Small-cap stocks turned in their best performance of the New Year today, as investors decided that a dreary picture of the current economic environment would simply make it that much easier for incoming President-elect Obama to push through a big fiscal stimulus package. The Russell 2000 (NYSE:IWM) closed up 9.68, or 1.92% at 514.71, the highest daily finish since November 4. For the first three days of trading in 2009, the Russell is up 3.1%, while the Dow is up 2.7% and the S&P 500 is up 3.5%.

In what promises to be a very busy week on the economic data front, the market skipped merrily through several gloomy reports today, with services sector activity, pending home sales and factory orders all consistent with an economy mired deep in recession. Even when a report beats the forecast, as was the case with today’s ISM Non-Manufacturing report on services sector activity, it’s still a low number historically. For the record, the ISM report came in at 40.6, well above the consensus projection of 37.0 and a nice turn of events considering the ISM’s tally on manufacturing Friday reflected a 28-year low.

Elsewhere on the data front, factory orders came in down 4.6%, which was quite a bit ...

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