Small caps take a hit
The Russell 2000 (NYSE: IWM) fell extra hard today as the major U.S. indices tumbled on news of poor corporate earnings and unimpressive economic reports. The small-cap index lost 32.84 points, or 3.97%, to 795.18—its biggest percentage loss this year. The Dow Jones Industrial Average (INDU) tumbled 362.14 points, or 2.60%, to 13,567.87.
On a year-to-date basis, the Russell 2000 has increased 0.99%, while the Dow has added 8.76% and the S&P 500 has gained 6.48%.
The day began with steep declines on news that Exxon Mobil Corp. (NYSE: XOM) suffered a bigger-than-expected drop in third-quarter profit and missed Wall Street’s expectations, while Citigroup Inc. (NYSE: C) was downgraded to “sector underperform” from “sector perform” by investment bank CIBC World Markets over concerns that it might have to cut its dividend to shore up its capital.
Small caps led the way down as stocks dove so sharply that trading curbs were introduced to prevent a massive sell-off.
Investors also had to digest economic news, when the U.S. Commerce Department reported that personal income increased at a seasonally adjusted rate of 0.4% in September, as expected, compared with a rise of 0.3% in August.
However, personal consumption in September increased 0.3%, below the projected rise of 0.4%. That’s a worrying sign that the American consumer might be cutting down on spending in the face of higher oil prices and a recession in the housing sector. In August, personal consumption added a downwardly revised 0.5%.
The commerce department also announced that the price index for personal consumption expenditures, a measure of inflation, has added 2.4% on a year-to-date basis, above the U.S. Federal Reserve’s target range of between 1% and 2%. In August, the year-to-date PCE was 1.8%.
Also helping the bears dominate the session was the realization that Wednesday’s cut in the Fed’s target interest rate will most likely be the last one this year.
As if all that wasn’t enough, the Institute for Supply Management reported that its manufacturing index fell to 50.9 in October from 52.0 in September. A level above 50 indicates an expansion, which means that U.S. factories are coming dangerously close to a decline in overall production.
Here are the day’s biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• Spreadtrum Communications Inc. (SPRD), up 18% to $15.22 on news of a rise in third-quarter profit.
• Flanders Corp. (FLDR), up 17% to $5.73 despite news of a third-quarter loss due to accounting changes.
• Moldflow Corp. (MFLO), up 13% to $17.25. A company representative could not be reached for comment.
Biggest percentage losers:
• Smith Micro Software Inc. (SMSI), down 30% to $10.75 on news of an analyst downgrade.
• Flotek Industries Inc. (FTK), down 28% to $36.45 on news that third-quarter profit missed expectations.
• Vanda Pharmaceuticals Inc. (VNDA), down 26% to $11.15 on news it plans to offer $100 million of convertible senior notes due 2014.
Volume leaders:
• Powerwave Technologies Inc. (PWAV) 6,444,300 shares traded on news of a narrowed third-quarter loss.
• Vanda Pharmaceuticals Inc. (VNDA) 6,001,700 shares traded on news it plans to offer $100 million of convertible senior notes due 2014.
• Smith & Wesson Holding Corp. (SWHC) 5,475,400 shares traded following news on Wednesday of weak fiscal second-quarter guidance.
The day saw 156 small-cap stocks set 52-week lows, while 12 small caps established 52-week highs.
