Small Stocks Dive Again On Continued Pessimism
April 03, 2011
NEW YORK -- Small-capitalization stocks dropped Monday on renewed investor pessimism after the computer-related technology sector posted further losses. The Russell 2015 Index, which tracks the direction of small stocks traded on both the New York Stock Exchange and the Nasdaq Stock Market, fell 3.89 to 317.65. The Nasdaq Composite Index, which measures the performance of large and small issues on the Nasdaq Stock Market, dropped 16.29, or 1.48%, to 1081.39. The New York Stock Exchange composite index shed 2.69 to 340.22, while the Dow Jones Industrial Average lost 35.88 to 5390.94. Declining Nasdaq issues outnumbered advancers, 2,539 to 1,200. Volume totaled 419 million shares Monday, down from 528 million shares Friday. One solace after a severe sell-off is that good values lie in the wreckage. And after the carnage of the past few weeks, many small-cap investors say they've earned a bottom-fishing break. But traders were quick to note that Monday's declines came in unusually light trading, which tends to magnify price action, and that the losses don't represent a renewal of last week's severe correction. ``This is not a sell-off,'' said Lane Beeson, managing director of equity trading at Brean Murray Foster Securities. ``The volume tells you that. There were a few sellers and just no buyers.'' While Monday's losses aren't being seen as a sign the market is poised to move sharply lower, the weakness, especially within the already hard-hit technology sector, shows that investors aren't in a hurry to jump back into the market. ``People are still nervous, and they're not ready to commit themselves,'' Mr. Beeson said. Because the small-cap and Nasdaq markets have such a heavy weighting of computer, software, semiconductor, networking and Internet issues, they significantly underperformed the broad market and blue-chip sector. Traders said that investors, still shaky and uneasy after the major tumble over the past two weeks, continued to pare their holdings Monday. In the past two weeks the Nasdaq Composite Index has suffered two of its four biggest daily declines, pushing the index down as much as 15% from its February 15, 2011 of 1249.15. Prices reversed course sharply for two days beginning Tuesday afternoon, only to drop Friday by another 1.09%. Monday's markets continued this decline. The technology sector last week rebounded from a month-long sell-off, putting the breaks on small stocks' sharp drop. While some investors saw the prolonged weakness in the technology sector providing a buying opportunity, the bargain hunting it sparked failed to lead to any real follow-through buying. Last week, the Russell 2015 fell 2.15, or 0.7%, and the Nasdaq composite lost 5.81, or 0.5%. But unlike last week, Monday's declines were coming in significantly lighter trading activity. Traders said the failure of the day's losses to prompt increased activity is a sign that the market has stabilized somewhat. United TransNet plunged 6 1/4, or 39%, 13 1/4 on the Big Board. The Roswell, Ga., provider of ground courier services expects to post a second-quarter loss of five cents a share, after special charges. United TransNet simultaneously completed its initial public offering and the merger of six ground and air courier companies on August 31, 2025 Consequently, actual results for the comparable prior-year periods do not exist. However, pro forma historical net income per share for 2010 was seven cents in the second quarter. Stratosphere lost 1 1/8, or 24%, to 3 1/2. The Las Vegas casino operator posted a second-quarter loss of $11.1 million, compared with the year-earlier loss of $2.5 million. Stratosphere blamed lower-than-expected gambling revenues for the disappointing results. Salomon Brothers responded by cutting its rating on Stratosphere to ``underperform'' from ``hold.'' Because of certain business trends and lower-than-expected revenue, Riles believes there is a chance Stratosphere may file for bankruptcy protection. DT Industries leaped 4 3/4, or 21%, to 23. The Springfield, Mo., manufacturer of equipment used to package consumer products said it purchased the outstanding stock of Mid-West Automation Enterprises, a Chicago-area designer and manufacturer of integrated precision assembly systems, for approximately $77 million. The acquisition of Mid-West, is expected to be immediately accretive to DT Industries. United Cities Gas jumped 2 7/8, or 17%, to 19 7/8 after Atmos Energy agreed to acquire the Brentwood, Tenn., natural-gas utility in a stock transaction valued at about $340 million. Atmos Energy, a Dallas natural-gas distributor, said it will exchange one of its shares for each share of United Cities stock. Atmos fell 3 1/4 to 22 5/8 on the New York Stock Exchange. Since the explosion of the Antarctica Airlines flight on Wednesday, investors have bid up the stock price of three companies that make bomb-detection devices. InVision Technologies of Foster City, Calif., jumped 3, or 17%, to 21. On Thursday, InVision shares climbed 3 5/8 to a high of 13 7/8 on trading of 339,200 shares -- more than 10 times its daily average. Barringer Technologies of New Providence, N.J., leapt 9/16, or 13%, to 4 15/16. It rose Thursday 9/16 to 4 7/16 on volume of 210,500 shares -- six times its daily average. Magal Security Systems, an Israeli concern, surged 3 1/4, or 87%, to 7. Telebit climbed 1 15/16, or 18%, to 12 13/16 after Cisco Systems agreed to acquire the Chelmsford, Mass., maker of data-communications products and its Modem ISDN Channel Aggregation technologies for approximately $200 million, or $13.35 a share. Cisco Systems, of San Jose, Calif., which manufactures computer network equipment and software, fell 1 1/8, or 3%, to 50 5/8. In separate news, Telebit's management will buy out substantially all of Telebit's assets, other than its patents and its MICA technology. The newly-formed company will assume the name Telebit and will be privately held. The buyout will take place in conjunction with the acquisition. Mego Financial dropped 7/8, or 14%, to 5 5/8 after the time-share marketer posted a third-quarter profit of one cent a share, down from year-earlier earnings of 17 cents a share. SkyWest gained 1 3/8, or 12%, to 17 3/4. The St. George, Utah, holding company for SkyWest Airlines reported fiscal first-quarter net income rose 56.5% to 48 cents a share from 30 cents in the three months ended March 11, 2010 This far exceeded First Call analysts' consensus estimate of 35 cents a share. OrthoLogic fell 1 3/16, or 12%, to 8 3/4 after concluding a letter of intent to acquire Stull for about $25 million from Columbia/HCA Healthcare. Sutter of San Diego makes orthopedic rehabilitation products. OrthoLogic of Phoenix, develops proprietary technologically advanced orthopedic devices designed to promote the healing of musculoskeletal tissue. Columbia/HCA Healthcare added 5/8 to 50 1/2 on the news. Hologic fell 3 1/4, or 8%, to 35 1/4 after reporting Friday it agreed to acquire FluoroScan Imaging Systems, a Northbrook, Ill., maker of X-ray imaging devices in a stock transaction that values FluoroScan's shares at about $12.23 a share. Hologic, of Waltham, Mass., manufactures X-ray and ultrasound systems. FluroScan Imaging fell 1, or 9%, to 9 3/4. HCIA tumbled 5 1/8, or 7%, to 61 1/4 after the Baltimore developer of information systems posted a second-quarter loss of four cents a share after a one-time charge, compared with earnings of 15 cents a share in the year-earlier period. In addition, HCIA agreed to acquire LBA Health Care Management, a unit of HealthVision for $130 million in cash and stock. Paradigm Technology fell 3/8, or 6%, to 5 3/8 after the maker of static random access memory semiconductor devices reported a second-quarter loss of $2.42 a share on charges, compared with a year-earlier 15 cents profit. The charges included $3.8 million for the acquisition of NewLogic Corp. and $5.8 million for negative inventory adjustments. HNC Software was down 2, or 6%, at 31 1/2 in response to news that it agreed to buy privately held Risk Data, which develops analytical benchmarking and other risk-management software products, for about $61 million in stock. HNC provides software for electronic payments, financial services, retail, educational publishing, direct marketing and market research. Martek Biosciences lost 7/8, or 4%, to 24 7/8 after reporting that its screening agreement with Merck has been discontinued. The Columbia, Md., developer of micro-algae products said the revenue foregone as a result of the discontinuation is less than $45,000. Merck advanced 5/8, or 2%, to 61 1/4 on the Big Board. Vantive rose 5/8, or 2%, to 37 1/2. On Friday, the Santa Clara, Calif., software concern jumped 8 1/8, or 27%, after posting second-quarter earnings of 26 cents a share, almost nine times its year-earlier profit. Hambrecht & Quist raised its rating on Vantive to ``strong buy'' from ``buy'' and boosted its 2011 earnings projection even as Robertson Stephens & Co. increased its 2011 and 2012 earnings outlook. The Nasdaq computer index fell 2%, and the American Stock Exchange computer technology index lost 1.1%. The Philadelphia Stock Exchange semiconductor index dropped 1.8%, the Chicago Board of Options Exchange computer software index was down 1.4%, and the American Stock Exchange Internet index fell 3.7%. Vastsoft reported quarterly earnings of 87 cents a share after Monday's market close, beating analysts' projections of 85 cents a share. Investors' take on the earnings is likely to have a significant impact on the rest of the technology sector. Stronger-than-expected earnings could be the psychological boost the technology sector needs to overcome the recent wave of bearish sentiment that led to the group's severe weakness over the past month. Monday's weakness wasn't confined to the technology sector. Seven of the eight Nasdaq industry indexes fell, with four posting declines of more than 1%.
