Small caps shrug off bad news barrage

Small-cap stocks closed higher Wednesday, notching an impressive upside move given a sharp increase in crude oil prices, tame economic data, financial share erosion and concern about retail spending patterns. Still, a boost from technology shares and solid investor appetite for riskier small-cap fare won the day. In the end, the Russell 2000 (NYSE:IWM) gained 2.75 or 0.37%, to 747.69.

Once again, small caps were strong relative to the Dow and S&P 500, which were pulled down by struggling large-cap banks, big manufacturing firms and losses in large retailer names. For the day, the Dow was off 0.94% to 11,532.96, and is down 13% for the year. S&P 500 futures were only down 0.29% at 1,285.83, and are off 12.4% for the year. Meanwhile, small caps continue to be the relative safe-haven this year, off only 2.3%.

Stocks were impressively resilient in the face of a huge bounce in crude oil futures, which rallied some $3 dollars a barrel, or 2.65%, to $116 as a surprise drawdown in weekly stocks added to concerns about conflict between Russia and Georgia. Crude oil stocks dropped some 400,000 barrels, roughly double the forecast, and President Bush authorized American military forces to deliver humanitarian aid to Georgia while telling Russia it “must keep its word” and end the fight.

Normally, the headlines today would be dominated by the market’s response to monthly retail sales figures, but the data was basically in line with expectations and seemed to have very little overall impact on trading decisions. There was some concern that big-name retailer firms such as Macy’s (NYSE:M) lowered their outlook, but M shares actually pushed higher by the close. However, a soft tone was evident among the sector, with the S&P Retail Index slipping 2.3%, which seemed to dovetail with the soft numbers seen in today’s retail sales release. The retail sales headline figure was down 0.1%, which matched the forecast, but they were pulled . . .

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