The Wall Street Journal-20080116-FirstFed Slips 10-- Matrix Falls
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FirstFed Slips 10%; Matrix Falls
After yesterday's market rout, both major indexes of small stocks are near the defining mark of a bear market.
The Russell 2000 index of small-capitalization stocks fell 15.05 points, or 2.11%, to 697.43. Yesterday's close was roughly 18.5% below its record close on July 13, 2007, of 855.77 -- the traditional definition of a bear market is a drop of 20% from peak to trough. The closing price also marked the index's lowest close in about a year and a half.
The Standard & Poor's SmallCap 600 shed 7.30, or 1.98%, to 361.35, an 18.8% drop from its peak of 445.19 on July 19, 2007, and its lowest point since Aug. 25, 2006.
"Every sector in the Russell" was down, said Christopher Colarik, portfolio manager at Glenmede Investment Management in Philadelphia. "Utilities [were] the least down, followed by health care . . . with the worst-performing sectors continuing to be technology and anything lending related."
While large-cap stocks were also pinched on weak sales data and the ramifications of write-downs from Citigroup, small caps, which are perceived as riskier and more U.S.-focused than their larger brethren, faced some of the heaviest selling.
"Anything having to do with pressure on the consumer is going to hurt small caps," said Quincy Krosby, chief investment strategist at Hartford Financial. "And any economic data that says the economy is deteriorating further, will weigh on small caps."
Reflecting Ms. Krosby's comments, many financials and lenders continued their recent slides and finished yesterday in the red, including Boston Private Financial, down $1.90, or 9%, at $20.08; Nara Bancorp, off 70 cents, or 6%, at 10.68; and FirstFed Financial, which slid 3.51, or 10%, to 31.59, on the New York Stock Exchange, after boosting its loan-loss provision guidance on rising delinquencies.
Another sector hampered yesterday were small-cap energy stocks after crude oil fell to a three-week low on concerns about a decline in the demand for oil.
Among the energy stocks pinched from the drop in oil prices were Matrix Service, sliding 1.33, or 6%, to 20.13, and Superior Well Services, off 1.11, or 5%, to 20.83.
Consumer-spending issues further damped the market for small stocks after the Commerce Department said retailers posted weak sales in December, down 0.4%. Economists had forecast a 0.1% dip. The sales figures led to declines for Big 5 Sporting Goods, down 1.51, or 14%, to 9.07, and Christopher & Banks (NYSE), off 1.68, or 16%, to 8.54.
Two additional retailers were pinched after noting declining customer traffic would hurt results in the fiscal fourth quarter. Hibbett Sports, down 2.58, or 16%, to 13.38, cut its fourth-quarter earnings forecast, while Coldwater Creek lost 1.29, or 25%, to 3.86, after widening its fiscal-fourth-quarter loss guidance.
Another company declining on a reduced earnings forecast was Fair Isaac, down 5.43, or 19%, to 22.91, on the NYSE. The credit-scoring systems developer lowered its fiscal-first-quarter, second-quarter and full-year earnings guidance.
MoneyGram International (NYSE) slid 6.02, or 49%, to 6.15, after the company reported additional net unrealized losses of $571 million, bringing its total unrealized losses to $860 million. In addition, MoneyGram is in negotiations to sell up to a 65% stake in the company to an investment group led by Thomas H. Lee Partners through a recapitalization.
Kellwood climbed 1.61, or 10%, to 18.12, on the NYSE, after an affiliate of Sun Capital Securities Group launched a hostile tender offer for the apparel maker, valuing the company at $21 a share, or $762 million.
Lifecore Biomedical increased 3.92, or 31%, to 16.76, after the medical-device maker agreed to be acquired by private-equity firm Warburg Pincus for $17 a share, or $239 million, while Ocwen Financial jumped 2.11, or 53%, to 6.09, on the NYSE, after a group including its chairman and chief executive, as well as Oaktree Capital and Angelo Gordon, offered to buy the financial-services holding company for $7 a share.
Dendreon rose 27 cents, or 4%, to 6.73, after the company said it was granted a broad European patent covering an investigational active cellular immunotherapy for the treatment of advanced prostate cancer.
