The Wall Street Journal-20080111-AnnTaylor Falls 15-- Zep Rises
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AnnTaylor Falls 15%; Zep Rises
Small-capitalization stocks rose yesterday but the Russell 2000 index of small-cap shares remains down 6% for the young year.
The Russell rose 8.09 points, or 1.14%, to 720.21. The Standard & Poor's SmallCap 600 increased 3.09, or 0.84%, to 372.11; it is also down about 6% for the year.
While almost all small-cap sectors were up, materials companies helped lead the way, strengthened by higher gold and commodities prices.
"Gold being up makes sense if we're going to have more interest-rate cuts," said Richard Campagna, managing director for Provident Investment Counsel. He said Fed rate cuts will theoretically lead to a weaker dollar and enable U.S. steel and materials companies to be more competitive through exports.
Among the small-cap materials companies that moved higher were Schnitzer Steel, up $1.95, or 3.4%, to $58.68, and RTI International Metals, up 3.06, or 5.3%, to 60.87 on the New York Stock Exchange.
Another stalwart among materials companies was Zep Inc., which tacked on 1, or 7.4%, to 14.54 after the Atlanta company reported higher first-quarter earnings and sales on favorable pricing.
Mr. Campagna doesn't think yesterday's strength will be the catalyst for a rally in the coming days. "This will be a short-lived bounce because we're not really seeing a reduction in rates until the 30th, and even a [half-percentage-point] cut doesn't get us to where we need to be," he said.
Declines in December same-store sales prompted earnings guidance cuts from both Men's Wearhouse, down 7.60, or 30%, to 17.84, and AnnTaylor Stores, off 3.65, or 15%, to 19.95, both on the NYSE.
The price of sweet crude oil, which opened lower and then remained well below recent highs, weighed on some of the market. Several oil- related stocks were down at close, including Hornbeck Offshore Services, down 1.94, or 4.4%, to 42.31, and Basic Energy Services, down 58 cents, or 2.8%, to 20.26, both on the NYSE.
Reflecting continued subprime-related worries, Thornburg Mortgage (NYSE) declined 40 cents, or 4.6%, to 8.38, after the Santa Fe, N.M., single-family residential mortgage lender said continued pressure in the mortgage market has cut the book value of its portfolio by about $200 million in two months.
E-House Holdings rose 3.63, or 15%, to 27.86, on the NYSE, after the Shanghai real-estate-services company signed agreements to be the sales agent for several projects owned by three real-estate developers in China.
Bar-and-grill operator Ruby Tuesday (NYSE) fell 1.03, or 14%, to 6.21, after the Maryville, Tenn., chain reported it swung to a fiscal second-quarter net loss, cut its 2008 outlook and warned it could default on some borrowing agreements in the next year.
Among the companies hurt by weak earnings reports or guidance was WD-40 Co., which slid 4.68, or 13%, to 31.66, after the San Diego petroleum-based lubricant maker posted fiscal first-quarter earnings below Wall Street expectations.
In addition, Electronics for Imaging fell 5.95, or 31%, to 13.22. The Foster City, Calif., publishing hardware and software company forecast fourth-quarter earnings below analysts' expectations, citing weak demand for its high-margin Fiery products.
Ikon Office Solutions dropped 2.18, or 18%, to 10.01, on the NYSE, after the Malvern, Pa., office-products and software company lowered its first-quarter earnings guidance on lower-than-anticipated equipment revenue.
Synaptics dropped 5.72, or 15%, to 32.71, after American Technology Research cut its rating on the Santa Clara, Calif., maker of touchpads for computers to neutral from buy, citing a loss in market share.
Noven Pharmaceuticals declined 42 cents, or 3%, to 13.37, after the Miami drug-delivery-systems developer said it received a Food and Drug Administration warning letter concerning a patch used to treat ADHD.
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Ed Welsch contributed to this article.
