Small caps soar on Fed rate cut
The Russell 2000 (NYSE:IWM) closed with a remarkable gain following news that the U.S. Federal Reserve has lowered its target interest rate. The small-cap index rose 31.45 points, or 4.83%, to 681.93. The Dow Jones Industrial Average (INDU) advanced 420.41 points, or 3.51%, to 12,392.66.
On a year-to-date basis, the Russell 2000 has retreated 10.98%, while the Dow is down 6.57% and the S&P 500 has let go 9.37%.
Small-cap stocks soared higher than their larger counterparts and added to their earlier gains on news after the start of trading that the U.S. Federal Reserve has decided to lower its target interest rate 0.75% to 2.25%.
“Recent information indicates that the outlook for economic activity has weakened further,” the Fed said in a statement. “Growth in consumer spending has slowed and labor markets have softened.”
The market had priced a full 1% of the federal funds rate, the rate at which commercial banks make overnight loans to each other, but policymakers expressed concern about inflation.
“Inflation has been elevated, and some indicators of inflation expectations have risen,” the statement reads.
The U.S. Labor Department reported before the opening that producer prices, the selling prices received by domestic producers for their output, climbed an expected 0.3% in February. However, core producer prices, which exclude the costs of food and energy, rose 0.5%, above the projected 0.4%.
The Russell 2000 opened in the green on news that investment banks The Goldman Sachs Group, Inc. (NYSE:GS) and Lehman Brothers Holdings Inc. (NYSE:LEH) beat analysts’ expectations despite posting declines in quarterly profit.
Predictably, the financial services sector was the best performer. Shares of small-cap securities and banking firm SWS Group, Inc. (NYSE:SWS) added 14%, while St. Louis, Mo.-based Stifel Financial Corp. (NYSE:SF) climbed 11%.
Meanwhile, shares of Oppenheimer Holdings Inc. (NYSE:OPY) inched up 2%.
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:
• Consolidated Water Co. Ltd. (CWCO), up 25% to $22.42 on news of a rise in fourth-quarter profit.
• Ultrapetrol (Bahamas) Ltd. (ULTR), up 24% to $9.08 on news of a share repurchase program.
• Anworth Mortgage Asset Corp. (ANH), up 23% to $6.15.
• Shuffle Master, Inc. (SHFL), down 26% to $5.32 on news of a fiscal first-quarter net loss.
• Somanetics Corp. (SMTS), down 26% to $13.38 on news of a decline in first-quarter profit.
• EMCORE Corp. (EMKR), down 23% to $6.78.
• EMCORE Corp. (EMKR) 14,875,500 shares traded.
• Allscripts Healthcare Solutions, Inc. (MDRX) 7,446,300 shares traded.
• Hovnanian Enterprises, Inc. (HOV) 6,453,300 shares traded.
The day saw 42 small-cap stocks set 52-week lows, while seven 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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