Small caps up on productivity news
The Russell 2000 (NYSE: IWM) is rising following news that U.S. productivity grew more than expected in the fourth quarter.
At 10:20 a.m. ET, the small-cap index had climbed 3.35 points, or 0.48%, to 704.93. The Dow Jones Industrial Average (INDU) had advanced 54.14 points, or 0.44%, to 12,319.27.
Worker productivity grew more than expected during the fourth quarter, the U.S. Labor Department reported before the start of trading. Productivity increased at an annual rate of 1.8% during the final three months of 2007, above the 0.5% rate expected by economists but below the downwardly revised 6% pace during the third quarter.
Productivity for the entire 2007 rose 1.6%, compared with 1% in 2006.
Increases in productivity allow for an increase in production without a corresponding increase in prices or a jump in the company’s costs.
Unit labor costs, which are a key measure of inflation, rose 1.6% after falling 1.9% in the third quarter. Economists were expecting fourth-quarter unit labor costs to rise 3.8%. Increases in labor costs must be matched by productivity increases in order to keep inflation in check.
The unexpectedly bullish productivity news lifted all the major U.S. indices out of the gate, but the Russell 2000 gave investors a scare when it briefly dipped into the red shortly before 10 a.m. ET.
Among the best performing small caps this morning is Multi-Fineline Electronix, Inc. (Nasdaq: MFLX), which makes flexible printed circuits and has seen its shares jump more than 40% on news that its first-quarter profit tripled.
On the other hand, nutritional and personal-care products maker USANA Health Sciences, Inc. (Nasdaq: USNA) forecasted that its first-quarter results will be below Wall Street’s projections due to soft consumer demand.
Shares of Monaco Coach Corp. (NYSE: MNC) have shifted into higher gear on news that the Coburg, Ore.-based recreational vehicle maker swung to a fourth-quarter profit.
FreightCar America, Inc. (Nasdaq: RAIL) is riding in positive territory even though the maker of railcars swung to a fourth-quarter loss after closing a manufacturing plant.
