Surprise rally lifts Russell 2000
The Russell 2000 (NYSE: IWM) reversed earlier losses and posted a solid gain as investors embraced news of a report that the end of writedowns is near. The small-cap index climbed 12.43 points, or 1.86%, to 679.74. The Dow Jones Industrial Average (INDU) advanced 35.50 points, or 0.29%, to 12,145.74.
On a year-to-date basis, the Russell 2000 has shed 11.26%, while the Dow is down 8.44% and the S&P 500 has decreased 10.41%.
Stocks small and large opened with steep declines but managed to recover midway through the session on news of a report by rating agency Standard & Poor that said the end is in sight for writedowns stemming from the mess in the subprime mortgage sector.
Also helping the bulls establish their dominance was news of a bill proposed by House Financial Services Committee chairman Barney Frank that would allow the U.S. Federal Housing Administration to refinance mortgages that have been written down by lenders.
Small-caps confidently moved into the green at about 12 p.m. ET and never looked back.
The bearish mood in the morning was partially due to news from the U.S. Commerce Department before the opening that retail sales dropped 0.6% in February, defying economists’ forecasts for an increase of 0.2%.
“The weakness in February retail sales, coming on top of a weak holiday shopping season, shows that consumers are now sitting on their wallets,” said Arun Raha, vice president of economic research and consulting for the North American operations of reinsurance company Swiss Re, in an email. “This may turn around after the one time tax-rebate checks get delivered later in the year.”
“We could well be in a recession, and if not, the probability that we'll be in one this year remains elevated at about 55%,” Raha said.
Investors also got spooked on news that private equity investment firm Carlyle Group could collapse due to the inability of one of its affiliates to repay $16 billion of debt.
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:
• Cumulus Media Inc. (CMLS), up 28% to $6.25 on news that it will merge with an investment group.
• China Fire & Security Group, Inc. (CFSG), up 27% to $7.57.
• GateHouse Media, Inc. (GHS), up 20% to $5.86.
Biggest percentage losers:
• Sigma Designs, Inc. (SIGM), down 16% to $21.10 on news of a disappointing first-quarter sales guidance.
• Trimas Corp. (TRS), down 16% to $5.66 on news of a fourth-quarter net loss.
• Global Partners LP (GLP), down 14% to $22.50 on news of a decline in fourth-quarter earnings.
Volume leaders:
• Sigma Designs, Inc. (SIGM) 14,083,900 shares traded.
• AirTran Holdings, Inc. (AAI) 4,985,100 shares traded.
• Hovnanian Enterprises, Inc. (HOV) 4,739,400 shares traded.
The day saw 48 small-cap stocks set 52-week lows, while eight small caps established a 52-week high.
