Small caps close higher

Small-cap stocks pushed higher Monday, buoyed by an improved tone in financial shares, a rise in tech stocks and a pullback in crude oil prices from record highs set early in the session. The Russell 2000 (NYSE:IWM) gained 7.12, or 0.97%, to 740.74.

“Financials are strong going into Goldman Sachs earnings tomorrow. Lehman Bros. (NYSE:LEH) also failed to ignite selling and there was a Washington Post story suggesting that the Fed would not tighten rates, which has helped financials,” Nick Kalivas, vice president of financial research with MF Global, said in an email interview.

Kalivas said that investors appeared to be rotating out of some defensive names and into financial stocks. In addition, smaller oil companies and regional banks were helping to provide a lift to small caps relative to the big index products.

Small caps started out the day in the red, pressured by a sudden upside burst in crude oil prices, which charged to new record highs just shy of $140 dollars a barrel. The surge in energy prices was complemented by climbing metals prices and record high corn prices. However, a pullback in crude oil back toward $134 helped ease concerns about energy prices and refocused attention on a solid performance in financial issues.

The U.S. dollar slumped against the euro today, which played a role in supporting the energy market, as well as other commodities. The greenback was pressured by record inflation numbers in the eurozone, a weekend G8 meeting that did not spotlight a strong dollar stance and by talk that rate hikes in the United States have been premature. Goldman Sachs weekly Economics Analyst report said that while they could not rule out a rate hike given recent warnings by Federal Reserve Chairman Ben Bernanke and vice chairman Donald Kohn about inflation expectations that tightening at this stage is “inappropriate” and “unlikely any time soon.”

Goldman Sachs analysts said that “as these points become apparent, we . . .

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