Dreary manufacturing report slashes early gains

Small-cap stocks pushed modestly higher on the opening, and were still holding in positive territory after a dreadful manufacturing report slashed away gains in large-cap index products. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was up 4.05, or 0.75%, at 541.57.

The ISM Manufacturing Survey came in at 38.9%, which was below the forecast of 42% and marked the lowest manufacturing activity index in 26 years.

Now that ISM is out of the way, focus will return to debate about the U.S. elections. The general perception right now is that Barack Obama will win the presidential election, which means market watchers will be looking to see whether or not Democrats win power in the Senate and House. Since 1900, the stock market has averaged a gain of nearly 10% in the 12 months following a Democrat transition into the White House. In addition, vehicle sales were slated to roll in today and could have an impact on automaker shares. The rate for vehicle sales is pegged at 12 million units.

Libor, or inter-bank lending rates, continue to decline and are now at the lowest point since the Lehman Brothers bankruptcy. The steady pullback in Libor rates is seen as a sign that frozen credit lines are thawing and that banks are more trusting on the lending front.

In company news this morning, Wal-Mart Stores Inc. (NYSE:WMT) was upgraded by analysts at JP Morgan and the world’s largest retailer was up 1.1% shortly after the open. Also on the analyst front, Merrill Lynch downgraded rival Goldman Sachs Group Inc. (NYSE:GS) and the investment bank was off 1.3%. Goodyear Tire and Rubber Co. (NYSE:GT) topped the earnings forecast and rallied 14.5%.

Individual small-caps of note were highlighted by Seneca Foods Corp. (Nasdaq:SENEA) was up 25%, gapping higher on light volume. Safe Bulkers Inc. (NYSE:SB) was up 12.8%, climbing above the 20-day moving average for the . . .

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