Small-cap stocks began Monday in the red and have continued slipping in afternoon trading. The wave of selling was partially staved off by a better-than-expected non-manufacturing survey, but has not been able to break the 725 mark since about half-past 10 a.m. ET. At 1:40 p.m. ET, the Russell 2000 (NYSE:IWM) was down 2.35, or 0.32%, at 723.39.

The ISM Non-Manufacturing Survey came out at 52%, which was well above the median forecast of 49.5%, and the highest point since December. The reading also snapped three consecutive months of contractions, which is a plus for the economic outlook.

News that Microsoft (Nasdaq:MSFT) abandoned its takeover bid for Yahoo! (Nasdaq:YHOO) kept investors gloomy during the first session of the week. Yahoo shares dipped on the news, sinking as much as 18% in early trading, but down about 13% in afternoon trading. Several reports over the weekend suggested the deal might go through and Wall Street was evidently disappointed with the end result.

The dollar/commodities inflation front was a source of concern for equity bulls this morning. Crude oil prices jumped back above $117 dollars a barrel overnight . . .

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