Small-cap stocks opened higher, then turned slightly down as investors juggled tame inflation data, sinking Asian stocks, ongoing worries about the economy and testimony about the TARP against an optimistic profit view by a major computer maker. At 10:06 a.m. ET, the Russell 2000 (NYSE:IWM) was down 0.94, or 0.21%, at 450.36.

The “big” event so far this morning was the earnings release from Hewlett-Packard Co. (NYSE:HPQ) as the world’s largest PC-maker topped the estimate, but more notably raised guidance, which has been unheard of in recent corporate profit reports. The HPQ news clearly triggered a sizable bounce off the overnight lows in stock index futures ahead of the regular open, and bolstered investor psychology early on today.

On the inflation front, the headline producer price index tumbled by 2.8%, which was the largest decline on record, fueled largely to a collapse in energy prices. The “core” rate, which excludes volatile food and energy prices was actually up 0.4% and is up 4.4% on a yearly basis, the biggest climb in 19 years. The consumer side of the equation will be released Wednesday morning. Clearly, prices have tumbled hard, completely erasing inflation worries at this stage of the economic decline.

Crude oil prices were down solidly overnight, but climbed back into positive territory ahead of the stock market open. Oil services shares were lower overseas and commodities were down in Europe, which could keep a defensive posture in play for energy and other commodity-themed stocks early today.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke were on Capital Hill this morning to update progress on the TARP (the government’s $700 billion financial bailout plan). Paulson said that the TARP needs to be preserved to allow flexibility and the package is designed to help the financial system and is not a panacea for all economic problems. He also said that the housing market collapse is the root of the downturn and that a slowing economy may prolong the . . .

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