Small-cap stocks edged slightly lower in choppy early trade, with a downward spike in Europe bank stocks throwing a little cold water on a mild pre-market rise. Support stems from upbeat psychology as investors anticipate final formal approval today on a $789 billion stimulus spending plan. A dour reading on sentiment also played into the cautious early tone. At 9:55 a.m. ET, the Russell 2000 (NYSE:IWM) was down 1.05, or 0.23%, at 449.37.

A sudden freefall in Lloyds Banking Group this morning sparked a pullback off pre-market highs in stock index futures and pulled down sentiment into the U.S. stock market open. At one point, Lloyds was approaching 40% losses after saying that they would post a bigger loss than expected, which sparked spillover selling into Barclays and Royal Bank of Scotland. The volatility in Lloyds was severe, with the stock bouncing back to a 7% loss by the U.S. open. U.S. bank stocks were down about 3% shortly after the open, serving as a primary drag on the overall market indices.

The University of Michigan consumer sentiment survey came in at 56.2, which was well below the forecast of 61, and which appeared to trigger a mild selling extension in the stock market. A sub-index of the report on consumer expectations tumbled to the lowest level since May 1980.

The Obama Administration is looking at establishing a program to help subsidize mortgage payments, which would presumably stem the tide of foreclosures. That news helped spark a late recovery move in stocks Thursday and now faces deeper scrutiny by market watchers today and over the weekend.

Australian lawmakers passed their own stimulus spending program, overcoming some political hurdles that stalled passage earlier this week. The plan calls for $28 billion in spending stimulus projects, joining the U.S., China and other countries . . .

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