Small-cap stocks opened sharply lower, pressured by a renewal of the credit crisis fears and reeling from a dramatic surge in crude oil that could crimp consumer spending habits and weigh on sentiment. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was down 4.43, or 0.62%, at 715.12.

Financial shares sparked a wave of overnight selling after American International Group (NYSE:AIG) released earnings that disappointed investors and renewed concerns about debt write-downs among financial institutions. AIG tumbled 5% on the regular opening (which was better than the overnight showing), and the largest bank Citigroup (NYSE:C) was basically flat — also not as bad as overnight action — as the CEO spoke at an investor meeting.

There also was talk of asset allocation plays being back in vogue this morning, with investors shifting money away from equities and into treasury products. The old stock market adage “sell in May and go away” appeared to have a life this first full week of May trading.

In a Goldman Sachs research report released overnight, analysts say that the underlying shock of mortgage credit defaults is large and “still has a ways to go.” Although they say that some of the markets that have been beaten down will normalize and create positive spillover on sentiment in the broader economy, they said that excess housing supply, acceleration of home price declines and over leverage in the U.S. housing market will not go away anytime soon.
 
“We believe that such losses (from over leverage) imply further adverse surprises for balance sheets in parts of the financial sector, with correspondingly adverse effects on lending and economic activity. The focus of the pain is likely to shift away from subprime mortgages, where the markets are already discounting very large losses, to other residential mortgage debt, including prime mortgages. This is one reason why we are expecting a renewed slowdown in economic activity after the stimulus-fueled bounce in mid- to late 2008. In turn, it makes us fairly confident that Fed officials will not start tightening policy at that time, as markets now seem to believe. If anything, they may come under renewed pressure to ease further, though at present this is not our base case,” Goldman Sachs said in the report.

As for crude oil, that market shot right through $125 dollars a barrel with startling ease, which is a sobering thought for American consumers heading toward the peak summer driving season. Soaring gas prices, coupled with higher food costs and sinking home values continue to drag down spending power for consumers, and the higher energy values also raise costs for businesses (just ask the airlines — UBS analysts downgraded six prominent airline stocks today).

Among broad market sectors, sellers emerged in insurance, REITS, metals and mining shares on the opening. On the upside, meager advances were seen in consumer services, photo products and homebuilding shares, but those gains were on a smaller scale than the losses in other groups.

As for individual small-cap shares, 3D Systems Corp. (Nasdaq:TDSC) tumbled 22%, gapping lower as earnings failed to impress investors. PowerSecure International (Nasdaq:POWR) also gapped down, sinking about 21% in the wake of sloppy earnings. Deltek Inc. (Nasdaq:PROJ) tumbled nearly 20%, also tied to earnings news. On the upside, Aceto Corp. (Nasdaq:ACET) jumped 20% and FreightCar America Inc. (Nasdaq:RAIL) was up nearly 10% after an arbitrator ruling in a grievance brought on by the United Steel Workers of America.

Small-cap firms slated to release earnings today at 11:00 a.m. ET or later include, U Store It (NYSE:YSI), Hiland Holdings (Nasdaq:HPGP), Superior Industries International (NYSE:SUP), Pharmerica Corp. (NYSE:PMC), Geoeye Inc. (Nasdaq:GEOY), Halozyme Therapeutics Inc. (Nasdaq:HALO), Caplease Inc. (NYSE:LSE), Cornell Companies Inc. (NYSE:CRN), Sterling Construction (Nasdaq:STRL), Landrys Restaurants Inc. (NYSE:LNY), Meridian Resource Corp. (NYSE:TMR), Patriot Capital Funding Inc. (Nasdaq:PCAP), Rentech Inc. (AMEX:RTK), Thomas PPTYS Group Inc. (Nasdaq:TPGI), US Global Investors Inc. (Nasdaq:GROW), Stonemor Partners (Nasdaq:STON), Jupitermedia Corp. (Nasdaq:JUPM), Specialty Underwriters Alliance (Nasdaq:SUAI), Fibernet Telecom Group (Nasdaq:FTGX) and Hooper Homes Inc. (AMEX:HH).

The chart picture for the Russell 2000 is dominated right now by the failure above the 731 line, an area that also turned back the market in early February. Looking at today’s action, initial support is at 713.50, then down at 708 and 700. On the upside, look for resistance back toward 720.50 and then at 726.