Bounce; Tuesday’s losers attract bargain buyers today

Small-cap stocks pushed higher in early trading Wednesday, supported by scattered bargain hunting after the big downside press Tuesday on disappointment over a lack of details in the bank rescue plan. Bank, financial and commodity stocks were among the leaders on the early rise today after getting battered Tuesday. At 9:53 a.m. ET, the Russell 2000 (NYSE:IWM) was up 5.41, or 1.21%, at 451.17.

Investors will continue to keep a close eye on developments out of Washington today, with hearings slated on the first distribution of the TARP funds, ongoing banter about the stimulus plan and any “damage control” following Tuesday’s messy response to Treasury Secretary Timothy Geithner’s rollout of the bank bail out package.

The MBA Mortgage Applications Index fell 24.5% in this week’s report, slipping back to the lowest level since November. The purchase sub-index was down 9.8% to the lowest level since December 2000 and this decline in mortgage activity took place even though mortgage rates actually edged slightly lower in the latest week.

“Despite this week's decline in fixed mortgage rates, mortgage rates have drifted higher since the beginning of the year,” Steven Wood, chief economist with Insight Economics, said in an email. “As a result, mortgage activity has collapsed since the first of the year. Moreover, these data are for applications, not approvals; anecdotal evidence indicates that fall out rates are running as high as 50% so the actual effects on economic activity are far weaker than these data indicate. The housing market is still mired in a deep recession with no indication that a bottom has yet been reached,” Wood said.

In addition to the MBA report, the monthly trade report was released and showed the smallest trade gap in nearly six years, but that gap was still a tad bigger than expected. The report reflected the lowest auto import figure in some 10 . . .

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