Small caps edge lower in early trading

Small-cap stocks edged lower, pressured by ongoing worries about sluggish economic conditions, slumping corporate profits and soft holiday retail sales. Losses were limited by a firm tone in the commodities arena, which helped support overseas markets in overnight trading. At 9:53 a.m. ET, the Russell 2000 (NYSE:IWM) was down 3.14, or 0.66%, at 473.62.

Energy markets were on the rise this morning, but the rally trigger was linked to geopolitical tension, not improving fundamentals. Crude oil prices climbed back above $40 dollars a barrel in overseas trading, but slipped off the highs into the U.S. open, up about $1.6 dollars near $39.60. Shortly after the open, energy stocks were up 2.4%.

Israeli military forces have been attacking targets in the Gaza Strip for the last three days, which has heightened tension in the Middle East and generated a bid in the crude oil market.

Gold prices were also on a roll, climbing to 11-week highs in European action, which could provide a lift to gold stocks and mining shares if the trend remains in play today. Commodities in general were supported by a big decline in the U.S. dollar, which was off some 1.7% against the euro early today. A slide in the dollar tends to boost demand for commodities – especially those priced in dollar terms (such as crude oil).

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