The Wall Street Journal-20080124-Ambac- MBIA and YRC Rise as Small Caps Rally
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Ambac, MBIA and YRC Rise as Small Caps Rally
A potential 11th-hour rescue for downtrodden bond insurers, coupled with more strong moves for some of the most sold-off stocks, pushed small caps into the black for the first time in four sessions.
"Home builders and small regional banks that have suffered quite a bit are getting parts of this rally," said Vivienne Hsu, senior portfolio manager for Charles Schwab Investment Management.
Ambac Financial Group and MBIA also buoyed the market after New York's state insurance regulators met with banks to discuss raising new capital for the downtrodden bond insurers. Ambac gained 72% to 13.70, while MBIA climbed 33% to 16.61, both on the NYSE.
For the session, the Russell 2000 index of small-capitalization stocks rose 21.86, or 3.26%, to 693.43 points, marking its biggest one-day gain since Nov. 28. For the year, the Russell is now up 9.5%. The Standard & Poor's SmallCap 600 climbed 11.51, or 3.28%, to 362.03, and is now up 8.4% on the year.
Ms. Hsu attributed some of the gains to a drop in the aversion to risk, as the high volatility of the past six months has led to a less- cautious approach. "People could be overly aggressive with allocation," she warned.
Transportation companies, including truckers and airlines, were among the stalwarts, as the price of oil pulled back to a three-month low, and hopes rose that aggressive interest-rate cuts would hasten the next cycle of U.S. economic growth.
The Dow Jones Transportation Average rose 294, or 7%, its biggest- ever point gain and the largest percentage increase since Aug. 7, 1989. Small caps rising in the sector included Yellow Transportation trucking-line operator YRC Worldwide, which rose 3.44, or 23%, to 18.72. Alaska Air Group (NYSE) rose 1.67, or 7.3%, to 24.69.
A day after the interest-rate cut from the Federal Reserve, several banking companies continued upward movement for a second straight session, led by big moves for large caps Citigroup and J.P. Morgan Chase. Among the big movers for small-cap banks were Irwin Financial (NYSE), up 19% to 7.99, and Cascade Bancorp, rising 19% to 14.11. Piper Jaffray (NYSE) was up 5.89, or 15%, to 46.32. The Minneapolis financial-services firm posted fourth-quarter earnings above Wall Street expectations.
Mortgage insurer MGIC Investment, after being down as much as 32% as it warned 2008 losses will be at least $500 million higher than expected, finished the day up five cents at 16.10. Several other small-cap mortgage insurers also finished in the green by the end of trading, including PMI Group, up 13% at 8.31, and Radian Group, rising 18% to 7.10 (both NYSE).
Marine Products (NYSE) rose 1.62, or 23%, to 8.70. The Atlanta fiberglass-powerboats maker posted period earnings and sales above Wall Street forecasts and raised its dividend.
Ethan Allen Interiors (NYSE) rose 6.49, or 26%, to 31.45, after the Danbury, Conn., home-furnishings retailer posted quarterly earnings above analysts' forecasts and said it was "cautiously optimistic" for the near term.
Human Genome Sciences fell 4.40, or 44%, to 5.62, after the Rockville, Md., drug developer moved high-dose Albuferon patients in two continuing late-stage hepatitis C trials to the low-dose group, citing higher rates of serious lung-related problems in those using the higher dosage.
Plantronics (NYSE) fell 1.38, or 7.1%, to 18, after the Santa Cruz, Calif., communication-headsets maker forecast a fourth-quarter profit below Wall Street expectations.
Buckeye Technologies (NYSE) rose 3.10, or 30%, to 13.40. The Memphis cellulose and absorbent-products maker forecast second-quarter earnings above year-earlier results on higher pricing, higher wood volume and cost control.
First Cash Financial Services fell 4.79, or 34%, to 9.29, after the Arlington, Texas, operator of pawn-brokerage and check-cashing stores posted lower quarterly earnings, partly on results at its Auto Master unit.
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Rob Curran, Josee Rose and Tom Gryta contributed to this article.
