Small caps collapse
The Russell 2000 (NYSE: IWM) and Dow lost big today as news of disappointing earnings and residual credit fears scared investors. The small-cap index suffered the biggest loss of the major U.S. indices, falling 26.24 points, or 3.18%, to 798.79. The Dow Jones Industrial Average (INDU) retreated for the fifth time this week, letting go 366.94 points, or 2.54%, to 13,522.02.
On a year-to-date basis, the Russell 2000 has increased 1.44%, while the Dow has added 8.34%.
The Russell 2000 futures were flat before the start of trading but the index opened in negative territory on news that Charlotte, N.C.-based Wachovia Corp. (Nasdaq: WB), the fourth largest U.S. bank, reported a 10% decline in its third-quarter profit due to difficult credit market conditions.
The bank also said that that it recorded a provision for credit losses of $408 million, about four times the level during the same three months of 2006.
The news came as an unpleasant reminder that the turmoil in the subprime mortgage sector, which peaked during summer months, is still relevant and capable of spreading shockwaves throughout the financial sector.
The subprime mortgage sector started bleeding earlier this year after U.S. housing prices went into reverse in the second half of 2006. The ongoing housing recession has been identified by observers as the biggest risk to the economy.
Today heavy equipment maker Caterpillar Inc. (NYSE: CAT) became the latest in a long list of casualties.
The Peoria, Ill.-based company, a Dow component, announced that quarterly profit missed analysts’ forecasts. Caterpillar attributed the shortfall to a decline in machinery sales to nonresidential builders, a worrying sign that the commercial construction sector could go the way of residential construction.
The bears took the reins and spent the rest of the session dragging stocks down.
Today’s corporate news increases the possibility of another cut in the target interest rate when the U.S. Federal Reserve convenes for a two-day meeting on Oct. 30.
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:
• CyberSource Corp. (CYBS), up 18% to $14.90 on news of a rise in third-quarter profit.
• LaserCard Corp. (LCRD), up 14% to $10.17 on news of a narrower second-quarter loss.
• Authorize.Net Holdings Inc. (ANET), up 13% to $21.58. A company representative could not immediately be reached for comment.
Biggest percentage losers:
• Triad Guaranty Inc. (TGIC), down 20% to $7.46. A company representative could not immediately be reached for comment.
• China Architectural Engineering Inc. (RCH), down 17% to $12.03.
• Isramco Inc. (ISRL), down 15% to $39.21. The company said it could not comment on the movement of its stock.
Volume leaders:
• Targa Resources Partners LP (NGLS) 10,281,200 shares traded, on news it is offering more shares for sale.
• CyberSource Corp. (CYBS) 4,640,000 shares traded.
• Coldwater Creek Inc. (CWTR) 4,343,100 shares traded.
About the Author
Reporter Alex Alexandrov is based in SmallCapInvestor.com's Washington, D.C. bureau.
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