US SMALL/MIDCAPS-Stocks little changed after Fed twist
NEW YORK, June 20
NEW YORK, June 20 (Reuters) - Mid and small cap stocks were edged lower o n Wednesday as news the Federal Reserve was extending a program to keep long-term interest rates low got a lukewarm reception from investors who had already bid stocks up in anticipation of such a move.
The Fed said it was extending Operation Twist, an effort to depress borrowing costs by selling short-term bonds to buy longer-dated ones. The U.S. central bank will buy $267 billion in longer-dated securities through the end of 2012. The Fed's original "Twist" program was set to end this month.
"The Fed extending Twist was expected," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. "There may be some disappointment that the Fed didn't provide any strong hints in terms of new policy announcements."
The S&P MidCap 400 index fell 0.2 percent while the S&P SmallCap 600 index lost 0.4 percent. In comparison, the benchmark S&P 500 dipped 0.2 percent.
Several small and mid cap companies either cut their forecasts or reported weaker-than-expected earnings. Their news came as large cap companies Procter&Gamble and Adobe Systems cut their guidance to investors, citing weakness in European and Chinese markets.
Actuant Corp shares fell 3.4 percent to $26.51 The diversified manufacturer forecast fiscal 2013 revenue below analysts' expectations, also citing weak demand in Europe and China that it said is likely to continue.
Analysts at Bank of America Merrill Lynch say small and mid cap stocks should be more insulated from events overseas as their businesses are generally focused in the United States.
According to their estimates about 20 percent of small cap revenues come from overseas compared to about 35 percent for large caps. Less than half of small cap companies have exposure outside U.S. markets compared to 80 percent of large caps, they say.
"With much of the trouble stemming from Europe and a slower China, investors can argue that small caps are more immune to these problems than large caps," the analysts wrote.
"A strong dollar in theory should boost small caps relative to large caps with the stronger currency impacting large-cap earnings more than small caps."
However, they acknowledge that in times of market stress investors tend to move up the market cap spectrum to companies that have better access to credit, often depressing small cap prices.
Jabil Circuit Inc, the contract electronics maker, forecast fourth-quarter results below analysts' estimates as sales stagnate. But shares rose on expectations that it retained a key mobile phone customer, climbing 6.8 percent to $20.75.
Shares in La-Z-Boy Inc fell 12.6 percent to $11.47 after the furniture maker missed analysts' estimates for its quarterly revenue due to weak sales at its retail business.
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