Energy stocks fuel rally off new lows

Small-cap stocks took flight this afternoon, spurning fresh bear market lows as bargain-hunters swooped in to snatch up deals, especially in the oversold and downtrodden commodities arena. The market once again showed a willingness to look past dreary employment data, seeing bad news on that score as Wednesday’s worries. The Russell 2000 (NYSE:IWM) closed up 38.41, or 8.48%, at 491.20. For the year, the Russell is down 36%, while the Dow is off 33% and the S&P 500 is down 38%

The weekly unemployment claims report this morning showed that the number of Americans filing continuing claims is at the highest point in 25 years, and just the latest weekly figure alone was the highest since September 2001. Still, the market barely budged when those figures came out, even though they were worse than expected, which created an aura that the jobs numbers weren’t behind market actions today. Even when the market crumbled in the afternoon and sank to new lows, you could tell there was more to the story than just worries about the jobs picture.

Coming into this morning’s activity, investors also had to weigh a revenue warning from technology bellwether Intel Corp. (Nasdaq:INTC); solid quarterly profits, but a mixed outlook from the world’s largest retailer, Wal-Mart Stores Inc. (NYSE:WMT); another wave of selling in overseas markets; a rise in bank lending rates for the first time in a month; the first German recession in five years; and a dip in crude oil prices to 22-month lows before an afternoon snap-back bounce in concert with equities.

“I think selling was related to the lift in Libor rates, poor earnings at Intel, weak guidance from Wal-Mart and ongoing disappointment over the TARP,” Nick Kalivas, vice president of financial research with MF Global, said in an email interview. “There have also been rumors that GE’s dividend may be cut. When the market started to rally back, I think sellers did not want to press in front of the G-20 meeting, insider buying at GE was announced and the earlier selling in stocks was not confirmed by outside market action.”

The market appears preoccupied with finding a bottom for the collapse, which is understandable because the risk is obviously much less near the lows. The pace of market declines has now shifted into a grueling slow-torture process, especially compared with the breakneck speed of the September-October collapse, . . .

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