Tag - Rdn

Two services-related companies and a little-known Chinese coal miner were among the best-performing small-cap stocks on Tuesday. The day marked by President Barack Obama signing off on a bill resolving the federal government's debt ceiling crisis. Wall Street's response was negative, indicating disfavor about the nation's economic health.

There was little to cheer about for stocks, as the Dow Jones Industrials fell for an eighth straight day. The Standard & Poor's Small-Cap 600 has closed lower for the same number of trading sessions, while the Russell 2000 Index is on a seven-day losing skid.

Radian Group (Nasdaq:RDN), Xenoport Inc (Nasdaq:XNPT), MGIC Inventory Corp (Nasdaq:MTG) and Liz Claiborne (Nasdaq:LIZ) are among the most actively traded companies in Tuesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: STEC Inc (Nasdaq:STEC), Sequenom Inc (Nasdaq:SQNM), Taser International Inc (Nasdaq:TASR). Canadian Solar Inc (Nasdaq:CSIQ), and Texas Roadhouse (Nasdaq:TXRH)

Sinovac Biotech Ltd. (Nasdaq:SVA), Nanometrics Inc. (Nasdaq:NANO) and Aspect Medical Systems Inc. (Nasdaq:ASPM) are among the new 52-week highs in Tuesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Internet Gold-Golden Lines Ltd. (Nasdaq:IGLD), Blue Nile Inc. (Nasdaq:NILE), Big 5 Sporting Goods Corp. (Nasdaq:BGFV), Evercore Partners Inc. (Nasdaq:EVR), Radian Group Inc. (Nasdaq:RDN) and Broadpoint Gleacher Securities Group Inc. (Nasdaq:BPSG).

Territorial Bancorp Inc. (Nasdaq:TBNK), Air Methods Corp. (Nasdaq:AIRM) and Radian Group Inc. (Nasdaq:RDN) are among the new 52-week highs in Wednesday's trading among companies with market capitalizations under $1 billion.

Huron Consulting Group Inc. (Nasdaq:HURN), Radian Group Inc. (Nasdaq:RDN) and Johnson Outdoors Inc. (Nasdaq:JOUT) are among the biggest percentage gainers in Tuesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: IncrediMail Ltd. (Nasdaq:MAIL), Primeenergy Corp. (Nasdaq:PNRG), Tenneco Inc. (Nasdaq:TEN), Amrep Corp. (Nasdaq:AXR), SmartHeat Inc. (Nasdaq:HEAT) and Crocs Inc. (Nasdaq:CROX).

Stocks closed lower today as investors took some profits off the table after the market had a long sustained rally. The Dow closed down 39.22 points to 9,280.97; the Nasdaq finished at 1,993.05, down 18.26 points; and the S&P 500 stayed over 1,000 to close at 1,002.72, down 2.93 points.
 

The Russell 2000 was down 4.75 points to close the day at 565.99.

 

Small-cap price gainers were lead by Radian Group (NYSE:RDN) up 83% on news that the firm handily beat Wall Street expectations. Wall Street had called for the firm to report a quarterly per share loss of $1.51 while the Radian actually reported $2.82 to the positive. Radian's revenues were reported at $577.4 million, with analysts calling only for $284 million.

 

Other small-cap gainers include Triad Guaranty (Nasdaq:TGIC) up 65%; American Axle & Manufacturing (NYSE:AXL) up 44%; and UQM Technologies (AMEX:UQM) up 31%.

 

*****Stocks rallied out of the hole yesterday, as expected. It should be clear now that government intervention in the financial markets is supporting asset prices across the board. That includes cars, houses, stocks, bonds - you name it.

Now, I don't mean to suggest that economic fundamentals support current stocks prices. Most likely, earnings expectations and valuations are getting a little out of whack. Barron's has the P...E ratio for the Dow Industrials at 14.76 and the Wall Street Journal says it's 15.03. And forward estimates are about the same. In the current environment, that's fair value at best.

At worst, earnings estimates are too aggressive and valuations should be lower. While the U.S. economy is expected to grow slightly this quarter, I don't see that translating to earnings surprises when third quarter earnings come in. If companies can manage to meet expectations, I'd consider that a victory. Clearly, I don't see much upside for valuations based on fundamentals.

For the bulls, however, the story is about how much downside there is. And again, the government is saying "not much."

*****70% of the U.S. economy is consumer spending. That's a big ratio, and it shows why the U.S. can plunge in to recession easily. It also shows why I expect it to take a while before we return to decent growth rates.

The unemployment rate is pushing 10%. Economists expect it to move into double-digits in early 2010. Personally, I can't believe it will take that long.

The U.S. lost 371,000 jobs in July. Since December 2007, 6.5 million jobs have been lost. There were 5.7% fewer job cuts announced in July than a year ago. That's supposed to sound like the rate of job losses is slowing. And believe it or not, some economists are saying that payrolls could actually rise some in early 2010. Sounds crazy, I know.

But suppose payrolls start rising at the same rate they've been declining? If 371,000 people get jobs every month, it'll take 17 months to get the unemployment rate back where it was when the recession began. That would put the U.S. economy back on track by January 2011 at the absolute earliest.

*****One aspect of government intervention (which I call "Managed America"), is that the U.S. dollar is being systematically devalued. Against the Euro, it's trading lower than when that currency was introduced. (Reference point: today the U.S. dollar fetches just 0.69 Euros while back on January 1, 1999-when the Euro was introduced-you could get 0.86 Euros for your dollar. That's a 25% long-term slide in the value of the dollar.)

This is having a profound effect on commodity prices. Oil, copper, even steel prices are up significantly this year. And given China's continually robust demand and the near certainty that the dollar will remain weak, investing in commodities is rewarding investors handsomely. And if inflation takes hold as the global economy starts to go and central bankers leave stimulative monetary policy in place, commodity prices will hit new all time highs.

My Global Commodity Investing advisory service is benefiting from current commodity prices and will provide one of the only safe havens if inflation picks up. You can find out more about Global Commodity Investing here.

*****The Managed America video conference is coming up next Monday, August 10 at 6:00 P.M. It's free to attend and you can register HERE.

Best Regards,

Ian Wyatt
Editor
SCI Daily

Radian Group Inc. (Nasdaq:RDN), Cardtronics Inc. (Nasdaq:CATM) and UQM Technologies, Inc. (Nasdaq:UQM) are among the biggest percentage gainers in Wednesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Buckeye Technologies Inc. (Nasdaq:BKI), Hill International Inc. (Nasdaq:HIL), T 3 Energy Services Inc. (Nasdaq:TTES), Commonwealth Bankshares Inc. (Nasdaq:CWBS), Kindred Healthcare Inc. (Nasdaq:KND) and GT Solar International Inc. (Nasdaq:SOLR).

Small-cap stocks remained solidly higher into mid-session activity, with industrial, commodity and energy stocks paving the way higher after President-elect Obama announced plans for a massive infrastructure project over the weekend. Some of today's small-cap gainers included Integrated Electrical Services Inc. (Nasdaq:IESC), TBS International Ltd. (Nasdaq:TBSI) and James River Coal Co. (Nasdaq:JRCC).

Other Market Watch highlights included:

• Commodities in general were in favor today, with crude oil prices climbing 7%, while energy stocks were up more than 4%.  
• On the downside, personal products firms, hypermarkets, food distributors, retail drug companies and restaurants were the primary losing sectors.  
• The best performers so far today have been industrial REITs, metal and mining stocks, automobile manufacturers, aluminum firms and steel companies.
• Small-cap stocks remained solidly higher into mid-session activity, with industrial, commodity and energy stocks paving the way higher.  
• A big part of the early rise in stocks was tied to news this weekend that Obama was planning a massive infrastructure stimulus project.  

Small Cap Gainers:

• Integrated Electrical Services Inc. jumped 34% presumably riding the wave of industrial and energy-related services companies higher. See (Nasdaq:IESC).  
• TBS International Ltd. jumped 30% as the ocean transportation services company got an earnings-related lift. See (Nasdaq:TBSI).  
• James River Coal Co. rallied 26%, receiving a lift with other beaten-down commodity names. See (Nasdaq:JRCC).
• Cemex rallies as Deutsche Bank says it may gain from U.S. plan. See (NYSE:CX).

Small Cap Losers:

• The Talbots announces CFO retires, hires a new COO. Shares fall over 12%. See (NYSE:TLB).  
• Radian Group dips 10% on lower-than-average volume. See (NYSE:RDN).
• Blyth cuts earnings outlook, down 4% in light after-hours trade. See (NYSE:BTH).  
• Allos Therapeutics slumping 21% in pre-market, reports Propel trial results. See (Nasdaq:ALTH).

The Russell 2000 (NYSE:IWM) dove again Tuesday, closing down over 2% and rejecting a brief afternoon bounce into positive territory. Today’s small-cap gainers are Optimer Pharmaceuticals (Nasdaq:OPTR), Clear Channel Outdoor Holdings (NYSE:CCO) and Hospitality Properties Trust (NYSE:HPT).

Other Market Watch highlights today included:

• For the year, small caps are off 37%, while the Dow is down 34% and the S&P 500 is down 39%.
• Energy, insurance, retail, technology and financial stocks were major sources of weakness today.
• Homebuilders, drug stocks, agriculture products and home entertainment software companies lagged the overall market downdraft.
• Russia is the second-largest oil producer in the world and in addition to the commodity woes right now, had to raise interest rates today to fight off capital outflow and inflation.
• Crude oil prices tumbled to 20-month lows, slipping below $59 a barrel as concerns about demand continue to chip away at commodity valuation.
• Data from China overnight showed that import growth was slowing and that inflation was at a 17-month low.
• The slide in physical markets gained momentum as the dollar rallied against the euro, with the greenback up 1.5% as the day progressed.
• The Commodity Research Bureau Index of 19 commodity markets tumbled some 3%, sinking to the lowest point since December 2003.

Small Cap Gainers:

• Optimer Pharmaceuticals Inc. jumped 87% on news that the firm’s antibiotic drug met late-stage trial goals. See (Nasdaq:OPTR).
• Clear Channel Outdoor Holdings closed up 27% despite being downgraded . . .

Small caps took a dive today, closing down 5.97% and snapping a string of six consecutive higher sessions in the process amid gloomy economic worries. Today’s small-cap gainers are Radian Group (NYSE:RDN), Venoco, Inc. (NYSE:VQ) and BlueLinx Holdings (NYSE:BXC).

Other Market Watch highlights today included:

• The Russell is now down 33% for the 2008, while the Dow is off 31% and the S&P 500 down 35%.
• In a research letter this morning, analysts at Goldman Sachs cautioned that downside risks in the economy could lead an even larger slide in GDP figures.
• A weekly inventory report showed growing stocks of energy products and soft demand, which helped fuel today’s decline.
• Even though the dollar gave back overnight gains, commodity markets struggled today, which is a sign that demand worries were front and center.
• Forest products, coal, steel, metals and mining stocks were among the worst performing broad market sectors today.
• In a research letter this morning, analysts at Goldman Sachs cautioned that downside risks in the economy could lead an even larger slide in GDP figures.

Small Cap Gainers:

• Radian Group posts Q3 profit on strong revenue; shares rose 31%. See (NYSE:RDN).
• Independent energy company Venoco, Inc. closed up 20% on higher-than-average volume. See (NYSE:VQ).
• BlueLinx Holdings closed up 20% after appointing George Judd CEO today. See (NYSE:BXC). 
• Acquisitions boost health care company Greatbatch's Q3 profit 53%. Shares closed up 15%. See (NYSE:GB).

Small Cap Losers:

• Adept Technology Inc. tumbled 33%, gapping lower and sinking on heavy volume as the vision-guided robotics firm took a hit on earnings news. See (Nasdaq:ADEP).
• Lakes Entertainment Inc. slumped 29%, plunging a day after earnings and also as a casino referendum in Ohio was defeated. See (Nasdaq:LACO).
• Ashford Hospitality Trust closed down 20% after naming interim CFO. See (NYSE:AHT). 
• Fitch downgraded Colonial BancGroup's ratings last week; shares dove over 22% today. See (NYSE:CNB). 

Small-cap stocks took a dive Wednesday as the market closed the door on a long and historic political campaign and refocused back on a gloomy economic picture. The Russell 2000 (NYSE:IWM) closed down 31.31, or 5.74%, at 514.64, snapping a string of six consecutive higher sessions in the process. The Russell is now down 33% for the 2008, while the Dow is off 31% and the S&P 500 down 35%.

Small-cap stocks were able to grind out modest gains Monday and Tuesday despite sloppy economic reports on manufacturing, car sales and factory orders, but were unable to sidestep awful data again today on the jobs front and on the sprawling services sector. The marquee economic release today was probably the ISM Non-Manufacturing Survey, but it also shared top billing with the ADP Employment release ahead of Friday’s big Labor Department report on payrolls. The ISM report tumbled to 44.4, which marked the lowest reading for the service sector in the 10 years that the report has been issued. Meanwhile, the ADP data showed a larger-than-expected decline in jobs, which sent shivers up investor spines ahead of Friday’s release. And while the focus now shifts to Friday’s big jobs report, there will still be a hurdle to cross Thursday morning when the weekly unemployment claims come out.

In a research letter this morning, analysts at Goldman Sachs cautioned that downside risks in the economy could lead an even larger slide in GDP figures. “Economic reports continue to imply that the U.S. economy is in decline, with real GDP perhaps contracting by more than the 2% annual rate that we are currently estimating for fourth-quarter real GDP. In just the last day, we’ve seen a sharp drop in auto sales, another significant decline in the ISM manufacturing index, and further evidence of tightening in bank lending standards. Although energy prices are also falling rapidly, this is mainly a reaction to the sharp weakening in economic activity, both here and abroad, and therefore apt to cushion the decline rather than reverse it.”

Commodities were a big part of the advance Tuesday in stocks, but reversed course today. Crude oil prices tumbled 7% today in a violent turnabout from Tuesday’s 10% rally. A weekly inventory report showed growing stocks of energy products and soft demand, which helped fuel today’s decline. Even though the dollar gave back overnight gains, commodity markets struggled today, which is a sign that . . .

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 . . .

Small-cap stocks steamrolled higher, putting a bullish exclamation point on one of the most tumultuous and dramatic weeks in stock market history. The Russell 2000 (NYSE:IWM) climbed 30.07, or 4.15%, to 753.74, bolstered by investor confidence that government moves to stabilize troubled financial conditions would save the day and put an end to recent firestorms that saw the 4th-largest investment bank in the country file for bankruptcy while the Treasury Department dashed in to rescue the world’s largest insurance firm.

For the week, the Russell was actually up 33.48, or 4.64% despite enduring the two largest one-day declines of the year Monday and Wednesday. It will probably come as a shock to many to know that the Russell actually posted the highest weekly close of the year on Friday, topping the previous peak set during the August rally. For the year, small-caps are down just 1.6%, while the Dow is down 14.1% and the S&P 500 down 14.5%.

Volatility reached manic proportions this week as daily ranges swelled to mammoth levels. Even a Hollywood action film would have been spent trying to keep pace with this week’s market action.

The strong finish this week suggested that investors were willing to buy into talk from the Treasury Department that a rescue plan would be able to gobble up mountains of bad debt among elite U.S. financial companies, re-establish credit lines, secure investor profits in money market accounts, stave off an economic recession, cure cancer and help all old ladies cross the road (okay, maybe those last two . . .

eTelecare Global Solutions Inc. (Nasdaq:ETEL), Community Bancorp  (Nasdaq:CBON) and Radian Group Inc. (Nasdaq:RDN) are among the biggest percentage gainers in Friday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Imperial Capital Bancorp Inc. (Nasdaq:IMP), Dearborn Bancorp Inc. (Nasdaq:DEAR), First Regional Bancorp. (Nasdaq:FRGB), Pzena Investment Management Inc. (Nasdaq:PZN), Genesis Energy LP (Nasdaq:GEL) and City Bank (Nasdaq:CTBK).

Here are the biggest percentage gainers among small caps:

Small-cap stocks waffled back and forth near steady levels into midday, with support from lower crude oil prices and a firm U.S. dollar countered by slumping technology stocks and worries about a global economic slowdown. At 12:48 p.m. ET, the Russell 2000 (NYSE:IWM) was up 1.20, or 0.16% at 739.70.

The Russell was holding up much better than other large-cap indices. The tech-laden Nasdaq 100 was down 1.3%, with key stocks like Intel Corp. (Nasdaq:INTC) and International Business Machines (NYSE:IBM) both generating sizable declines. INTC was off about 4% and IBM down about 2.5%.

In the lunchtime frame, Boston Federal Reserve Bank President Eric Rosengren said that the impact of rate cuts has been minimized by the credit crunch and he cautioned that the economy could slow down in the second half of 2008 and that the unemployment rate could surge beyond 6%. His comments seemed to have a much more dovish tone than recent Fed speak from Richard Fisher of the Dallas Fed and Jeffrey Lacker from the Richmond Fed.

Commodity names and tech stocks dominated the losing trends so far today, with coal, metals and mining, gold, semiconductors and semiconductor equipment among the biggest losing sectors. On the upside, healthcare facilities and airlines were doing well, with the latter boosted by the recent reprieve on the jet fuel front.

There were still some lingering jitters about a large hedge fund shutting down overnight. The fund, Ospraie Management LLC, had some $2.8 billion under management and reportedly has losing large sums of money on various commodity-tied equity investments. There are concerns that other hedge funds could be in a precarious position as well as the market unwinds the short dollar/long commodity trade. In the case of Ospraie, Lehman Brothers Holdings Inc. (NYSE:LEH) held a 20% stake in the hedge fund, but LEH shares were holding up reasonably . . .

Shares of Radian Group Inc. (NYSE:RDN) are veering lower today after the provider of credit-related insurance coverage said this morning that Standard & Poor lowered its ratings on the Philadelphia, Pa.-based firm to 'BBB' from 'A-' and on its mortgage insurance subsidiary, Radian Guaranty, to 'A' from 'AA-.' Radian noted that S&P also announced credit rating changes with regard to several other companies in the mortgage insurance sector.

Shares skidded 11.7%, or $0.69, to $5.19 at 2:59 p.m. ET. For detailed price information and recent news stories about Radian Group, click RDN. 

Nektar Therapeutics (Nasdaq:NKTR), The Pantry, Inc. (Nasdaq:PTRY) and AMAG Pharmaceuticals, Inc. (Nasdaq:AMAG) are among the biggest percentage losers in Wednesday's trading among companies with market capitalizations under $750 million.

The PMI Group, Inc. (NYSE:PMI), Gladstone Capital Corp. (Nasdaq:GLAD) and Radian Group Inc. (NYSE:RDN) are also among the top small-cap percentage losers.

Here are Wednesday's biggest percentage losers among small caps:

The Russell 2000 (NYSE: IWM) and the other major U.S. indices declined for the second day in a row on news of bearish economic reports. The small-cap index fell 3.80 points, or 0.54%, to 701.52. The Dow Jones Industrial Average (INDU) declined 28.77 points, or 0.23%, to 12,348.21.

On a year-to-date basis, the Russell 2000 has let go 8.42%, while the Dow has shaved 6.91% and the S&P 500 has fallen 8.06%.

The session belonged to the bears as news of government reports that showed a weak economy and hinted at a rise in inflation spooked investors.

The U.S. Labor Department reported that import prices jumped 1.7% in January due to higher energy and food prices. Economists had projected a rise of 0.5%. The year-over-year rise in import prices was 13.7%, which is the biggest change since the measure was introduced in 1982.

The United States has long relied on cheap foreign imports to keep domestic inflation low.

Adding to the economic worries was news of a report from the New York Federal Reserve that its index of general business conditions fell to its lowest level since May 2005. The numbers show that new manufacturing orders and shipments decreased while the index of prices climbed to its highest level in more than a year.

The reports suggest that the U.S. Federal Reserve might have difficulty holding inflation in check while keeping the economy growing.

Separately, preliminary numbers released by the Reuters/University of Michigan indicate a sharp drop in consumer sentiment in early February. The index fell to a level of 69.6 from 78.4 at the end of January. The result was worse than the decline expected by economists and the lowest reading in 16 years.

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:

The Russell 2000 (NYSE: IWM) went through the roof today as a late rally in financial shares lifted all the major U.S. indices. The small-cap index advanced 21.86 points, or 3.26%, to 693.43. The Dow Jones Industrial Average (INDU) gained 298.98 points, or 2.50%, to 12,270.17.

On a year-to-date basis, the Russell 2000 has lost 9.48%, while the Dow has let go 7.50% and the S&P 500 is missing 8.84%.

Small-cap stocks outpaced their larger brothers today as speculation of more rate cuts fueled the late-session rally.

February fed funds futures overwhelmingly suggest that the U.S. Federal Reserve will vote to lower its target for the federal funds 0.75% during its two-day meeting starting Jan. 29. A reduction of at least 0.50% is seen as a sure bet.

On Tuesday, the Fed lowered the federal funds rate, the rate at which commercial banks make overnight loans to each other, to 3.50% from 4.25%.

Shares representing the financial sector were invigorated and freed themselves of the bears’ grasp. Among the few exceptions was consumer financial services provider First Cash Financial Services, Inc. (Nasdaq: FCFS), which issued a 2008 earnings guidance below analysts’ projections.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices fell hard today on news of bad economic reports and Bernanke’s congressional testimony. The small-cap index let go 19.34 points, or 2.76%, to 680.57, its lowest level in more than one year. The Dow Jones Industrial Average (INDU) fell 306.95 points, or 2.46%, to 12,159.21.

On a year-to-date basis, the Russell 2000 is down 11.16%, while the Dow has deteriorated 8.33% and the S&P 500 has lost 9.20%.

Stocks small and large plunged today on more fears about the sad state of the U.S. economy.

“Incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and that the downside risks to growth have become more pronounced,” U.S. Federal Reserve chairman Ben Bernanke told Congress today. “In light of recent changes in the outlook for and the risks to growth, additional policy easing may well be necessary.”

“We believe the Fed will be aggressive in cutting the Federal Funds rate in a series of 50 basis point cuts, starting with one on January 30th,” said Arun Raha, vice president of Economic Research and Consulting for the North American operations of reinsurance company Swiss Re, in an email.

But investors focused on the grim economic picture and allowed the bears to completely dominate trading. Equities actually began the session with modest gains but were quick to lose their grip.

Bernanke’s testimony coincided with the release of the Federal Reserve Bank of Philadelphia’s general economic index, which showed that the region’s manufacturing activity contracted more than forecast in January.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices are hurting as investors react to Bernanke’s testimony. At 1:19 p.m. ET, the small-cap index was down 8.62 points, or 1.23%, to 691.29. The Dow Jones Industrial Average (INDU) had dropped 125.51 points, or 1.01%, to 12,340.65.

“The baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced,” U.S. Federal Reserve chairman Ben Bernanke told lawmakers on Capitol Hill today.

That spooked investors and small-cap stocks, which were already trading below the flat line, extended their declines.

The Fed chief painted a bleak picture of the current state of the U.S. economy, saying that labor market conditions in December were “disappointing” while investment in equipment and software has slowed.

What needs to be done?

“I agree that fiscal action could be helpful in principle,” Bernanke said. “Fiscal and monetary stimulus together may provide broader support for the economy than monetary policy actions alone.”

But he was careful not to endorse any specific stimulus package and emphasized that the measures should come into force quickly if they are to have a positive effect on the economy.

Bernanke did not talk much about the Fed’s policy meeting on Jan. 29 and 30, but hinted at a possible interest rate cut.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices are falling as investors listen to Ben Bernanke.

At 10:36 a.m. ET, the small-cap index had lost 10.31 points, or 1.47%, to 689.60. The Dow Jones Industrial Average (INDU) had declined 93.48 points, or 0.75%, to 12,372.68.

Stocks opened in the green but lost ground as investors digested the latest economic news and tuned in to hear U.S. Federal Reserve Chairman Ben Bernanke testify before the House Budget Committee.

Calls for a policy response to prevent the U.S. economy from slipping into recession have been mounting and all eyes are on the Fed chief as he discusses the overall state of the economy. Many observers expect that the Fed will lower the federal funds rate, which currently stands at 4.25%, when it next meets on Jan. 29 and 30.

In economic news, the U.S. Census Bureau reported before the start of trading that housing starts fell 14% to a seasonally adjusted annual rate of 1.006 million units, below November’s downwardly revised total of 1.173 million.

An estimated 1,376,100 housing units were authorized 2007, a stunning 25.3% below the 2006 figure of 1,838,900. That’s the worst one-year decline in nearly 30 years.

The situation will not improve soon and the housing sector appears to be headed for a third year of stagnation.

That’s because building permits, a sign of future construction, fell 8.1% to an annual rate of 1.068 million units.

Economists were expecting December housing starts and building permits to post smaller declines.

In more economic news, the U.S Labor Department announced that initial jobless claims for the week ended Jan. 12 decreased 21,000 to 301,000, from the preceding week’s unrevised figure of 322,000.

The 4-week moving average, a more stable measure, fell 11,750 to 328,500, from the preceding week’s downwardly revised average of 340,250.

A strong rally in the last hour of trading lifted the Russell 2000 (NYSE: IWM) and the other major U.S. indices in the green. The small-cap index rose 7.26 points, or 1.03%, to 712.12. The Dow Jones Industrial Average (INDU) added 146.24 points, or 1.16%, to 12,735.31.

On a year-to-date basis, the Russell 2000 has lost 7.04%, while the Dow is down 3.99% and the S&P 500 has declined 4.03%.

An uneven day of trading ended on a bullish note as investors went hunting for bargains late in the session.

Small-cap stocks had no clear direction much of the time, as the bears and bulls struggled and sought to gain a perspective on the state of the U.S. economy. The Russell 2000 spent the early morning near the flat line but slipped and fell at about 11:30 a.m. ET. It bottomed out shortly after 2 p.m. ET as investors reacted to news that Goldman Sachs Group Inc. (NYSE: GS) is predicting a recession.

The New York-based investment bank wrote in a note to its clients that it expects gross domestic product to decline in the second and third quarters, prompting the Fed to keep lowering the federal funds rate until it hits 2.5%.

The federal funds rate, the rate at which commercial banks make overnight loans to each other, currently stands at 4.25%.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices posted losses today following mixed housing news and more mortgage concerns. The small-cap index fell 19.09 points, or 2.64%, to 704.86. The Dow Jones Industrial Average (INDU) lost 238.42 points, or 1.86%, to 12,589.07.

On a year-to-date basis, the Russell 2000 has declined 7.99%, while the Dow is down 5.09% and the S&P 500 has shrunk 5.32%.

Small-cap stocks opened in positive territory and then gained more following news of an announcement at 10 a.m. ET that pending U.S. home sales fell 2.6% in November to a reading of 87.6.

The decline is more than what economists were expecting, but investors apparently liked the fact that the figures for October and September were revised higher.

Additionally, the National Association of Realtors reported that it expects existing-home sales to hold steady during the following months before rising later in the year and improving in 2009.

“On the one hand, we have a pent-up demand from the four million jobs added to our economy over the past two years of sales decline,” said Lawrence Yun, NAR chief economist, in a statement. “On the other, consumers continue to wait for additional signs of market stabilization.”

The Russell 2000 (NYSE: IWM) and the other major U.S. indices fell today as credit worries resurfaced following news of losses at Citigroup. The small-cap index fell 7.34 points, or 0.92%, to 790.44. The Dow Jones Industrial Average (INDU) lost 51.70 points, or 0.38%, to 13,543.40.

On a year-to-date basis, the Russell 2000 has increased 0.38%, while the Dow has added 8.57% and the S&P 500 has gained 6.04%.

The bears dominated trading today following news that Citigroup Inc. (NYSE: C), the largest U.S. bank, expects to incur additional losses of up to $11 billion after already suffering $6.5 billion in credit-related losses in the third quarter.

Analysts forecast that the credit problems will negatively affect Citibank in the fourth-quarter and lead to a net loss.

That was enough to scare investors, who had been hoping that this summer’s credit problems were in the past. Wall Street will now keep a watchful eye on other banks and brokerages for signs of additional losses stemming from the recession in the U.S. housing sector.

Many financial institutions bought securities backed by subprime mortgages that have become worthless in the wake of falling home prices and a wave of foreclosures by cash-strapped homeowners. No one knows for certain the extent to which the subprime debacle will damage the financial sector.