Mixed early signals give way to nice recovery

Small-cap stocks edged higher Thursday, a nice reversal from this morning when the market appeared to be in freefall mode after investors received a mixed bag of economic data, another batch of awful profit reports and remained in full fret mode about the government’s bank rescue and fiscal stimulus plans. In the end, the Russell 2000 (NYSE:IWM) closed up 2.47, or 0.55%, at 450.42. Small-caps are now down 9.8% for the year, while the Dow is off 9.6% and the S&P 500 is down 7.5%.

After spending most of this week digesting policy news out of Washington, the market got a chance today to divert attention back toward economic data, but the result was an upside surprise on retail sales that was basically impossible to accept at face value versus a more understandable dour reading on unemployment claims. No surprise there: the bearish claims data won that battle early on.

For those keeping track, the retail sales report showed a monthly rise of 1.0% in January, a far cry from the market’s projection for a slide of 0.7%. A rise in retail sales was deemed dubious right off the bat, and it didn’t help to see things in the report like a 1.6% rise in spending at auto dealers, but a 7.1% decline in unit sales.

“Early weakness was also a function of disappointment over the details of the fiscal stimulus package,” Nick Kalivas, vice president of financial research with MF Global, said in email interview with SmallCapInvestor.com.

Kalivas said that a roaring mid-morning comeback for stocks was fueled by gains in tech stocks, with Apple Inc. (Nasdaq:AAPL) and Research in Motion Ltd. (Nasdaq:RIMM) leading the way. “A favorable analyst note helped AAPL rally, while RIMM recovered from a sharp sell-off Wednesday. Additionally, KO had strong earnings, FCX completed a secondary offering and NTAP could find selling after it released soft earnings overnight,” Kalivas said. In addition, talk that the Obama Administration was developing a plan to slow down the pace of . . .

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