Russell 2000 falls as Dow gains

Alex Alexandrov | Nov 29, 2007 5:01pm EST | Comment

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The Russell 2000 (NYSE: IWM) moved down today but the Dow Jones Industrial Average (INDU) posted a modest gain on news of reports showing a coming slowdown in U.S. economic growth. The small-cap index fell 3.98 points, or 0.52%, to 766.06. The Dow added 22.28 points, or 0.17%, to 13,311.73.

On a year-to-date basis, the Russell 2000 has lost 2.71%, while the Dow is up 6.71% and the S&P 500 has advanced 3.75%.

Stocks began the session in the red as investors worried that an economic slowdown is imminent even though gross domestic product grew at an impressive 4.9% annual rate during the third quarter of 2007, according to the Commerce Department. That’s an upward revision from the preliminary figure of 3.9%.

“The upward revision to third-quarter GDP is not all good news,” said Arun Raha, vice president of economic research and consulting for the North American operations of reinsurance company Swiss Re, in an email. “Apart from the higher-than-expected exports, we also got a higher-than-previously-estimated inventory buildup, which accounted for a large part of the increase.”

“My view on fourth-quarter growth remains pessimistic,” Raha concluded, echoing the fears of many investors.

Helping the bears control trading in the morning was news from the U.S. Labor Department that jobless claims for the week ended Nov. 24 rose 23,000 to 352,000, the highest number since February. The revised figure for the preceding week is 329,000.

The four-week moving average was 2,589,250, an increase of 20,500 from the preceding week’s revised average of 2,568,750.

“Employment is a lagging indicator, and as activity slows, we’ll see some softening in the job market,” said Raha. “The bad news on this front is yet to come.”

Bad news of a different kind came shortly after the start of trading, when the U.S. Census Bureau reported that new home sales for October missed projections. The numbers showed an increase of 1.7% to 728,000, but the total from September was revised down sharply to 716,000 from 770,000 previously.

The median sales price of new houses was $217,800, 15% cheaper compared with a year earlier, when the average new home cost $250,400.

The housing slump shows no signs of bottoming out any time soon.

Stocks spent the morning in negative territory but managed to climb above the flat line shortly before noon ET. But the Russell 2000 fell shortly after and stayed down, while the Dow dropped but moved up for the second time and closed with a gain.

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:

• Pacific Ethanol, Inc. (PEIX), up 41% to $6.62. A company spokesperson attributed the rise to a news report shortly before the close that ethanol producer VeraSun Energy Corp. (VSE) agreed to buy rival US BioEnergy Corp. (USBE), lifting stocks of other ethanol producers.
• Solarfun Power Holdings Co. Ltd. (SOLF), up 31% to $15.19 on news of a rise in third-quarter profit.
• TiVo Inc. (TIVO), up 25% to $7.46 on news of a narrower third-quarter loss.

Biggest percentage losers:

• The Cato Corp. (CTR) down 24% to $14.88 on news of a decline in third-quarter profit.
• American Woodmark Corp. (AMWD), down 21% to $18.16 on news it cut its full-year profit and sales targets.
• Jo-Ann Stores, Inc. (JAS), down 20% to $16.54 on news the fabric and craft retailer lowered its fiscal 2008 profit forecast.

Volume leaders:

• TiVo Inc. (TIVO) 9,623,000 shares traded on news of a narrower third-quarter loss.
• Solarfun Power Holdings Co. Ltd. (SOLF) 5,834,600 shares traded on news of a rise in third-quarter profit.
• BIDZ.com, Inc. (BIDZ) 5,611,900 shares traded on news the company is considering suing an editor who published a derogatory article.

The day saw 43 small-cap stocks set 52-week lows, while 17 small caps established 52-week highs.