The Wall Street Journal-20080118-Radian Falls 19-- WCI Rises
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Radian Falls 19%; WCI Rises
Hefty write-downs for financials, a slowing U.S. economy and mortgage-related nervousness dealt a knock-out blow to small- capitalization stocks yesterday, which officially closed in a bear market.
The Russell 2000 index of small caps closed down 19.34 points, or 2.76%, to 680.57, more than 20% below its 2007 peak of 855.77 on July 13. The Russell is down 11.2% for the year to date.
The Standard & Poor's SmallCap 600 was down 9.51, or 2.62%, to 353.37, also off more than 20% from its peak of 445.19 on July 19.
"Some companies are just not working. Guarantors aren't working, and neither are financials," said Kevin Kruszenski, director of equity trading for KeyBanc Capital Markets.
Mortgage insurers dropped across the board after the Commerce Department said December housing starts fell 14.2% to a seasonally adjusted 1.006 million annual rate, marking its lowest pace since May 1991. Expectations for the month had been for a 5% drop.
On the news, MGIC Investment fell 2.28, or 14%, to 13.49, PMI Group dipped 1.29, or 17%, to 6.48, and Radian Group lost 1.50, or 19%, to 6.37, all on the NYSE.
Despite the disappointing housing data, WCI Communities, which trades on the Big Board, climbed 56 cents, or 23%, to 3, after the luxury-home builder said its lenders agreed to relax some debt agreements, giving the Bonita Springs, Fla., company more time to try to recover from the housing bust.
Deerfield Capital slipped 53 cents, or 7%, to 6.88, on the NYSE, after the Chicago real-estate investment trust said it took noncash charges totaling $90.1 million related to certain mortgage-backed and asset-backed securities.
Among the areas most strapped in recent days is the energy sector, pushed down by a continued drop in oil prices coupled with warnings for slowing U.S. economic growth. On these pressures, Penn Virginia slid $2.35, or 5%, to $43.15, while Basic Energy Services fell 83 cents, or 4%, to 18.73, both on the NYSE.
Like energy small caps, materials companies fell further following a report from the Federal Reserve Bank of Philadelphia that manufacturing activity in January contracted to its slowest pace in about six years. Notable decliners for materials stocks were Texas Industries, off 3.89, or 8%, to 46.74, and Brush Engineered Materials, down 2.12, or 7%, to 27.26, both on the NYSE.
Another large-materials decliner was A.M. Castle, which slid 2.49, or 12%, to 18.18 on the NYSE, after KeyBanc cut its rating of the specialty-metals distributor to "hold" from "buy," citing constrained near-term profitability momentum on excess aerospace, and oil and gas supply-chain inventories.
One of the few materials companies up was Stoneridge, which climbed 2.30, or 32%, to 9.39, on the NYSE. The Warren, Ohio, vehicle- electronics maker raised its 2007 earnings forecast on growth for its North American and European electronics businesses.
Briggs & Stratton fell 63 cents, or 4%, to 17.04, on the NYSE, after the Milwaukee engine maker posted fiscal second-quarter earnings below Wall Street expectations.
LaserCard jumped after disclosing it was part of a consortium to receive a $400 million prime contract from the government of Angola for a national identification card system. The Mountain View, Calif., optical-data-storage products maker closed trading up 1, or 9%, to 11.73.
Perini fell 10.05, or 27%, to 27.65 on the NYSE, after the Framingham, Mass., construction services provider said Deutsche Bank delivered a notice of loan default to the developer of the Cosmopolitan Resort and Casino project under construction in Las Vegas.
Insteel Industries decreased 85 cents, or 9%, to 8.14. The Mount Airy, N.C., industrial wire-products maker reported a drop in its fiscal first-quarter net income, noting shipments declined due in part to a weak housing market.
Matrixx Initiatives rose 1.20, or 11%, to 11.82, after the Phoenix pharmaceutical company said it expects 2008 sales will be flat to up 5% if the cold season trends continue. The stock set a 52-week low earlier this week.
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Alistair Barr contributed to this article.
