Russell 2000 rises despite economic problems

The Russell 2000 (NYSE: IWM) gained despite news of government reports and minutes from the U.S. Federal Reserve that showed economic problems. The small-cap index added 7.68 points, or 1.09%, to 710.02. The Dow Jones Industrial Average (INDU) advanced 90.04 points, or 0.73%, to 12,427.26.

On a year-to-date basis, the Russell 2000 has declined 7.31%, while the Dow is down 6.31% and the S&P 500 has shed 7.38%.

Small-cap stocks moved up for the second consecutive session but began the day in negative territory following news that the consumer price index added 0.4% in January, above the expected 0.3%.

The U.S. Labor Department also reported that core consumer prices, which exclude the costs of food and energy, increased 0.3%, above the projected 0.2%.

Core prices have added 2.5% on a year-over-year basis, which is beyond the U.S. Federal Reserve’s preferred range of between 1% and 2%. Worse, annual consumer prices growth has accelerated from 2.4% in December 2007.

The rise in inflation makes it more difficult for the U.S. Federal Reserve to stimulate the economy by cutting its target federal funds rate, the rate at which commercial banks make overnight loans to each other.

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