Small caps fall again
The Russell 2000 (NYSE: IWM) and the Dow Jones Industrial Average (INDU) fell for the second consecutive day as economic reports and poor earnings made investors bearish. The small-cap index lost 10.87 points, or 1.39%, to 771.60. The Dow shed 120.96 points, or 0.91%, to 13,110.05.
On a year-to-date basis, the Russell 2000 has retreated 2.01%, while the Dow has risen 5.09% and the S&P 500 has added 2.44%.
The U.S. economy came into focus today when the Labor Department announced before the start of trading that its consumer price index increased 0.3% in October. The result was expected by economists and follows a similar rise in September.
Core prices, which exclude the volatile costs of food and energy, added 0.2%, the same as in September.
“Despite rising energy prices, inflation appears restrained,” said Arun Raha, vice president of Economic Research and Consulting for the North American operations of reinsurance company Swiss Re, in an email. “Looking ahead, there are two opposing forces at work with respect to inflation—on one hand we have high oil prices that can feed through to the core, and on the other we have weakening economic activity that softens prices.”
Consumer prices have advanced 3.5% on a year-over-year basis, while core prices have increased 2.2%. The U.S. Federal Reserve has said that it prefers core prices to stay in the range between 1% and 2%.
“The Fed needs to continue keeping a close watch on the situation,” Raha concluded.
In other economic news, a separate report from the Labor Department showed that weekly jobless claims climbed 20,000 to 339,000, the highest level since April. Economists were expecting a much smaller rise of 3,000 from an upwardly revised level of 319,000 the previous week.
But worries of a softening labor market are probably premature, as the four week moving average, considered a more stable measure, stayed unchanged at 330,000 after the previous week’s average was revised.
Small-cap stocks began the day in negative territory and never recovered, while the Dow spent most of the morning in the green, then briefly fell just before 1 p.m. ET, then peaked and fell again.
Contributing to the bearish mood was news that department store J.C. Penney Company, Inc. (NYSE: JCP) lowered its fourth-quarter outlook, while semiconductor maker Applied Materials Inc. (Nasdaq: AMAT) said that it anticipates a fall in future orders.
Among small-cap companies, NovaStar Financial Inc. (NYSE: NFI) announced that it swung to a mind-boggling third-quarter loss of $64.05 per share, raising the possibility of bankruptcy.
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:
• Key Technology Inc. (KTEC), up 10% to $29.99 on news it swung to a fiscal fourth-quarter profit.
• MedCath Corp. (MDTH) up 9% to $23.95 following news of a drop in fiscal fourth-quarter earnings and a stock buy-back program.
• Encore Energy Partners LP (ENP), up 7% to $20.28. A company representative could not be reached for comment.
Biggest percentage losers:
• China Shenghuo Pharmaceutical Holdings, Inc. (KUN), down 26% to $5.45 on news of a decline in third-quarter net sales.
• Lifeway Foods Inc. (LWAY), down 23% to $10.60 on news of a decline in third-quarter profit.
• GlobalSCAPE Inc. (GSB), down 17% to $5.97 despite news of a rise in third-quarter profit.
Volume leaders:
• Novatel Wireless Inc. (NVTL) 4,986,800 shares traded.
• Kulicke and Soffa Industries, Inc. (KLIC) 4,939,500 shares traded on news of a rise in fiscal fourth-quarter earnings.
• Canadian Solar Inc. (CSIQ) 4,905,500 shares traded on news on Wednesday of a fourth-quarter outlook exceeding Wall Street’s projections.
The day saw 79 small-cap stocks set 52-week lows, while 10 small caps established 52-week highs.
About the Author
Reporter Alex Alexandrov is based in SmallCapInvestor.com's Washington, D.C. bureau.
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