Small caps reverse slide as retail, chip stocks climb

Small-cap stocks staged an impressive bullish reversal Thursday, rejecting a morning slide to five-week lows as a rally in retail and chipmaker stocks plotted an afternoon recovery course for stocks in general. Talk of another large government money float to embattled banks also played a role in turning the selling tide. The Russell 2000 (NYSE:IWM) closed up 9.45, or 2.09%, at 462.62, and is now down 7.4% for the year. Meanwhile, the Dow is off 6.4% for 2009, while the S&P 500 is down 6.5%.

The market appeared to pull off the bounce highs when news hit in the final half hour of trading about a plane crash in New York, but there were no signs of foul play and it appears the crash was the result of a flock of geese, which appeared to calm the market into the close and allow the rally in small caps to resume. Right after the close, a passenger on the plane told CNN that he thought everyone was rescued from the flight.

Investors fretted through the morning about reports Bank of America Corp. (NYSE:BAC) needed money to integrate the Merrill Lynch acquisition and also as Citigroup Inc. (NYSE:C) continued to see share prices collapse. However, rumors started to leak that the Treasury Department would provide more capital for the embattled banks and as the recovery started to take hold CNBC reported that the government would extend guarantees to BAC of $100 billion to $200 billion. While BAC and C were still sharply lower on the day, they did rally quite a bit off the intraday lows. News reports said that BAC would receive some $15 billion in TARP . . .

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