Wacky crude whipsaws small caps

Small-cap stocks finished out an up and down session Wednesday with a mild profit after spending much of the day getting bounced around by turbulent price action in crude oil futures. The Russell 2000 (NYSE:IWM) eventually closed up 1.54, or 0.21%, at 731.60 and is now down 4.49% for the year. The Dow closed up 0.61%, while the S&P 500 was up 0.62%. The Dow is off 13.9% for the year, while the S&P 500 is down 13.2%.

The frenetic action in crude oil overshadowed a positive story in the tech arena following upbeat results by the world’s largest computer maker and shuffled big overnight gains in Asian stocks into the backdrop as well.

Crude oil prices plunged to a morning low at $112.61, as the weekly inventory report showed a surprising increase in stockpiles, but then the market reversed course as the energy traders were uneasy with Russia’s response to a missile deal between the United States and Poland, especially with tensions rising between the U.S. and Russia over the Georgian conflict. For the day, crude oil traded in a wildly wide range between $112.61 and $117.03 and closed up $0.45 at $114.98. Goldman Sachs analysts also reiterated their call for $149 crude oil prices by the end of the year, which probably won’t sit well with long-term equity market bulls if it pans out.

The U.S. dollar remained firm against the euro despite the afternoon surge in crude oil, and a strong tone in the greenback remains a potential positive for equities — reflecting global confidence in U.S. assets, even if some of that confidence is really more a lack of faith in other economies around the world. Elsewhere on the commodity inflation front, corn, soybeans and wheat shot higher and the Commodity Research Bureau Index of 19 key physical markets rose about 0.7%.

Although financial shares performed much better today than they fared Monday and Tuesday, it was hard to look past the dramatic free fall in government-sponsored enterprises (GSE), with Fannie Mae (NYSE:FNM) collapsing 25% and Freddie Mac (NYSE:FRE) tumbling 21% as investors decided that a government bailout of the 1mortgage financing giants could crush current shareholder value. Both stocks were at their lowest levels in nearly two decades as everyone scrambled for the exit door at the same time. Despite the wipeout in GSEs, major bank stocks and many . . .

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