Tag - EVR

Small-cap stocks edged lower Thursday, unable to match gains registered in large-cap indices as the specter of record high oil prices and high unemployment were enough to hold back the Russell 2000 (NYSE:IWM). The Russell closed down 6.56, or 0.98%, at 665.78, the lowest daily close since March 19.

Despite the negative finish, the market did mount a modest solid bounce off the morning lows, finding support above 660, which is the next big test for an index that is once again back in bear market territory and flirting with a hard retest of the March trough.

Even though there seemed to be a little disconnect between the news and price action today, some traders weren’t that surprised with the overall trends. “I think a portion of Wednesday’s sell-off was linked to jitters over the employment report. The market was bracing for a payroll number closer to minus 100,000,” Nick Kalivas, vice president of financial research with MF Global, said in an email interview.

Also, Kalivas said that the weak performance in small caps compared to the Dow and S&P 500 was tied to a wave of profit-taking in small-cap energy shares, which were up sharply in the second quarter.

In some ways, price action today was relatively unsettling as headline figures on monthly employment and a rate hike by the ECB would seem to be bearish, but were embraced as far better than the “whisper” numbers bandied about in a worst-case scenario. In the case of employment data, the headline figure came out at minus 62,000, which was relatively close to the median forecast for a loss of 60,000. However, when the ADP report came out Wednesday at minus 79,000, it prompted some talk that the Labor Department figure could be closer to minus 100,000, which meant that losing “only” 62,000 non-farm jobs suddenly didn’t seem all that bad. It’s a little more tricky to shrug off the 5.5% unemployment rate however, which analysts expected to dip to 5.4% or even better after last month’s dramatic 0.5% leap was supposedly a statistical quirk. Regardless, the market chose to take . . .

The Russell 2000 (NYSE: IWM) posted a big loss as news of liquidity problems at Bear Stearns spread credit fears. The small-cap index fell 16.81 points, or 2.47%, to 662.90. The Dow Jones Industrial Average (INDU) declined 194.65 points, or 1.60%, to 11,951.09.

On a year-to-date basis, the Russell 2000 has lost13.46%, while the Dow is down 9.90% and the S&P 500 has retreated 12.27%.

Stocks small and large tumbled today on news that Bear Stearns’ (NYSE: BSC) cash position has deteriorated significantly over the past 24 hours. The investment bank, which has been highly exposed to the subprime mortgage sector, turned to J.P. Morgan Chase & Co. (NYSE: JPM) and the New York Federal Reserve for short-term financing to alleviate its liquidity problems.

There’s speculation that Bear Stearns will soon be purchased by one of its larger rivals. News of the company’s problems spread fears of a severe credit squeeze, leading to a sharp sell-off.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices are rising on news of a narrower-than-expected loss at General Motors Corp. (NYSE: GM) and financial relief.

At 10:16 a.m. ET, the small-cap index had advanced 8.54 points, or 1.22%, to 708.29. The Dow Jones Industrial Average (INDU) had added 192.33 points, or 1.57%, to 12,432.34.

Stocks small and large climbed out of the gate following news that GM swung to a fourth-quarter net loss that was not as bad as the one predicted by analysts. The Detroit-based carmaker also announced that it will offer buyouts or early retirements to all the 74,000 U.S. hourly workers represented by the United Auto Workers union in order to cut down on costs.

Helping the bulls gain traction is news that billionaire investor Warren Buffett has offered to have his company, Berkshire Hathaway, assume responsibility for $800 billion of municipal bonds guaranteed by bond insurers MBIA Inc. (NYSE: MBI), Ambac Financial Group Inc. (NYSE: ABK) and Financial Guaranty Insurance Co.

There are fears that the three companies could be downgraded due to writedowns stemming from the subprime mess. A downgrade would make it difficult to find clients and would lower the value of many of the bonds that it insures, causing more write-offs at banks and other financial institutions.

One of the three bond insurers has turned down the offer while the other two are still thinking it over, but investors are nevertheless in a buying mood.

Posting a solid gain is Evercore Partners Inc. (NYSE: EVR), a small-cap investment banking company that reported fourth-quarter earnings above Wall Street’s expectations.

On the flip side, Cynosure Inc. (Nasdaq: CYNO) reported fourth-quarter net income that disappointed analysts despite the fact that it was 300% better than a year ago. The maker of light-based aesthetic and medical treatment systems also said that revenues jumped 49%.

General retailer 99 Cents Only Stores (NYSE: NDN) barely beat analysts’ third-quarter earnings projections.

Global economic growth, low inflation and interest rates, and a surge in transnational investing are creating an ideal market for big financial deals. Mergers, buyouts and IPOs are occurring in record numbers and unprecedented sizes. Goldman Sachs officers indicate their company’s IPO pipeline is bigger than any time since the Internet boom, while Carlyle Group executives predict the market will soon see $100 billion in private equity deals. In 2007, the value of global mergers and acquisitions could reach $2.9 trillion, its highest level since 2000. The value of U.S. mutual funds could exceed $10 trillion, a 66% increase in four years. 

The M&A boom is creating exceptional growth opportunities for boutique investment banking firms such as Evercore Partners Inc. (NYSE: EVR). Evercore Partners is primarily in the consulting business, helping large multinational corporations negotiate and complete mergers, acquisitions and spin-offs. This firm is successfully positioned as a boutique investment bank and a viable alternative to Wall Street’s major banks. These larger banks typically pitch clients on a variety of services such as loans and private equity deals in addition to consulting, sometimes creating conflicts of interest that make their advice appear less than objective. Corporate boardrooms, eager to avoid regulatory scrutiny and allegations of conflicts of interest, are increasingly hiring specialized firms such as Evercore Partners to avoid these bias issues. 

While small compared to mainstream investment banks such as Goldman Sachs or Lehman Brothers, Evercore Partners has won many major M&A deals. Last year, the company advised AT&T Inc. (NYSE: T) on its BellSouth acquisition, Credit Suisse Group (NYSE: CS) on its sale of a business unit to AXA (NYSE: AXA), General Motors Corp. (NYSE: GM) on its sale of a 51% interest in GMAC and CVS Caremark Corp. (NYSE: CVS) on its Caremark acquisition. Deals announced during the March quarter include U.K. engineering company Smiths Group PLC’s sale of its aerospace division to General Electric Co. (NYSE: GE), IronPort Systems sale to Cisco Systems Inc. (Nasdaq: CSCO), Novalis’ sale to Hindalco and Aquila Inc.'s (NYSE: ILA) sale to Great Plains Energy Inc. (NYSE: GXP) and Black Hills Power.

The Russell 2000 small cap index is flat while Wall Street gains following news of deal making from some major players.

At 10:09 a.m. ET the Russell 2000 was down 0.09 points, or 0.01 percent, to 815.55.  Dow Jones Industrial Average was up 48.60 points, or 0.36 percent, to 13,525.32.

Microsoft Corp. (Nasdaq: MSFT) will buy Seattle-based digital marketing technology provider aQuantive, Inc. (Nasdaq: AQNT) for $6 billion in order to expand its share of the Internet advertising market.  That’s a purchase price of $66.50 a share in cash, 85% above aQuantive’s closing price on Thursday.

In more business news, the Wall Street Journal reported this morning that Fairfield, Conn.-based General Electric Co. (NYSE: GE) is close to selling its plastics division for nearly $11 billion to chemicals company Saudi Basic Industries.