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Small-cap stocks took a hit Thursday, snapping a string of four consecutive winning sessions with a resounding downside spiral as dreary economic data and lousy corporate profit reports triggered a wave of selling. The Russell 2000 (NYSE:IWM) tumbled 19.78, or 4.18%, to 453.24, and is now down 9.2% for the year. The Dow is now down 7.1% for 2009, while the S&P 500 is off 6.4%.

Just one day after generating the second-biggest rally of the year, the Russell slumped to the third worst daily decline, reminiscent of the roller coaster ride surrounding the Obama inauguration, which saw the best and worst days of 2009 in back-to-back fashion. It has become a familiar and uncomfortable trendless volatility as the market waffles between bargain hunting and renewed dread about the worst economic recession since the Great Depression 70 years ago.

Today’s big event was a trio of economic reports that stood to remind us all that even though data might be a “lagging” indicator for stocks, when the numbers get numbingly awful, the confidence to shrug them off starts to wane. This morning saw weekly unemployment claims rise to 588,000, which was slightly above the forecast. But it wasn’t the weekly figure that was troubling, it was the number of Americans forced to file for continuing unemployment benefits because they can’t find a job. That number swelled to 4.77 million, the highest number on record. There are now more people than ever before forced to draw unemployment insurance, and we’re supposedly not yet at the worst of the jobs situation.

“In addition to staggering layoff announcements in January across a wide spectrum of firms, the actual number of folks filing for unemployment insurance climbed 3,000 during the week ended Jan. 24. Continuing claims, which lag initial claims by one week, advanced to 4.776 million and the insured unemployment rate increased to 3.6%, which is a cycle high from 3.4% in the prior week. The January employment report is likely to show a grimmer picture of the labor market compared with the December data,” Asha Bangalore, economist with Northern Trust, said in an email. 

And while the weekly claims report alone was an uncomfortable piece of data, there was no relief to be found in the monthly durable goods report or the latest reading on new home sales. Durable goods orders declined for the fifth consecutive . . .

Small-cap stocks pushed lower on the opening, pressured by a sloppy batch of earnings reports this morning and another weak slate of economic reports that threatens to break a four-day winning streak for the market. At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was down 11.00, or 2.32% at 462.03.

New home sales fell off a cliff today, sinking 14.7% to an annual rate of 331,000 units, way below the forecast of 400,000. The stock market appeared to extend the morning slide after the dreary home sales report.

The weekly claims report came in at 588,000, which was a tad higher than the forecast. The bleak news was on continuing claims, which rose to record highs at 4.77 million, topping the recessions from the 1970s and 1980s in the process. This was a sobering look at recent layoffs ahead of the big monthly employment report next week.

Also on the data front, the durable goods report came out at minus 2.5%, which was nominally worse than the projection for a decline of 2%. However, when stripping out the “big ticket” transportation orders, durables were off 3.6%. This marked the December report on durable goods; for the year, orders were down more than any year since 2001.

As for the latest earnings reports, Allstate Corp. (NYSE:ALL), QUALCOMM Inc. (Nasdaq:QCOM), Black and Decker Corp. (NYSE:BDK) and Fortune Brands Inc. (NYSE:FO) all posted various troubling numbers on profit reports, setting a bleak tone for the morning, just a day after investors were finding spots of good news on the profit front for buying enthusiasm.

Interestingly, all the bleak news on earnings and economic data shuttled aside excitement over the House passage of the Obama stimulus plan; but even before today’s data, the market was already lower, suggesting that the House passage wasn’t a surprise and that the market would need something fresh to . . .

The Russell 2000 (NYSE: IWM) led the pack with the major U.S. indices posting solid gains as investors disregarded mixed earnings news and a decline in housing. The small-cap index added 13.79 points, or 2%, to 702.39. The Dow Jones Industrial Average (INDU) climbed 176.72 points, or 1.45%, to 12,383.89.

On a year-to-date basis, the Russell 2000 has let go 8.31%, while the Dow has let go 6.64% and the S&P 500 has shed 7.79%.

Small-cap stocks began the week with a strong showing despite beginning the session in negative territory following mixed earnings news from major corporate players.

McDonald’s Corp. (NYSE: MCD) reported that sales at restaurants open at least 13 months were unchanged in December, disappointing analysts expecting a rise.

“While severe winter weather throughout the month and softer consumer spending resulted in December U.S. comparable sales being flat, we remain confident in our U.S. business,” said CEO Jim Skinner in a statement.

The result brought out the bears, as consumer spending comprises about 70% of gross domestic product and a decline will surely be bad news for the economy. Previously, retailers had also reported weak December sales, raising the fear that American consumers are pulling back.

However, the fast food chain operator also announced that its net income for the three months ended Dec. 31 increased to $1.27 billion, or $1.06 per share, compared with $1.24 billion, or $1 per share, a year earlier.

The Russell 2000 (NYSE: IWM) is posting solid gains after a bearish start. At 12:41 p.m. ET, the small-cap index had advanced 4.42 points, or 0.64%, to 693.02. The Dow Jones Industrial Average (INDU) had climbed 38.61 points, or 0.32%, to 12,245.78.

Stocks small and large have recovered from a brief dip at the start of the session and are now comfortably in the green.

Corporate earnings took center stage this morning following news before the opening from fast food chain operator McDonald’s Corp. (NYSE: MCD) that sales at restaurants open at least 13 months were unchanged in December, while analysts were expecting a rise.

“While severe winter weather throughout the month and softer consumer spending resulted in December U.S. comparable sales being flat, we remain confident in our U.S. business,” said CEO Jim Skinner in a statement.

The Oak Brook, Ill.-based company also reported that its net income for the three months ended Dec. 31 increased to $1.27 billion, or $1.06 per share, compared with $1.24 billion, or $1 per share, a year earlier.

But the December sales number nevertheless spooked investors already on edge about the possibility of a U.S. economic recession. With consumer spending comprising about 70% of gross domestic product, a slowdown spells trouble.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices are rising despite news of mixed earnings and a decline in home sales.
 
At 10:31 a.m. ET, the small-cap index had added 3.31 points, or 0.48%, to 691.91. The Dow Jones Industrial Average (INDU) is up 56.66 points, or 0.46%, to 12,263.82.

Small-cap stocks fell out of the gate but recovered and moved into positive territory at about 10:35 a.m. ET even though economic concerns again came to the forefront following news of disappointing corporate news from major players and more housing woes.

Fast food chain operator McDonald’s Corp. (NYSE: MCD) reported before the start of trading that sales at restaurants open at least 13 months were unchanged in December, while analysts were expecting a rise.

However, the Oak Brook, Ill.-based company also reported that its net income for the three months ended Dec. 31 increased to $1.27 billion, or $1.06 per share, compared with $1.24 billion, or $1 per share, a year earlier.

Similarly, Towson, Md.-based power tool maker The Black & Decker Corp. (NYSE: BDK) announced that fourth-quarter profit increased due to a one-time tax gain, but forecasted that its first-quarter profit will come in below analysts’ projections.

“Looking ahead, we recognize that the U.S. economy is slowing, and we do not expect a housing recovery in 2008,” said chairman and CEO Nolan Archibald in a statement.

The Russell 2000 (NYSE: IWM) futures are pointing lower and the small-cap index is poised for a decline.

Small-cap stocks are headed for a bearish opening at the start of a week that will see a number of important economic releases, as well as the U.S. Federal Reserve’s decision on interest rates, which will be announced at the conclusion of a two-day meeting on Wednesday.

The only thing on the docket is a report on new homes sales for December. The U.S. Census Bureau will release the numbers at 10 a.m. ET, with economists expecting to see a decline.

Concerns about the U.S. economy are dominant this morning, with fast food chain operator McDonald’s Corp. (NYSE: MCD) reporting that sales at restaurants open at least 13 months were unchanged in December, while analysts were expecting a rise.

Similarly, Towson, Md.-based power tool maker The Black & Decker Corp. (NYSE: BDK) forecasted that its first-quarter profit will disappoint analysts.

In 1852, Horace Smith, who honed his skills in the firearms trade while working at the National Armory, and Daniel B. Wesson, a former apprentice to his brother, Edwin Wesson, the leading maker of target pistols and rifles during the 1840s, formed a partnership to market a lever action repeating pistol (to replace the cumbersome muzzle-loaded rifle). After struggling as a fledgling business, the company's products eventually gained prominence. The rest is, as they say, "history."
 
Springfield, Mass.-based Smith & Wesson Holding Corporation (Nasdaq: SWHC), parent company of Smith & Wesson Corp., built its reputation on producing high-quality, high-performance precision handguns. The legendary arms maker has equipped soldiers from the Civil War to Vietnam and the vast majority of American police forces. (Smith & Wesson's .357 Magnum was developed specifically for law enforcement agencies, and the world-famous .38 Special has, at one time or another, been the sidearm of choice for hundreds of police forces around the world.)
 
Known for merging age-old craftsmanship and state-of-the-art technology, Smith & Wesson produces some of the world's most coveted weapons. (It helps that their .44 Magnum was carried by Clint Eastwood's Dirty Harry character.) Smith & Wesson dominated the handgun business in the consumer, law-enforcement and military markets for almost a century.

But by the early 1980s, Smith & Wesson's market share with U.S. police departments dropped to 10% from 98% two decades earlier, as these law enforcement agencies transitioned from issuing revolvers to semi-automatic weapons. This gave the advantage to such high-profile competitors as Italy's Beretta, Austria's Glock and American rival Sig Sauer. By the end of fiscal 2002, Smith & Wesson had a net operating loss of over $5 million.