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Small-company stocks gain

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By The Associated Press
Tuesday, May 21, 2013, 12:01 a.m.
 

NEW YORK — Small-company stocks were a bright spot in a slow and choppy start to the week for Wall Street.

The Russell 2000, an index of small-company stocks, climbed above 1,000 points for the first time and ended higher Monday, even as the Dow Jones industrial average, the Standard & Poor's 500 index and the Nasdaq composite index all edged lower.

Small stocks are doing well because they are more focused on the United States, which is recovering, and are less exposed to recession-plagued Europe than the large international companies that make up the Dow and the S&P 500 index.

The gains for the smaller companies are encouraging for the broader stock market because they show that investors are becoming more comfortable about the economy and investing in riskier assets, said Rob Lutts, chief investment officer at Cabot Money Management.

Small-company stocks are considered riskier than the stocks of well-established, large companies like IBM or Coca-Cola. That's because small companies are often relatively young and tend to have less diversified businesses than larger ones, making them more susceptible to swings in demand from their customers. There also are fewer buyers and sellers for them, which can make the stocks harder to off-load if prices start to fall.

“Having smaller stocks hit new highs means that the rally is broad,” Lutts said. “It gives us a little more confidence that it's a good, sustainable rally that can hold together for a while.”

The Russell 2000 ended the day 1.70 points, or 0.2 percent, higher at 997.98. The index climbed as high as 1001.50 at midday. The index is 17.5 percent higher for the year, a better performance than better-known market barometers like the Dow and S&P.

The Dow closed down 19.12 points, or 0.1 percent, at 15,335.28, paring its gain for the year to 17 percent. The S&P 500 index fell 1.18 points, or 0.1 percent, to 1,666.29. Its advance for the year now stands at 16.8 percent.

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