Small caps lower

Small-cap stocks edged lower this morning, pulled down by ideas Friday’s gains were overdone, by ongoing worries about the credit crisis and the economic recession and by a batch of soft earnings announcements in the small-cap sphere this morning. Losses were limited by optimism about fiscal stimulus plans when President-elect Obama takes office later this month. At 9:56 a.m. ET, the Russell 2000 (NYSE:IWM) was down 9.82, or 1.94% at 496.03.

Over the weekend, Obama officials said that the stimulus plan could include some $310 billion in tax cuts, which could lessen the Republican resistance to the spending programs. Overseas markets were glad to hear the news, with Asian equities rallying. Federal Reserve officials also were extolling the benefit of a stimulus program in weekend talks, further driving home the point.

There was some concern that Friday’s big rise was perhaps a little premature, as noted in comments this morning from analysts at Goldman Sachs. “Friday's initial 2009 trading session saw global equity markets rally notably (around 3%). There was no obvious macroeconomic catalyst for the move, other than talk about a very large fiscal expansion. In fact, the macro news was clearly weak, as the ISM survey dropped much more than expected to 32.4. Technical factors, including year-end related flows, likely played a role, and it will be interesting to watch for any ...

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