Housing data, M&A hopes boost small caps

Small-cap stocks remained higher into mid-session, bolstered by a big acquisition on the pharma front, which sparks hope that small caps are undervalued overall. If there are deals being done for large caps, then there should be attractive acquisitions for a bevy of smaller companies. In addition, a surprisingly strong showing on existing home sales also provided a lift to the market. At 12:53 p.m. ET, the Russell 2000 (NYSE:IWM) was up 8.96, or 2.02%, at 453.32.

Buyers also were happy to see that bellwether stock General Electric Co. (NYSE:GE) retained its credit rating despite slumping profits last quarter. And massive bank Barclays said that they did not need additional capital to weather the current storm, which provided a boost to the financial sector. The Financial Select Sector SPDR Fund was up 2.2% at midday.

Energy stocks were on a roll today, up 2.9%, mirroring a 3% climb in cash crude oil prices. Energy prices and stock market direction have been trading hand-in-hand of late, so the rise in equities clearly supported crude oil. In addition, OPEC cuts appear to be attracting a higher compliance rate than usual, providing some offset to concern about weak demand and hefty reserves.

This morning’s existing home sales report came in with a rise of 6.5% to a rate of 4.74 million units, quite a bit better than the forecast of 4.40 million, according to the National Association of Realtors. In addition, the Conference Board said that an index of leading economic indicators rose 0.3%, which also topped the forecast for a slide of 0.3%. The home sales data were particularly positive for the market, as many believe that this whole mess started with a housing bubble and won’t turn around until the housing market shows that it has bottomed. Later this week we’ll get data on new home sales to add to the overall housing picture, but the bulk of home . . .

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