Small caps sinking fast as economy worries spread

Small-cap stocks extended morning losses into the midday time frame, as another batch of dour economic numbers quickly refocused attention from the U.S. elections back onto the recession. At 12:30 p.m. ET, the Russell 2000 (NYSE:IWM) was down 16.27, or 2.98%, at 529.68.

Drug, technology and financial shares paced today’s decline, fueled by worries that a recession in the U.S. and a slowdown around the globe would dampen corporate profitability and deepen jobs losses. The jobs issue is now on the front burner ahead of Friday’s big employment report, which is expected to show a nasty decline of 180,000 non-farm payrolls and an uptick on the unemployment rate to 6.3%.

Earlier today, the ADP Employment Survey came in at minus 157,000, which was worse than the forecast for a decline of 100,000 – and which didn’t include the Boeing strike numbers. The ADP report hasn’t had a very strong correlation with the Labor Department’s report due Friday morning, but the ADP figures did hint that the number could be even worse than feared.

Also on the data front, the ISM Non-Manufacturing Survey came in at 44.4, which was the lowest figure for services activity in the 10-year history of the report and way below the 50.0 line which represents contraction.

Looking at broad market sector activity, forest products, tire and rubber stocks, health care facilities, coal, internet retail and broadcast TV companies were the worst performers. The best performers were homebuilders, health care services, managed health care and office supplies. Even though the S&P homebuilder sector . . .

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