Small-cap stocks pushed higher Thursday, benefiting from money flow out of debt instruments and into equities amid hopes that credit markets are on the cusp of a recovery stirred by global rate cuts. The Russell 2000 (NYSE:IWM) closed up 23.30, or 4.75%, at 514.18, and is now down 33% for the year. The Dow is off 31% for 2008 and the S&P 500 is down 35%. This marked the third consecutive higher close for the Russell 2000, which has not happened since Sept. 12, or before the entire collapse took place. Looking ahead to Friday, the market hasn’t closed higher four consecutive trading sessions since May 30. The fact that small caps aggressively paced today’s rally reflected a more open investor stance on risk, as small caps were pummeled relative to the Dow on the way down in recent weeks.

Investors appeared to gather confidence when this morning’s GDP report came in a tad better than expected, which sparked a renewed appetite for riskier investment fare. The GDP headline figure came in at minus 0.3%, slightly better than the forecast for a slide of 0.5%. Still, this marked the steepest contraction in seven years and reflected the first quarterly decline in consumer spending since 1991. What’s more, economists are unanimously calling for things to get quite a bit worse in the fourth quarter.

However, news that the economy is struggling isn’t exactly fresh news, and investors appeared more confident that the worst of the picture is already priced into the recent collapse. Outside of a wild late slide Wednesday afternoon, intraday stock market gyrations have been a little less frantic and bewildering, and the movements seem a little more orderly, which could also help restore some confidence . . .

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