Small caps fall on economic worries

The Russell 2000 (IWM) fell as investors turned their attention to the economy. The small-cap index let go 3.85 points, or 0.55%, to 698.93, its fourth decline in the past five days. The Dow Jones Industrial Average (INDU) lost 64.87 points, or 0.53%, to 12,182.13.

On a year-to-date basis, the Russell 2000 has shed 8.76%, while the Dow has let go 8.16% and the S&P 500 has slashed 9.33%.

There was no major economic news scheduled for today and little on the corporate front and stocks small and large spent the first half of the session trading sideways.

The mood in pre-market trading was slightly bearish following news that an official from the U.S. Federal Reserve said that the economy is headed for a slowdown.

“I consider it most probable that the U.S. economy will experience slow growth, and not outright recession, in coming quarters,” said Janet Yellen, president of the Federal Reserve Bank of San Francisco, in a speech in Honolulu.

Concerns about the future of the economy are what led the U.S. Congress to approve a $168 billion economic stimulus package that consists of tax rebates and business incentives. President Bush said he would sign the bill next week. Rebate checks will be mailed to households and individuals as early as late May.

Trading was volatile as the Russell 2000 seesawed up and down before falling into the red at about 12 p.m. ET, and slumping to its session low shortly before 2 p.m. ET.

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