Small-cap stocks pushed higher Thursday, lifted by asset flow into equities, demand for technology shares trickling down from the large-cap issues and a perception that credit conditions are on the improve. The Russell 2000 (NYSE:IWM) rose 7.31, or 0.99%, to 743.28, the highest daily close since Jan. 3.

“I think investors are underweight equities, and in recent weeks there has been movement out of cash and treasuries into stocks,” Nick Kalivas, vice president of financial research with MF Global, told SmallCapInvestor.com.

Kalivas said that a narrowing of credit spreads after the JP Morgan purchase of Bear Stearns and the Fed’s aggressive open door policy on liquidity to the dealer community has sparked buying in equities. In addition, huge debt issuance in the last few weeks has bolstered corporate balance sheets.

“I think money has come to stocks because of robust profits in the non-financial sector and the macro news has not shown further meaningful weakness in the economy. I also don’t think players want to be too short given the injection of stimulus from tax rebate checks and other measures,” Kalivas said. Simply put, stocks are cheap relative to treasuries and cash, which attracts money flow into equities.

More attractive pricing of DRAM products appears to be pulling investors toward tech issues. What’s more, the possibility of great new “toys” from big-cap players like Research in Motion (Nasdaq:RIMM), with the touch screen Blackberry, and Apple Inc. (Nasdaq:AAPL), with its iPhone upgrades spreads goodwill down to all tech stocks, big and small. Hey, we’re all kids at heart, and there’s nothing like a nifty new toy to get us excited.

With stocks at the highest level of the year, it’s hard sometimes to pay attention to nagging little tidbits of soft economic data and perhaps that’s how the market was able to shrug off sloppy news today from the manufacturing sector. Although the Philly Fed Survey was better-than-forecast, it was still down 15.6, still the fifth-consecutive huge negative number and still suggests the national ISM Manufacturing Survey will be in recessionary territory. In addition to Philly Fed, the market received news from the NY Manufacturing Survey (it was worse than feared) and Industrial Production (it was well below the analyst forecast). It might have been a sobering day for manufacturing data, but it did not deter stock market investors, who are already anticipating better days ahead.

However, not everyone is convinced that the outlook is all chocolate and cherries. In a fascinating research report by Northern Trust co-authored by Paul Kasriel, director of economic research and Asha Bangalore, economist, they said “There seems to be sentiment developing that the U.S. has weathered the worst of the current cyclical economic storm and blue skies are ahead. We disagree. Any blue skies you see are likely to be short-lived. The economy is in the relative calm of the eye of the business-cycle hurricane. The mortgage credit problems are not over. And credit problems in other sectors are just beginning as the housing recession spreads to the rest of the economy.”

Kasriel and Bangalore also said that a lack of credit creation would temper the inflation rate going forward, and that energy prices would recede amid slowing global demand. In recent days some prominent brokerage firms have issued forecasts for dramatic increases in crude oil prices, and today UBS Securities upgraded oil stocks due to the continuing trend of higher crude oil values, which makes the Northern Trust forecast for softer crude prices very interesting.

Speaking of crude oil, futures prices on “black gold” took a dive Thursday, pulled down by losses in natural gas, a firming tone in the U.S. dollar vs. the euro (which took a hit momentarily overnight on strong GDP Eurozone data) and by positioning tied to options expirations.

Friday serves up a double witching options expiration for equities, but with the SPX moving more than 20 handles away from the concentrated strike at 1,400, it could take some of the excitement out of the expirations.

From a charting standpoint, it’s hard to overplay the importance of today’s rise in the Russell 2000. The market left a dynamic topping pattern in play during Wednesday’s rejection of new move highs, and if small caps had tumbled today, it would have cemented a potential short-term top. That’s not to say that small caps are now free and clear to extend the move. In fact, the Russell is now testing the next key upside resistance zone in the 743 area. From there, the next key spot is at 750, which marks a 50% retracement of the entire bear market collapse. If things do start to wobble on Friday, short-term support is at 735, then at 731.

Looking at broad market sectors today, the top-performing groups were electrical equipment manufacturers, coal, tech storage, oil and gas drillers, semiconductors and homebuilders. Left out of the buyer spotlight were health-care services and food retail shares.

Among individual small-cap issues, China Architectural Engineering (AMEX:RCH) jumped nearly 20% on unusually brisk volume, spurred by earnings-related news. National Coal Corp. (Nasdaq:NCOC) shot some 23% higher to the highest point since July 2006, also on heavy volume, and no news. Noven Pharmaceuticals Inc. (Nasdaq:NOVN) rose 10%, without any apparent fresh news behind the rally. Also on the plus side, Dollar Thrify Automotive Group (NYSE:DTG) was up over 8%.

Small caps of note on the downside included Yucheng Technologies (Nasdaq:YTEC), which gapped lower and sank nearly 28% on heavy turnover tied to disappointing results. Also, Omega Protein Corp. (NYSE:OME) lost about 4% without fresh news. And last but not least, my favorite fast food hamburger joint, The Steak n Shake Co. (NYSE:SNS) tumbled about 10% to the lowest price since December 2000 on disappointing earnings news.