Small caps up on credit relief
The Russell 2000 (NYSE: IWM) posted gains today as some of the world’s most influential central banks announced a plan to ease the credit squeeze. The small-cap index rose 5.44 points, or 0.71%, to 771.71. The Dow Jones Industrial Average (INDU) advanced 41.13 points, or 0.31%, to 13,473.90.
On a year-to-date basis, the Russell 2000 is down 2%, while the Dow has added 8.01% and the S&P 500 has climbed 4.94%.
The bulls ran the show today as investors cheered news that the U.S. Federal Reserve and four other major central banks will inject billions into global money markets to boost bank lending.
The Fed will allow depository institutions to receive billions in short-term funds at rates below the ones it normally charges for loans. Similar initiatives were announced by the central banks of Canada, England, Switzerland and the European Union.
The Fed also set that it has created “swap” lines with the European Central Bank and the Swiss National Bank, for $20 billion and $4 billion respectively. That allows the two banks to make dollar loans in their jurisdictions. Previously, foreign central banks were unable to inject funds in anything other than their own currency.
A number of major banks have in recent months reduced the flow of credit to businesses and consumers following the meltdown in the subprime mortgage market, which left many financial institutions with billions in losses as foreclosures and loan delinquencies made securities backed by subprime mortgages essentially worthless.
The surprise move today is an attempt to help financial markets recover from the subprime debacle before the mess slows U.S. economic growth to a near standstill – or causes a recession.
Stocks opened in spectacular style, but the rally lost steam as the session progressed.
Meanwhile, the U.S. Census Bureau reported that the trade deficit widened in October as imports increased more than exports. The numbers show the deficit at $57.82 billion, 1.2% above September’s upwardly revised total of $57.12 billion.
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:
• Nextest Systems Corp. (NEXT), up 63% to $19.54 on news it is being purchased by Teradyne Inc. (TER) for $325 million.
• EMCORE Corp. (EMKR), up 22% to $11.46 on news it will supply a solar power project in Ontario, Canada.
• BIDZ.com, Inc. (BIDZ), up 14% to $11.49.
Biggest percentage losers:
• CSK Auto Corp. (CAO), down 33% to $6.12 on news of an analyst downgrade.
• American Dental Partners, Inc. (ADPI), down 27% to $14.34.
• American Dairy, Inc. (ADY), down 25% to $13.53 on news it has dismissed its public accounting firm and withdrawn its 2007 outlook.
Volume leaders:
• Nextest Systems Corp. (NEXT) 7,589,900 shares traded.
• IndyMac Bancorp, Inc. (IMB) 4,960,800 shares traded.
• EMCORE Corp. (EMKR) 4,660,600 shares traded.
The day saw 61 small-cap stocks set 52-week lows, while 12 small caps established 52-week highs.
