Small-cap rally continues

Alex Alexandrov | Apr 01, 2008 3:20pm EDT | Comment

Rating: Unrated [rate it]

The Russell 2000 (NYSE:IWM) is posting impressive gains as the bulls continue to dominate trading. At 3:13 p.m. ET, the small-cap index was up 19.50 points, or 2.83%, to 707.47. The Dow Jones Industrial Average had added 373.80 points, or 3.05%, to 12,636.69.

Small-cap stocks have continued moving along an upward trajectory on news of better-than-expected economic data and hopes that the credit crunch is ending.

The bullish mood was set before the opening when Swiss banking giant UBS AG (NYSE:UBS) announced that it will issue up to $15 billion in new stock and receive help from other banks in order to deal with writedowns associated with the subprime mortgage debacle. Investors took that as a sign that the credit crunch is easing.

Separately, Lehman Brothers Holdings Inc. (NYSE:LEH) added to the cheery mood when it announced before the opening that it will raise a higher-than-expected $4 billion in preferred stock.

In economic news, the U.S. Census Bureau reported after the start of trading that construction spending fell 0.3% in February, a smaller decline than the one expected by economists.

Bucking the trend are shares of small-cap MAKO Surgical Corp. (Nasdaq:MAKO). The robotic orthopedic surgery company reported after the close on Monday that its net loss for the fourth quarter ended Dec. 31, 2007, was $4.53 per share, compared with a loss of $2.88 per share a year earlier.

“We believe that MAKO has a sound business model and technology that provides an attractive alternative to present treatment paradigms,” wrote Michael Matson, a senior analyst with brokerage house Wachovia Capital Markets, in a research note published today.

Matson, who has a “market perform” rating on the stock, lowered his full-year 2008 estimate to a loss of $2.44 per share from a previous guidance calling for a loss of $2.17 per share.

“Risks include slower-than-expected adoption and a slowdown in hospital capital spending,” Matson wrote.