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Small-cap stocks pushed higher Friday, gaining a boost from merger activity in the banking sector, a jump in restaurant shares and a lift from news of a rescue plan for automakers. All of those factors help offset sloppy action in commodities, and worries about retailer sales into a key shopping weekend. The Russell 2000 (NYSE:IWM) closed up 7.09, or 1.48%, at 486.26 and is now down 37% for the year. Meanwhile, the Dow is off 35% for 2088 and the S&P 500 is down 40%.

Small caps were noticeably strong relative to large caps, fueled by M&A activity in the banking area. “I think that the M&T Bank Corp. (NYSE:MTB) purchase of Provident Bankshares Corp. (Nasdaq:PBKS) has caused investors to see value in small-cap banks and the purchase came at a nice premium,” Nick Kalivas, vice president of financial research with MF Global, said in an email interview. PBKS shares jumped 60% on the news.

Kalivas also said that positive profit news from restaurant operator Darden Restaurants Inc. (NYSE:DRI) provided a lift to the restaurant sector, which was reflected through impressive positive breadth in small-cap eateries. Small-cap restaurants on the move today included Cheesecake Factory Inc. (Nasdaq:CAKE) which jumped 12%; Brinker International Inc. (NYSE:EAT) up 29% as the firm completed a sale of the Macaroni Grill; The Steak n Shake Co. (NYSE:SNS), up 12%; and Papa Johns International Inc. (Nasdaq:PZZA) up 8%.

In addition, Kalivas said that the general atmosphere of cheaper gasoline and a mini-wave of refinancing activity provides a supportive element to the small-cap universe.

As for today’s quadruple witching expirations of stock index futures, options and single stock futures, Kalivas said that “pinning” action (which refers to . . .

Small caps are taking a beating in Friday’s mid-session trading, as crude oil prices surged and credit jitters prompted a broad sell-off in the financial sector. At 12:04 p.m. ET, the Russell 2000 (NYSE:IWM) was down 10.85, or 1.47%, at 726.98.

Small-cap investors tried to rally in the third hour of trading but met resistance at the 730 notch. After the brief resurgence, the small-cap slide is continuing into the afternoon session.

Merrill Lynch (NYSE:MER) started off the selling frenzy after cutting its estimates for regional banks. Rival investment banks Goldman Sachs (NYSE:GS) and JP Morgan (NYSE:JPM) were both in the red in midday trading as well. MER is down 3.9%, GS has fallen about 1% and JPM is off 0.4%.

Crude oil futures have rebounded from the largest one-day decline in about three months. In recent trading, crude has climbed $3.29 to $135.22 a barrel. The rebound in crude prices was accompanied by a falling U.S. dollar, which is down against both the euro and the yen.

Broad market sectors attracting sellers today were airlines, computer storage devices, plastics and rubber, casinos, auto and truck manufacturers, audio and video equipment and computer peripherals. Sectors on the upside included school services, savings and loans banks, gold and silver and oil well services and equipment companies.

Small-cap stocks took a dive on the opening, pulled under water by yet another selling flurry in the financial sector, a recovery bounce in crude oil, declines overnight on international equities and safe-haven flow out of stocks into bonds. At 10:10 a.m. ET, the Russell 2000 (NYSE:IWM) was down 12.96, or 1.76%, at 724.87.

This morning’s whipping post for the financials was Merrill Lynch (NYSE:MER) and shares in the investment banking firm were down 5.2% shortly after the opening. The market seems to be rotating around various financial stocks, but the whole group is also being punished as investors shy away from the group amid the ongoing credit crunch. Rival investment banks Goldman Sachs (NYSE:GS) and JP Morgan (NYSE:JPM) were both in the red early today as well. Ironically, even as Merrill is a target for the bears this morning, their own analysts issued bearish news on several banks, forecasting dividend cuts and lowering price targets. Wachovia (NYSE:WB) was off 5% and Bank of America (NYSE:BAC) was down 4%.

During Thursday’s session, crude oil futures offered an olive branch to stock market bulls via the largest one-day slide in about three months, but the market for black gold rallied back some overnight, climbing above $136 dollars a barrel heading toward the U.S. stock market opening. There was some talk once again about Israel planning a strike against Iran’s nuclear facilities; those rumors were in the news back on June 6 when crude oil jumped.

The stiff bounce in crude oil was accompanied by a sinking U.S. dollar, which lost 0.7% against the euro and about 0.5% versus the yen. The sinking dollar also could support a wide range of other commodity markets heading into the weekend.

Stock markets around the world were on the defensive overnight, with Japan down 1.3%, Taiwan off 1.8%, Australia down 1.4%, India down 3.4%, Hong Kong down 0.2%, South Korea down 0.6%. China shares did bounce 2.7%, but that . . .

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 . . .

The Russell 2000 (NYSE: IWM) and the other major U.S. indices moved up today on news of a stronger-than-expected profit at International Business Machines Corp. (NYSE: IBM). The small-cap index gained 7.83 points, or 1.11%, to 712.48. The Dow Jones Industrial Average (INDU) added 171.85 points, or 1.36%, to 12,778.15.

On a year-to-date basis, the Russell 2000 is off 6.99%, while the Dow has lost 3.67% and the S&P 500 has declined 3.55%.

Stocks small and large got off to a positive start as the bulls dominated trading today on news that IBM, the largest information technology company in the world, reported better-than-expected preliminary quarterly results.

The Armonk, New York-based company expects earnings from continuing operations for the quarter ended Dec. 31 to be $2.80 per share, above analysts’ projections of $2.60 per share.

Investors clearly liked the news so much that they disregarded a forecast from Hoffman Estates, Ill.-based retailer Sears Holdings Corp. (Nasdaq: SHLD), which forecasted that fourth-quarter earnings will be below analysts’ expectations due to a decline in same-store holiday sales.

That’s troubling because it points to a negative economic trend.

The announcement from Sears is the latest sign that consumer spending, which comprises about 70% of U.S. gross domestic product, has begun to slow. In the past few weeks many U.S. retailers, including those catering to the wealthy, have reported slugging sales.

Shares of Steak n Shake Co. (NYSE: SNS) are barreling lower today after the casual dining restaurant chain reported disappointing preliminary first-quarter results after Friday’s close, and said its prior guidance was no longer reliable.

A challenging economic environment, along with a prior year incremental coupon that was not repeated in the current year, unfavorable weather in the month of December, aggressive promotional activity from competitors and ongoing issues with store level execution all combined to cause the company to careen to a loss in the quarter.

For the fiscal first quarter of 2008, the Indianapolis, Ind.-based company said it expects to record a loss per share within a range of $0.04 to $0.05, compared with earnings per share in the first quarter of last year of $0.15. The consensus of seven analysts polled by Thomson Financial was for a profit per share of $0.05.

The small cap anticipates revenue of $136 million, compared with $147 million in the same period last year. The consensus of four analysts polled by Thomson Financial is for revenues of $141.08 million.

Same-store sales are expected to decline 9.5%, as guest traffic declined.

The company stipulated it will concede greater details on an earnings call scheduled for Jan. 24.

Shares of Steak n Shake (SNS) toppled 16.14%, or $1.53, to $7.95 at 1:25 p.m. ET. Shares of Steak n Shake have been trading in the range of $7.75 to $18.10 for the past 52 weeks.

The Russell 2000 (NYSE: IWM) has trimmed some of its earlier gains but is still comfortably in positive territory. At 1: 31 p.m. ET, the small-cap index had climbed 2.94 points, or 0.42%, to 707.59. The Dow Jones Industrial Average (INDU) was up 122.75 points, or 0.97%, to 12,729.05.

Trading got off to a good start on news that International Business Machines Corp. (NYSE: IBM), the largest information technology company in the world, reported better-than-expected preliminary quarterly results.

The Armonk, New York-based company said that it expects earnings from continuing operations for the quarter ended Dec. 31 to be $2.80 per share, above Wall Street’s consensus estimate of $2.60 per share.

The better-than-expected result is partially attributed to the weak U.S. dollar, which makes IBM’s overseas profit seem larger.

One greenback is currently worth 0.6722 euros, the currency used by 15 countries in the 27-member European Union. The dollar began the day at a level just above 0.675 euros.

The U.S. dollar has been losing ground for months. In March 2007, it was at a level of around 0.75 euros.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices are posting gains on news of unexpectedly robust earnings at International Business Machines Corp. (NYSE: IBM).
 
At 10:09 a.m. ET, the small-cap index had advanced 3.28 points, or 0.47%, to 707.93. The Dow Jones Industrial Average (INDU) was up 100.47 points, or 0.80%, to 12,706.77.

The mood on Wall Street is bullish on news before the start of trading that IBM, the largest information technology company in the world, reported better-than-expected preliminary quarterly results.

The Armonk, New York-based company said that it expects earnings from continuing operations for the quarter ended Dec. 31 to be $2.80 per share, above Wall Street’s consensus estimate of $2.60 per share and 24% higher than the $2.26 per share achieved a year earlier.

Elsewhere, retailer Sears Holdings Corp. (Nasdaq: SHLD) announced before the start of trading that it forecasts fourth-quarter earnings below analysts’ expectations due to a decline in same-store holiday sales.

Shares of The Steak n Shake Co. (NYSE: SNS) are veering lower today after the casual dining restaurant reported a gloomy fourth quarter and issued 2008 guidance below Wall Street’s expectations.

For the three months ended Sept. 26, the Indianapolis, In.-based company recorded net earnings of $1.5 million, or $0.05 per diluted share, compared with $0.10 six analysts were polled by Thomson Financial were on average expecting, and $7.5 million, or $0.27 per diluted share earned in the fourth quarter of 2006.

The small cap noted that it incurred a $1.1 million pre-tax charge ($0.7 million, or $0.02 per share net of tax) during the quarter for non-operating expenses related to “evolution of the organization.” Higher commodity costs and minimum wage increases, took a toll on the company’s bottom-line during the quarter.

Total revenues were $151.1 million, compared with $152 million in the same quarter last year. Five analysts polled by Thomson Financial were on average projecting revenues of $152.97 million.

Same store sales declined by 3.9% due to languishing guest traffic on account of store level execution and tighter consumer purse strings as a result of the feeble housing market and rising gas prices.

“The sharp earnings decline reflected continuation of weak comps and margin compression,” Robert W. Baird analyst David Tarantino wrote in a research note today. “Their near-term strategy involves emphasis on refining concept, improving operations, and cutting costs. Expect turnaround initiatives under new leadership to take time to gain traction.”

Cost Plus, Inc. (Nasdaq: CPWM), Novacea, Inc. (Nasdaq: NOVC) and Isramco, Inc. (Nasdaq: ISRL) are among the biggest percentage gainers in Thursday's trading among companies with market capitalizations under $500 million.

Here are today's biggest percentage gainers:

Laboratory products maker Kewaunee Scientific Corp. (Nasdaq: KEQU) reported a profit of $0.51 million, or $0.21 per share, for the fourth quarter ended April 30, compared with a loss of $0.25 million, or $0.11 per share, in the same period ended of 2006

A group of investors – including the firm HBK Investments LP - reported a 9.5% ownership in The Steak n Shake Co. (NYSE: SNS) in an SEC document filed after Monday’s closing bell.

Hoku Scientific, Inc. (Nasdaq: HOKU) shares are up more than 133.5% since June 13. The reason for the rise is unclear, but a Cowen and Co. analyst believes institutional investors are buying shares after the company’s market capitalization broke $100 million following last Wednesday’s announcement of a seven-year deal with the German solar panel maker Solar-Fabrik AG.

American Software, Inc. (Nasdaq: AMSWA) reported revenue of $22.5 million, or $0.11 per share, for the fourth quarter ended April 30, compared with revenue of $20.46 million, or $0.05 per share, in the same quarter a year earlier.

Identification technology company Intelli-Check, Inc. (AMEX: IDN) executives tried to assuage investors concerned for the company’s wellbeing after its 73-year-old CEO Frank Mandelbaum passed away on June 7. In a press release, Intelli-Check said the management transition since Mandelbaum’s death has been “orderly and the company is positioned to pursue its growth strategy.”

These are the biggest percentage gainers in Tuesday’s trading among companies with market capitalizations under $500 million: