Small caps rise as broader market slips

Small-cap stocks are treading higher in afternoon trading, boosted by healthy earnings on the banking front and mergers and acquisitions news. At 2:07 p.m. ET, the Russell 2000 (NYSE:IWM) was up 2.96, or 0.43%, at 696.04. As oil prices rose and two pharmaceutical blue chips delayed reporting their quarterly results, the broader market was down in afternoon trading. The Dow lost 36.88, or 0.32%, to 11,459.69.

The leading indicators report, which came out at 10:00 a.m. ET, was in line with the forecast for a dip of 0.1% and had almost no immediate impact on the market. Overall, this is a very light week for economic data, but it will be a huge week for earnings results.

Pharmaceutical giants Merck & Co. (NYSE:MRK) and Schering-Plough Corp. (NYSE:SGP) delayed releasing their second-quarter earnings until after the closing to let researchers report results from a study of a cholesterol drug marketed by the two companies in a joint venture.

In what has become an ongoing trend, a major U.S. bank has posted better-than-expected earnings. This time around, the good news was from Bank of America (NYSE:BAC), as the nation’s largest retail bank topped the Street earnings forecast and jumped 7% in the afternoon session. The earnings surprise follows on the heels of better-than-expected results last week from Wells Fargo & Co. (NYSE:WFC), JP Morgan (NYSE:JPM) and Citigroup (NYSE:C).

Within the financial spectrum, government-sponsored mortgage lenders Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) were solidly higher this morning in the wake of weekend comments from Treasury Secretary Henry Paulson, who said that he expects Congress to quickly pass his bail-out program for GSEs. Paulson . . .

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