Resilient small caps choppy despite sliding techs

Small-cap stocks pushed lower on the opening, but edged back into the green about 30 minutes after the open as a slide in tech stocks and a turn for the worse for key financial shares was offset by money moving into small-cap commodity and consumer stocks. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was down 3.43, or 0.49%, at 694.20.

The tech-laden Nasdaq index bore the brunt of early selling interest, fueled by disappointing earnings results from benchmark companies like Apple Inc. (Nasdaq:AAPL) and Texas Instruments (NYSE:TXN), which were off 9% and 15% shortly after the open. Also, Vodafone Group (NYSE:VOD) slumped 13% as the mighty European-based mobile phone company lowered its outlook.

Within the financial arena, Wachovia Corp. (NYSE:WB) shed 10% early, snapping a run of positive surprises in the banking sector from recent days. WB, the fourth-largest U.S. bank, posted disappointing earnings, slashed dividends and announced sizable job cuts. Also, American Express (NYSE:AXP) was down 10% after missing the Street’s forecast, which triggered some analyst downgrades and a widening of credit default swap spreads (meaning it costs more to protect debt on the firm).

Comments this morning from Philadelphia Federal Reserve Bank President Charles Plosser had a decidedly hawkish tone and pulled down interest rate futures while supporting the U.S. dollar, but his remarks seemed to have a muted impact on stocks. Plosser said that “we will need to reverse course” on the policy front, and that the inflation picture is getting worse. Plosser is seen as one of the more hawkish members of the Fed and there seems to be a growing divide between policy members lately.

Goldman Sachs analyst Ed McKelvey addressed that very topic in a research report this morning titled “Mixed Messages from the Fed: Listen to Bernanke First.” Goldman’s McKelvey said that not all Fed officials are created equal and that the Bernanke Fed allows more dissent than typical policy boards. More importantly, the . . .

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