Small caps drop on weak economy
The Russell 2000 (NYSE: IWM) lost more than the other major U.S. indices as news of disappointing economic reports spread recession fears. The small-cap index declined 13.74 points, or 1.94%, to 696.28. The Dow Jones Industrial Average (INDU) fell 142.96 points, or 1.15%, to 12,284.30.
On a year-to-date basis, the Russell 2000 has declined 9.11%, while the Dow is down 7.39% and the S&P 500 has retreated 8.57%.
Small-cap stocks erased early gains and declined sharply as investors focused on news of a weak economy.
The U.S. Labor Department reported that jobless claims for the week ended Feb. 16 fell 9,000 to 349,000 from the preceding week’s upwardly revised total of 358,000.
Economists were expecting a rise to 349,000 from an originally reported 348,000.
However, the more stable four-week measure increased 10,750 to 360,500, the highest average in more than two years.
“The jobless claims number is consistent with a softening labor market,” said Arun Raha, vice president of Economic Research and Consulting for the North American operations of reinsurance company Swiss Re, in an email. “Firms have moved from not hiring to laying off workers.”
Regardless, the Russell 2000 opened in the green on news that tech sector heavyweight Cisco Systems Inc. (Nasdaq: CSCO) received an analyst upgrade. The bullish trend lasted until about 11 a.m. ET, when the index fell into negative territory.
The catalyst was news that the Philadelphia Federal Reserve’s regional index of manufacturing conditions fell to -24 in February from a reading of -20.9 in January. A reading above zero indicates an expansion.
“The Philadelphia Fed manufacturing index was indeed dismal,” said Raha. “It adds to the flow of news about the weakening economy.”
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:
• Furniture Brands International, Inc. (FBN), up 24% to $12.78 on news the company might be purchased by Sun Capital Securities Group LLC, which is already a shareholder.
• ProCentury Corp. (PROS), up 21% to $18.56 on news of a rise in fourth-quarter net income.
• New Gold Inc. (NGD), up 17% to $6.66 on news it found gold in its Nevada property.
• VASCO Data Security International, Inc. (VDSI), down 38% to $11.39 on news of disappointing fourth-quarter profit.
• Lithia Motors, Inc. (LAD), down 32% to $10.03 on news it swung to a preliminary fourth-quarter loss.
• 3SBio Inc. (SSRX), down 28% to $8.39 on news of disappointing fourth-quarter earnings.
Volume leaders:
• Novatel Wireless, Inc. (NVTL) 11,080,400 shares traded on news of a weak first-quarter profit and revenue outlook.
• VASCO Data Security International, Inc. (VDSI) 8,135,000 shares traded.
• North American Palladium Ltd. (PAL) 7,536,100 shares traded.
The day saw 61 small-cap stocks set 52-week lows, while 12 small caps established a 52-week high.
About the Author
Reporter Alex Alexandrov is based in SmallCapInvestor.com's Washington, D.C. bureau.
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