Small caps declining

Alex Alexandrov | Jan 22, 2008 10:20am EST | Comment

Rating: Unrated [rate it]

The Russell 2000 (NYSE: IWM) and the other major U.S. indices are deep in the red amidst recession fears and an interest rate cut.

At 10:19 a.m. ET, the small-cap index had fallen 8.88 points, or 1.32%, to 664.30. The Dow Jones Industrial Average (INDU) was down 230.13 points, or 1.90%, to 11,869.17.

Stocks small and large are posting declines due to fears of a U.S. recession and sell-offs on some overseas exchanges.

Increased worries of an economic recession motivated the U.S. Federal Reserve to make an emergency cut in the federal funds rate to 3.50% from 4.25%.

The Fed has not moved to lower its target rate between meetings since September 2001, in the wake of the terrorist attacks. Its next regularly scheduled meeting is on Jan. 29 and 30.

“The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth,” the Fed said in a statement. “While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.”

The Russell 2000 opened with a large drop, losing more than 3% right of the bat, with the Dow posting a slightly smaller loss. But stocks trimmed those numbers and the roles reversed, the Dow now posting a deeper decline.

The bearish sentiment follows news that Bank of America Corp.’s (NYSE: BAC) fourth-quarter net income declined 95% to $0.05 per share from $1.16 per share a year earlier due to $5.28 billion in collateralized debt obligation write-downs. Analysts were expecting to see earnings of $0.18 per share.

Similarly, Wachovia Corp. (NYSE: WB) announced that its fourth-quarter profit slumped to $51 million, or $0.03 a share, compared with $1.20 a share a year earlier. Wall Street was calling for net income of $0.33 per share.

New York-based bond issuer Ambac Financial Group, Inc. (NYSE: ABK) reported that it swung to a fourth-quarter loss of $3.26 billion, or $31.85 per share, compared with a profit of $202.7 million, or $1.88 per share.

Overseas, Japan’s Nikkei index lost 5.7%, its biggest loss in nearly 10 years. Hong Kong’s Hang Seng index declined 8.7%.

Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:

Biggest percentage gainers:

• Petmed Express, Inc. (PETS), up 9% on news of a rise in third-quarter earnings.
• Sport Supply Group, Inc. (RBI), up 9%.
• Phoenix Technologies Ltd. (PTEC), up 8% on news of a stellar first-quarter.

Biggest percentage losers:

• Twin Disc Inc. (TWIN), down 24% despite news that second-quarter sales improved.
• VisionChina Media Inc. (VISN), down 17%.
• Wonder Auto Technology, Inc. (WATG), down 18%.