Small caps steeply down

Alex Alexandrov | Oct 19, 2007 10:38am EDT | Comment

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The Russell 2000 (NYSE: IWM) is down steeply as the major U.S. indices are swimming in a sea of red following news of weak earnings.

At 10:34 a.m. ET, the small-cap index had lost 10.38 points, or 1.26%, to 814.65. The Dow Jones Industrial Average (INDU) was off 162.09 points, or 1.17%, to 13,726.87.

With little on the economic front, news of poor earnings from major corporate players is grabbing the headlines and spooking investors.

Charlotte, N.C.-based Wachovia Corp. (Nasdaq: WB), the fourth largest U.S. bank, reported before the opening that its third-quarter profit fell 10% due to difficult credit market conditions.

Net income stumbled to $1.69 billion, or $0.89 per share, compared with $1.88 billion, or $1.17 per share, a year earlier. Wall Street was looking for earnings of $1.03 per share. Wachovia said that it recorded a provision for credit losses of $408 million, about four times the level during the same three months of 2006.

In other disappointing news, heavy equipment maker Caterpillar Inc. (NYSE: CAT) announced a quarterly profit that missed analysts’ forecasts.

That’s a sign of the slowdown in housing, as residential builders are breaking ground on fewer new homes and have less need for Peoria, Ill.-based Caterpillar’s signature products. The company also reported a decline in machinery sales to nonresidential builders. That indicates that the commercial construction sector could go the way of residential construction.

Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:

Biggest percentage gainers:

• CyberSource Corp. (CYBS), up 18% on news of stronger third-quarter earnings.
• LaserCard Corp. (LCRD), up 16% on news of a narrower second-quarter loss.
• Steve Madden Ltd. (SHOO), up 12% on news of a possible sale.

Biggest percentage losers:

• Vascular Solutions Inc. (VASC), down 17% on news that third-quarter profit missed expectations.
• Nanophase Technologies (NANX), down 16% on news of a wider third-quarter loss.
• Nautilus Inc. (NLS), down 12% after swinging to a third-quarter loss.