Small caps up thanks to Bernanke
The Russell 2000 (NYSE: IWM) and the other major U.S. indices are posting gains on news of a possible interest rate cut. At 2:46 p.m. ET, the small-cap index had advanced 7.49 points, or 1.05%, to 719.61. The Dow Jones Industrial Average (INDU) was up 135.59 points, or 1.06%, to 12,870.90.
“In light of recent changes in the outlook for and the risks to growth, additional policy easing may well be necessary,” U.S. Federal Reserve chairman Ben Bernanke told an audience at the Women in Housing and Finance and Exchequer Club this afternoon.
Those comments sent stocks rising and fueled speculation that the Fed is considering lowering the federal funds rate. But the bullish mood did not last and within an hour small-cap stocks were back down to their starting level.
Blame the bearish mood on the uncertain economic environment.
The day began with news from U.S. retailers that December sales were weak, suggesting that consumer spending is slowing. That would be a negative development, since consumption is about 70% of gross domestic product.
Economic growth is already being weighed down by the slump in the housing sector and higher energy costs.
“Incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced,” Bernanke said today.
Fortunately, thus far the labor market appears to be weathering the turmoil. The U.S. Labor Department before the start of trading today said that jobless claims for the week ended Jan. 5 fell to a two-month low of 322,000 from a revised level of 337,000 a weak earlier.
Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:
Biggest percentage gainers:
• Eddie Bauer Holdings, Inc. (EBHI), up 37% on news of a rise in same-store revenue.
• IndyMac Bancorp, Inc. (IMB), up 15%.
• Helicos BioSciences Corp. (HLCS), up 17%.
Biggest percentage losers:
• Electronics for Imaging, Inc. (EFII), down 32% on news it expects a decline in fourth-quarter earnings and revenue.
• Nanometrics Inc. (NANO), down 27% on news it plans on cutting 7% of its workforce.
• Interactive Intelligence, Inc. (ININ), down 15%.
About the Author
Reporter Alex Alexandrov is based in SmallCapInvestor.com's Washington, D.C. bureau.
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