Small caps climb with commodity stocks

Small-cap stocks pushed higher early Wednesday, trying to recapture some of the huge losses from Tuesday’s collapse, which was powered by sinking financial, homebuilder and commodity shares. Financial shares were still on wobbly footing this morning, but commodity stocks were rising nicely. At 9:56 a.m. ET, the Russell 2000 (NYSE:IWM) was up 9.23, or 1.30%, at 716.52.

In the wake of Tuesday’s collapse, which marked the largest one-day swoon of 2008, traders were keeping a close eye on trading in Lehman Brothers Holdings Inc. (NYSE:LEH), which released earnings under fire ahead of the opening after sinking more than 40% Tuesday. LEH, then nation’s fourth-largest investment bank, confirmed they were shopping prized assets in an effort to raise capital. The swirl of fear encompassing LEH seemed to calm somewhat this morning, with LEH shares bouncing back and forth near steady levels shortly after the open.

Well ahead of the opening, the MBA mortgage applications index jumped 9.5%, boosted by a decline in the 30-year fixed mortgage rate, which dipped to 6.06% from 6.39% the previous week. The market is basically economic indicator free today, ahead of Thursday’s weekly claims report and Friday’s PPI/retail sales tandem, which could set the tone for the finish to what has already been a wild week for stocks. Speaking of economic indicators, in a research report this morning, Goldman Sachs said that last Friday’s weak employment report “Closes the argument when it comes to whether or not the economy is in recession — it is.”

As recession talk in America picks up steam once again, it coincides with concerns that the global economy is also slowing, which has been blamed for some of the recent downdraft in commodity prices. In addition, some hedge funds that were long commodity stocks have been unraveling those trades, exacerbating the move. On the commodity front this morning, crude oil prices climbed back into positive territory into the stock market opening, rising about 90 cents a barrel back above $104. OPEC leaders surprised energy market watchers by deciding to trim output by 500,000 barrels a day at their meeting in Vienna Tuesday, which provides some support to energy prices. Stabilizing energy values however, represents a double-edged sword for equities; while it might support falling commodity names, it also thwarts . . .

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