Russell 2000 Falls, Led by Financial Companies; Apollo Declines

The Russell 2000 Index (RTY) fell to the lowest in almost two months, led by financial companies Apollo Investment (AINV) Corp., CompuCredit Corp. and Newcastle (NCT) Investment Corp.

Apollo Investment fell the most ever after reporting its first loss since going public in 2004. CompuCredit, a lender to people with poor credit, erased more than a quarter of its market value after Stephens Inc. analysts lowered their recommendation on the stock. Real estate investment trust Newcastle slumped on earnings that missed analysts' forecasts.

``The whole issue around access to credit is obviously having an impact on the ability for small companies to finance growth and the potential for larger companies to finance acquisitions,'' said Matthew Patsky, who helps oversee $550 million in stocks of small- and mid-sized companies at Winslow Management Co. in Boston. ``That's given people some worry.''

The Russell 2000 slipped 3.2 percent to 775.96, the lowest since the day before the Federal Reserve's interest rate cut on Sept. 18. Its members have a median market value of $618 million. The measure has alternated between daily gains and losses since Oct. 29. The Standard & Poor's Smallcap 600 Index declined 3.2 percent to 401.77.

The Fed's lending-rate reduction sparked a 9 percent rally in the Russell 200 through Oct. 9. The measure has since erased that advance.

Financial companies in the S&P SmallCap 600 (SMLL1) have lost 26 percent of their value this year, underperforming their larger rivals in the S&P 500 by eight percentage points. A group of thrifts and mortgage companies in the S&P Smallcap 600 Index fell 6.1 percent, declining for the sixth time in seven days.

Leon Black

Banks and brokerages dragged down the S&P 500, a benchmark for larger companies, by falling 2.9 percent after New York Attorney General Andrew Cuomo said he's expanding his investigation of the home-loan industry.

Apollo Investment, run by former Drexel Burnham Lambert Inc. mergers chief Leon Black, dropped $2.05, or 10 percent, to $18.37. The company reported a quarterly loss of 22 cents a share, compared with profit of $1 a share a year earlier.

CompuCredit fell the most in almost six years, losing $3.77, or 27 percent, to $10.27. Analyst Dennis Telzrow at Stephens Inc. cut the company's rating to ``equalweight'' from ``overweight.''

Newcastle, which holds securities based on the value of subprime loans, fell $1.81, or 13 percent, to $12.42, the lowest since October 2002. The company said third-quarter funds from operations excluding some items was 68 cents a share. That's less than the average analyst estimate of 73 cents a share, compiled from a Bloomberg survey.

Nastech, Veraz

Nastech, a maker of medicines given by nasal spray, slumped $5.37, or 38 percent, to $8.62 for the second-steepest drop in the Russell 2000. The company said Procter & Gamble Co., the largest U.S. maker of consumer goods, halted collaboration on a treatment for osteoporosis. The agreement would have been worth as much as $577 million to Nastech, according to regulatory filings.

Veraz Networks Inc. lost $3.56, or 44 percent, to $4.56. The maker of telecommunications equipment, which sold shares at $9 apiece in an April initial public offering, reported an unexpected decline in sales of Internet gear that caused profit to fall short of projections.

Credence Systems Corp. fell 55 cents, or 18 percent, to $2.49 for the biggest decline since March 2. The maker of chip- testing gear said Joy Leo resigned as the company's chief financial officer. The stock's rating was also cut to ``sell'' from ``hold'' at Citi Investment Research.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net.

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