Big blue lifts small caps

Alex Alexandrov | Jan 14, 2008 4:35pm EST | Comment

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The Russell 2000 (NYSE: IWM) and the other major U.S. indices moved up today on news of a stronger-than-expected profit at International Business Machines Corp. (NYSE: IBM). The small-cap index gained 7.83 points, or 1.11%, to 712.48. The Dow Jones Industrial Average (INDU) added 171.85 points, or 1.36%, to 12,778.15.

On a year-to-date basis, the Russell 2000 is off 6.99%, while the Dow has lost 3.67% and the S&P 500 has declined 3.55%.

Stocks small and large got off to a positive start as the bulls dominated trading today on news that IBM, the largest information technology company in the world, reported better-than-expected preliminary quarterly results.

The Armonk, New York-based company expects earnings from continuing operations for the quarter ended Dec. 31 to be $2.80 per share, above analysts’ projections of $2.60 per share.

Investors clearly liked the news so much that they disregarded a forecast from Hoffman Estates, Ill.-based retailer Sears Holdings Corp. (Nasdaq: SHLD), which forecasted that fourth-quarter earnings will be below analysts’ expectations due to a decline in same-store holiday sales.

That’s troubling because it points to a negative economic trend.

The announcement from Sears is the latest sign that consumer spending, which comprises about 70% of U.S. gross domestic product, has begun to slow. In the past few weeks many U.S. retailers, including those catering to the wealthy, have reported slugging sales.

That’s surprising, since those with deep pockets usually spend freely regardless of the surrounding economic environment.

The worst case scenario is that we’re seeing the beginning of a decline in personal consumption, a development which has not been seen in the United States in more than a decade and which will most likely push the economy into recession.

Investors will be looking at Tuesday’s report by the U.S. Census Bureau on December retail sales for more clues. A poor showing will almost certainly make the bears roar.

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:

• A.S.V., Inc. (ASVI), up 45% to $17.79 on news it is being purchased by Terex Corp. (TEX) for about $488 million.
• Golden Cycle Gold Corp. (GCGC), up 35% to $14.20 on news it has entered into an agreement to be acquired by AngloGold Ashanti Ltd. for about $149 million.
• LaserCard Corp. (LCRD), up 21% to $11.63 on news Italy’s state printer has invited interested parties to submit a bid to help the rollout of the Italian Citizen ID Card program.

Biggest percentage losers:

• The Steak n Shake Co. (SNS), down 18% to $7.80 on news of a decline in same-store sales during the fiscal first quarter.
• MEMSIC Inc. (MEMS), down 16% to $8.41.
• Downey Financial Corp. (DSL), down 13% to $24.45 on news it has reclassified $99 million of loans as non-performing.

Volume leaders:

• Origin Agritech Ltd. (SEED) 10,928,300 shares traded.
• A.S.V., Inc. (ASVI) 9,001,200 shares traded.
• Dendreon Corp. (DNDN) 7,737,200 shares traded.

The day saw 69 small-cap stocks set 52-week lows, while nine small caps established a 52-week high.