Wall Street sinks
Stocks ended the day down sharply due to fears that hedge funds that have invested in sub-prime mortgages will need to be bailed out. The Russell 2000 weathered the sell-off relatively unscathed, falling 5.06 points, or 0.60%, to finish at 834.75. The Dow Jones Industrial Average shed 185.58 points, or 1.37%, to 13,360.26.
Stocks were already heading south this afternoon and news that investment bank Bear, Stearns & Co. (NYSE: BSC) has assumed the $3.2 billion loans to its hedge fund in order to stop creditors from seizing assets only made things worse.
The announcement sparked concern that institutional investors will have to pick up the tab for funds that have invested in sub-prime mortgages.
Otherwise, the morning began with all eyes focused on the highly anticipated public offering of private equity firm Blackstone Group LP. The price had been originally set at $31 per share, but trading started at $36.45.
Among specific small-cap companies:
Specialty retailer of home living and entertaining products Cost Plus, Inc. (Nasdaq: CPWM) had an analyst cut its target price. Concerns of sluggish consumer spending and a tough environment for home fashion retail justify a lowering of the target price to $7 from $10, according to a research note released before the opening bell by UBS Investment Research analyst Brian Nagel. The stock is still rated as “Sell.” Shares of the Oakland, Calif.-based company declined $0.55, or 7%, to $7.74.
Shares of Quantum Fuel Systems Technologies Worldwide Inc. (Nasdaq: QTWW) ran out of gas, dropping $0.42, or 20%, to settle at $1.67, on news the provider of packaged fuel systems for specialty vehicles has agreed to privately place $18.75 million of common stock with institutional investors. The Irvine, Calif.-based company will sell a total of 12.5 million shares at a price of $1.50 per share, according to news reports before the opening bell. That’s 28.2% below the stock’s Thursday closing price of $2.09.
Magna Entertainment Corp.’s (Nasdaq: MECA) CEO Michael Neuman is leaving the company effective immediately, the Canadian horse track operator said after the start of trading. He will be succeeded by founder and Chairman Frank Stronach, 74. Stronach said that the company remains committed to selling some of its non-core assets in order to reduce debt. Shares fell $0.34, or 11%, to close at $2.83.
