Credit jitters down Russell 2000
The Russell 2000 (NYSE:IWM) declined as news of an emergency sale of Bear Stearns spread fears of financial turmoil. The small-cap index fell 12.42 points, or 1.87%, to 650.48. The Dow Jones Industrial Average (INDU) gained 21.16 points, or 0.18%, to 11,972.25.
On a year-to-date basis, the Russell 2000 has shed 15.08%, while the Dow is down 9.74% and the S&P 500 has retreated 13.06%.
Stocks small and large opened significantly lower on news that investment bank JPMorgan Chase & Co. (NYSE:JPM) has purchased Bear Stearns (NYSE:BSC) for just $2 per share, according to an announcement on Sunday.
The buyout was unprecedented, as the U.S. Federal Reserve gave JPMorgan $30 billion in special financing to complete the deal and prevent further financial turmoil. Shares of Bear Stearns were worth over $170 a year ago, but the company was heavily involved in securities backed by subprime mortgages and was dealt a lethal blow by the housing downturn.
The Fed also lowered its discount rate, the rate at which it lends funds to commercial banks, to 3.25% from 3.50%. The central bank will hold a regularly scheduled policy meeting on Tuesday, with investors expecting a steep cut in its target federal funds rate.
The Russell 2000 dropped out of the gate, falling to a session low of about 646 within minutes of the opening bell. From there the index traded choppy but was firmly in the red. Meanwhile, a late rally lifted the Dow into positive territory.
Predictably, shares of financial services companies were the worst sector performers. In turn, that affected the stock of small-cap TradeStation Group, Inc. (Nasdaq:TRAD), which provides software for online trading. Shares declined 8%.
Elsewhere, Penson Worldwide Inc. (Nasdaq:PNSN), which provides technology for the processing of securities and futures, saw its shares drop more than 20% even though the Dallas, Texas-based company insisted that it has no exposure to commodities broker MF Global Ltd. (NYSE:MF). There’s speculation that MF Global, a broker of exchange-listed futures and options whose stock fell 65%, is facing a shortage of funds.
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:
• I-trax Inc. (DMX), up 34% to $5.23 on news it is being purchased by Walgreen Co. (NYSE: WAG) for $278 million in cash.
• Cardiome Pharma Corp. (CRME), up 31% to $8.15 on news a successful drug trial.
• Trubion Pharmaceuticals, Inc. (TRBN), up 19% to $9.84.
• FCStone Group, Inc. (FCSX), down 41% to $21.44.
• National Financial Partners Corp. (NFP), down 24% to $17.14.
• Boston Private Financial Holdings, Inc. (BPFH), down 24% to $10.31.
• I-trax Inc. (DMX) 9,258,300 shares traded.
• Cardiome Pharma Corp. (CRME) 7,527,300 shares traded.
• FCStone Group, Inc. (FCSX) 6,105,700 shares traded.
The day saw 4 small-cap stocks set 52-week lows, while 235 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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