Jobs surprise and Fed buoy small caps

Better-than-expected payrolls data and the Federal Reserve’s extension of credit to Wall Street banks buoyed investors’ moods, boosting small caps on the open and keeping them afloat in the green midday.

At 12:34 p.m. ET, the Russell 2000 (NYSE:IWM) was up 2.28, or 0.32%, at 716.83, while the Dow was up 81.5, or 0.72%, at 11,479.06.

A positive surprise from the ADP Employment Report this morning bolstered investors’ expectations for the Labor Department’s monthly employment report due out Friday.

The ADP report showed an uptick of 9,000 in non-farm payroll jobs, substantially above the forecast for a decline of 58,000 non-farm payroll jobs. Historically, the ADP report has carried muster, as it used to correlation with the Labor Department’s employment report; however that correlation has broken down over the last year and the ADP figure has tended to only be a good predictor when it falls near the consensus estimate. Economists are expecting a slide of 75,000 jobs in Friday’s employment report and were skeptical about the ADP data this morning.

In other economic news, the weekly MBA Mortgage Applications Survey clocked in this morning at minus 14.1, the lowest level since December 2001. The combination of weak home sales and slumping home equity continue to take a toll on mortgage applications, despite moderating mortgage rates.

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