A bullish day for small caps

Alex Alexandrov | Dec 10, 2007 4:56pm EST | Comment

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The Russell 2000 (NYSE: IWM) posted solid gains today as investors looked ahead to Tuesday’s Fed meeting and welcomed news of a cash injection into a major bank. The small-cap index advanced 5.68 points, or 0.72%, to 791.20. The Dow Jones Industrial Average (INDU) moved up 101.45 points, or 0.74%, to 13,727.03.

On a year-to-date basis, the Russell 2000 is up 0.48%, while the Dow has added 10.04% and the S&P 500 has climbed 7.01%.

Only the bears showed up today as investors focused their attention on the U.S. Federal Reserve’s Tuesday policy meeting. The Fed is widely expected to lower the federal funds rate, the rate at which commercial banks make overnight loans to each other, to give the economy a boost and ease financial strains.

On Oct. 31, the central bank lowered its target interest rate to 4.5% from 4.75%. During the preceding meeting on Sept. 18, the Fed voted to lower the rate to 4.75% from 5.25%.

The upbeat mood was also due to news that UBS AG (NYSE: UBS) has received a cash injection of about $11.5 billion dollars after the Swiss financial services giant became the latest casualty of the subprime mess.

The bank announced today that it has suffered $10 billion in write-downs due to bets placed on securities backed by subprime mortgages. Consequently, the Zurich-based company expects to report a loss for the fourth quarter and possibly the entire 2008 year.

Coming to the rescue was the government of Singapore, which shelled out $9.75 billion for a 9% stake. Additionally, an undisclosed investor from the Middle East paid $1.77 billion.

The cash infusion should allow UBS to continue normal operations without having its liquidity negatively affected by the losses.

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:

• Cardica Inc. (CRDC), up 30% to $10.83 after the company announced that it will hold a live webcast of an off-pump coronary artery bypass graft on Jan. 17.
• China Automotive Systems, Inc. (CAAS), up 20% to $8.41 on news it has signed its first aftermarket supply contract in the United States.
• Security Capital Assurance Ltd. (SCA), up 20% to $8.20 despite news it is facing a class action lawsuit that it misled investors.

Biggest percentage losers:

• Myers Industries, Inc. (MYE) down 31% to $14.98 on news that GS Capital Partners has sought more time to complete the acquisition of the maker of polymer products.
• NaviSite, Inc. (NAVI), down 31% to $14.98 on news of a wider fiscal first-quarter net loss.
• Force Protection, Inc. (FRPT), down 25% to $7.48 despite news it opened a new production facility in Roxboro, N.C.

Volume leaders:

• Force Protection, Inc. (FRPT) 7,232,600 shares traded.
• Hoku Scientific, Inc. (HOKU) 6,342,500 shares traded.
• Palm, Inc. (PALM) 6,119,000 shares traded on news of an analyst downgrade.

The day saw 27 small-cap stocks set 52-week lows, while 27 small caps established 52-week highs.