set 52-week lows, while 11 small caps established 52-week highs.
