Strike two for Russell 2000

The Russell 2000 (NYSE: IWM) and the Dow Jones Industrial Average (INDU) fell for the second day in a row on news of housing and subprime concerns and record oil prices. The small-cap index let go 6.01 points, or 0.72%, to 823.35. The Dow lost 71.86 points, or 0.51%, to 13,912.94.

On a year-to-date basis, the Russell 2000 has increased 4.56%, while the Dow has added 11.53%.

Predictions by high-level U.S. officials that the slump in the housing sector will get worse and slow down economic growth brought out the bears today, as small and large caps ended in the red for the second consecutive day.

After the close on Monday, Fed chairman Ben Bernanke said that the slump in the housing sector is expected to get worse and be a drag on economic growth going into 2008. Treasury Secretary Henry Paulson made similar comments at Georgetown University’s law school today, adding that the federal government should work to avoid foreclosures and prevent property values from falling further.

As if to confirm the downcast predictions, the National Association of Home Builders announced that its monthly home builder confidence index fell more than expected in October to a record low.

Contributing to the negative mood was news of weaker-than-expected third-quarter earnings for Wells Fargo & Company (NYSE: WFC). CEO John Stumpf blamed disruptions in the credit markets.

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