Small caps climb into the green on Fed remarks

Small caps gained shallow ground midday on the heels of Fed Chairman Bernanke’s sanguine comments surrounding the aftermath of the credit crisis and banks’ recent abilities to raise capital in response.

At 1:08 p.m. ET, the Russell 2000 (NYSE:IWM) edged up 3.89, or 0.53%, to 739.96 while the Dow gained 51.37, or 0.4%, to 12,949.75.

In a prepared statement to a Chicago Fed conference, Bernanke offered encouraging remarks this morning when he addressed lessons learned from the credit debacle. The Fed Chair said conditions remain delicate and encouraged banks to continue being “proactive” in raising needed capital to create new profit opportunities as the economy and financial markets improve.

“Importantly, capital raising and balance sheet repair allow for the extension of new credit, which supports economic expansion,” Bernanke said.

He also noted that banks that closely monitored valuation inaccuracies of financial instruments fared better.

In economic news, investors shrugged off a slew of downbeat data. The Philadelphia Fed survey clocked in at negative 15.6, which was better than the projection for a decline of 19. That report followed disappointing numbers from the release of Industrial Production and the New York Manufacturing Survey, both of which pointed to a bleak manufacturing activity. Industrial Production was pegged at minus 0.7%, which was below the forecast for a dip of 0.3%. Meanwhile, the NY Manufacturing data came in at minus 3.23 for May, below the forecast for 0.00.

In addition, the Weekly Claims report edged slightly higher to 371,000, which was just above the forecast of 370,000.

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