Russell rises on Bernanke comments, factory orders data

Small-cap stocks pushed higher on the opening, supported by a modest dip in crude oil prices, ideas that Monday’s slide was overdone, solid factory orders data and comments from Federal Reserve Chairman Ben Bernanke. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was up 4.28, or 0.58%, at 745.30.

Bernanke said that monetary policy was well positioned to promote growth and price stability, but that until the housing market stabilizes, growth risks remain on the downside. In addition, Bernanke said that financial market conditions have improved, but are still strained. Bernanke made a rare comment about the dollar, which sparked a dramatic reversal in the dollar’s value against the euro, sending the greenback to a gain of about 0.6% versus the euro after being lower before the U.S. stock market opening. This was Bernanke’s first public policy statements in about a month, and the market appeared to embrace his comments, with stock futures edging up a couple of handles from the overnight price, in addition to the dollar rally.

The factory orders report came out at 10:00 a.m. ET, with the headline figure at plus 1.1%, well above the median forecast for a dip of 0.1%. Stock index futures markets pushed higher immediately after the release of the numbers.

Crude oil prices tumbled more than $2 dollars per barrel in response to the rise in the U.S. dollar. Billionaire investor George Soros said today that the rise in oil prices and other commodities resembles some bubble moves. He also said that a crash in oil prices is not imminent and that commodity index trading is inflating the speculative bubble in physical markets.

There is a perception among some traders that if the energy market starts to sink, we could see a massive unwinding of a short dollar/long crude oil trade that would stand to benefit the greenback and equities as traders shift funds away from energy and back into stocks. However, that theory is just speculation at this stage. There is also a firestorm of jawboning from regulators and elected officials about market oversight and speculative commodity buying as everyone scrambles for a scapegoat . . .

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