Tag - Fnm

Small-cap stocks opened higher but quickly slipped into negative territory, as a bounce in banking and commodity stocks and a rise in overseas equities was countered by weak profit reports for a raft of small-cap firms. The market is clearly oversold following dramatic losses this week, which could power a pre-weekend short-covering bounce, but fear about the slumping global economy remains a big part of negative investor psychology. At 10:00 a.m. ET, the Russell 2000 (NYSE:IWM) was down 4.29, or 1.11%, at 381.02, sinking to yet another new bear market low.

On the banking front, shares in Citigroup Inc. (NYSE:C) have absolutely collapsed in recent days and the firm’s management is reportedly meeting today to discuss strategy to shore up confidence in the massive banking firm. The bank’s CEO said today that they are not looking to spin off Smith Barney and that “rumor mongering” was to blame for some of the recent decline in stock value. C stock was up 11% shortly after the open and financial shares in general were on the rise, with the Financial Select Sector SPDR up 3.5%.

On the retail front, Wal-Mart Stores Inc. (NYSE:WMT) CEO announced he was stepping down. WMT has been one of the few bright spots in a dreary year for equities, and investors took today’s news in stride. WMT shares were up 1.6% and the S&P Retail Index was up 1.2%.

A big part of the action this week has been massive flight to safe haven ports and out of stocks, which drove yields on Treasury products to historically low levels. This morning, the bounce in equities has created a big bounce for Treasury yields, with the 10-year note yield up 5.8%.

On the commodity front, crude oil prices rebounded about $0.75 a barrel into . . .

Small-cap stocks staged a dramatic opening slide, as the market nervously tried to price in news this weekend that Lehman Brothers Holdings Inc. (NYSE:LEH) filed for bankruptcy. At 10:04 a.m. ET, the Russell 2000 (NYSE:IWM) was down 14.57, or 2.02%, at 705.69.

The entire financial system was seemingly under fire as the LEH news became the latest casualty of the ongoing credit crunch. What made this go-around different than previous debacles at Bear Stearns and Fannie Mae (NYSE:FNM) is that the government was unwilling to once again bail out the firm in question, which forced LEH to announce the bankruptcy filing this weekend.

Despite these new storm clouds on the financial horizon, there was still some talk about the market making a “capitulation” low today. Some traders also noted that while a LEH bankruptcy might have been a worst-case scenario, it certainly isn’t that much of a shock given what took place at the firm last week. Also, news that Bank of America (NYSE:BAC) was buying Merrill Lynch & Co. Inc. (NYSE:MER) didn’t seem like bearish news (although the initial reaction from BAC shareholders wasn’t exactly a warm embrace as the stock tumbled 16% shortly after the open).

Another firm that was in the crosshairs of bears last week and remained on the hotseat this morning is American International Group Inc. (NYSE:AIG), as stock in the world’s largest insurer tumbled some 40% early today, after hitting the skids last week as well.

Even though the Treasury Department and Federal Reserve decided not to earmark taxpayer funds to bail out Lehman, central banks around the world were adding liquidity into the system to help the markets ride out this morning’s selling storm. This latest calamity adds even more zest to the FOMC policy meeting Tuesday afternoon — with some market watchers now wondering if a rate cut has gone . . .

Small-cap stocks fell hard Tuesday, completely wiping out Monday’s GSE-takeover advance as investors fretted about the overall state of financial companies. In addition, money also flowed out of homebuilding stocks and commodity names as traders searched for a safe-haven in credit markets. In the end, the Russell 2000 (NYSE:IWM) shed 25.57, or 3.49%, to 707.29, notching the largest one-day decline of the year by the time the dust settled. The small-cap benchmark is now down 7.6% for the year.

Although losses in the Dow today were less extreme than in the Russell 2000, sellers still were in control, with the Dow off 2.43% for the day, and down 15.3% on the year. Over in the S&P 500, the market tumbled 3.41% today and is off 16.6% for 2008.

“The GSE takeover was basically a band-aid on a gaping wound,” James Comiskey, senior market strategist with Lind-Waldock, said in a phone interview. When the Lehman meltdown took place this morning, it showed that there are systemic risks in the financial system that go beyond just bailing out mortgage underwriters. And it also brings up the question of just how many times the government can try to rescue these firms that are bleeding money from terrible business decisions, Comiskey said.

The “Lehman meltdown” Comiskey referred to was Lehman Brothers Holdings Inc. (NYSE:LEH), which collapsed 44% today amid fears that the firm was hitting a wall in raising capital to shore up losses tied to the mortgage/credit crisis. As LEH shares plummeted, Standard & Poors rating agency said it may slice Lehman’s credit rating. The rout in LEH shares simply stoked selling throughout the financial arena, with the Financial Select Sector SPDR Fund sinking 6.3%. “When the banks are throwing knives in each other’s backs, things are bloody. It makes the GSE takeover . . .

Small-cap stocks rallied Monday, but most of the fireworks took place in the morning as the market awoke to news that government-sponsored enterprises Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) had been taken into conservator status by the government. There was an initial euphoria that pushed small-caps up some 3% in after-hours trading, but the market drifted well off the highs through midday as tech stocks continued to fret about the possibility of a global slowdown. An afternoon push in the final 30 minutes of trading helped lift the Russell 2000 (NYSE:IWM) to a gain of 14.01, or 1.95%, at 732.86; the small-cap benchmark is now down just 4.3% for the year. Meanwhile, the Dow was up 2.58% and the S&P 500 was up 2.05%. For 2008, the Dow is down 13.2% and the S&P 500 down 13.6%.

The market spent much of the day trying to decide if the Treasury Department’s takeover of Fannie Mae and Freddie Mac represented a long-term positive, or just a short-term stop-gap measure. Clearly, the outside world loved the news, as equity markets in Asia and Europe posted strong rallies overnight. There was a sense among investors that the government was basically forced to take this action, and that it would help pull some of the uncertainty out of the equation when it comes to trusting mortgage-related debt issues. Still, it’s a big leap from shoring up paper mortgage-backed securities debt to finding a bottom in the housing market slump.

In a research report earlier today, strategists at Goldman Sachs said that the GSE plan was a short-term bullish factor for equities and the U.S. dollar. “The move is consistent with the U.S. administration’s main aim to secure financial stability first, in the spirit of the Bear Stearns bailout in March and the declaration of the unusual and exigent circumstances by the Federal Reserve Board,” Goldman said . . .

Small-cap stocks remained solidly higher into mid-session trading, but the morning euphoria sparked by the Treasury Department takeover of government-sponsored enterprises (GSE) was losing steam as tech stocks failed to join the party. At 12:42 p.m. ET, the Russell 2000 (NYSE:IWM) was up 9.27, or 1.29%, at 728.12, but well below the morning peak just shy of 740.

Tech shares slipped into the red, pulling down other index products as investors in tech stocks remain concerned that a global slowdown will curb spending on technology and curb investor appetite for the latest, greatest cell phone and personal computer gadgets. In addition to the slide in tech stocks, thrifts were getting absolutely hammered as the market basically gives up hope that preferred stock holders in Fannie Mae (NYSE:FNM) or Freddie Mac (NYSE:FRE) will get anything back, as the Treasury’s takeover appears to be focused on the credit side of things. Still, optimism about the GSE news provided a lift to homebuilding stocks and home furnishing stocks on ideas that it could help put a bottom in the slumping housing market. Also, financial stocks were boosted by ideas their exposure to debt through the GSEs would now be much more secure.

Some of the upside momentum in financial shares was stalled by a big slide in Lehman Brothers Holdings Inc. (NYSE:LEH), which was spooked by fears that valuable firm assets would be sold off at fire sale prices. LEH shares were down some 18%.

In addition to thrifts, coal stocks were getting pounded again today, a theme that has been repeated often in recent days following news that hedge funds with commodity stock ties have been liquidating. Also, steel, mining, aluminum and fertilizer . . .

Small-cap stocks broke out of the gate this week like a rocket as investors cheerfully greeted news of a government takeover of mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was up 12.92, or 1.80%, at 731.77.

The U.S. government had already inked plans to open credit windows to government-sponsored enterprises like FNM and FRE, but on Sunday the Treasury Department decided more drastic measures were needed, and stepped in to takeover the firms, which investors saw as a big relief to financial shares.

The clear immediate beneficiaries of the news were banks, insurance firms and brokerage firms. Even though preferred stock holdings in FNM and FRE might not be worth much now, the housing loans secured through GSEs should be on better footing for now. Shortly after the open, American International Group Inc. (NYSE:AIG) was up 5%, while Citigroup Inc. (NYSE:C) was up 7% and Bank of America Corp. (NYSE:BAC) was up 8%. The Financial Select Sector SPDR Fund was up 8%, while the PHLX KBW Banking Index was up 7%.

Stock markets around the world embraced the GSE takeover news, with Japan up 3.3%, Hong Kong up 4.2%, Taiwan up 5.5%, Australia up 3.9%, Singapore up 4.4%, South Korea up 5.2% and India up 3.1%, which also helped set the stage for a stunning morning climb in U.S. equities.

Looking beyond the news, it will be interesting to see how the market trades throughout the session from this morning’s immediate bullish reaction. The opening gap left by the overnight rally in stocks was huge — history suggests that an opening gap that is not filled within the first hour of trading often marks an important turning point for markets. Probably the most important trading time frames today will . . .

Small-cap stocks are expected to open sharply higher, soaring in response to news over the weekend that the Treasury department will takeover operations at embattled government-sponsored enterprises Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). The Russell 2000 (NYSE:IWM)was up some 3% in after-hours trading, which would translate to an opening near 740, compared with Friday’s close just below 719.

Stock markets around the world embraced the GSE takeover news, with Japan up 3.3%, Hong Kong up 4.2%, Taiwan up 5.5%, Australia up 3.9%, Singapore up 4.4%, South Korea up 5.2% and India up 3.1%

Financial stocks truly took flight on the GSE plan, with the nation’s number one bank, Citigroup (NYSE:C) rising some 9%, while the number two bank, Bank of America (NYSE:BAC) was up 8%. Also, American International Group (NYSE:AIG), climbed some 10%, setting the tone for what should be a wild morning for financial sector shares. There are a bevy of small-cap and mid-cap financial companies that stand to benefit today from the wave of confidence stemming from the GSE bailout news.

The U.S. dollar also climbed on the news, although the move was much less dramatic than what was seen in equities. The dollar pushed to fresh move highs against the euro, and was up about 0.2% on that currency; meanwhile, the buck was up about 0.7% versus the yen.

Even with the dollar up and the stock market in major rally mode, crude oil . . .

Small-cap stocks turned lower Tuesday, rejecting an impressive morning rally as financial and tech stocks failed to gain traction even with the benefit of a sharp pullback in crude oil prices. The Russell 2000 (NYSE:IWM) closed down 0.99, or 0.13%, at 738.51. For the year, the Russell is down 3.5%, which is quite a shift from the morning rally when the Russell looked poised to post one of the highest daily settlements of the year. The selling pot was stirred among large caps too, with the Dow slipping 0.2% on the day; the Dow is now down 13.1% for the year. In addition, the S&P 500 lost 0.4% Tuesday and is off 13% for 2008.

The dramatic reversal in fortune for stocks today left a mild bearish reversal formation on daily charts as the Russell closed lower after threatening to challenge move highs in the morning. In addition, when a market sinks in the face of seemingly bullish news, it is often considered a classic signal that something else is wrong. In this case, the market seems to be saying that a little relief at the gas pump isn’t enough to fix what ails the economy or the credit crisis.

It’s interesting to note too that the erosion in stocks seemed to coincide with a surge in Treasury markets. The yield on the benchmark 10-year note tumbled nearly 2% to the lowest closing level since late April. Yields move inversely to price, which means that demand for Treasury products (a traditional safe-haven) was strong today. Some of that push for a safety net seemed to move in tandem with the Fitch downgrade of paper debt for mortgage lending giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). If there were concerns in the market about the government-sponsored enterprises, they didn’t really show up in the stock, as shares in FNM rose 8%, while FRE jumped 14%.

The day dawned brightly for equities as investors embraced a huge slide in crude oil prices. Even though the stock market turned lower in the afternoon, crude oil prices still lost about 5% on the day, sinking $5.75 a barrel to $109.71. The stiff decline in energy prices was accompanied by a big rally in the U.S. dollar, and a whole host of commodity markets succumbed to the pressure — all of which would seem . . .

Small-cap stocks edged lower on the opening, pulled down by a big rally in crude oil futures and a mixed bag on this morning’s batch of economic data. At 9:59 a.m. ET, the Russell 2000 (NYSE:IWM) was down 3.91, or 0.52%, at 743.88.

The Michigan sentiment survey came in at 63.0, which was just a tad above the forecast of 62. There was very little stock market response to the Michigan number. The Chicago Purchasing Manager’s Survey topped the forecast in a big way, coming in at 57.9, compared with the projection of 50.0. The stock market rallied off early lows after the stronger-than-expected number, but the bounce off those lows had very little staying power.

Earlier, the personal income report came in below expectations, with the headline figure down 0.7%, compared with expectations for a flat reading. Spending patterns also tailed off as the impact of government stimulus checks faded and the inflation component of the report (the year-over-year PCE price index) was at the highest point in 17 years.

Crude oil prices shot higher into the stock market opening, climbing some $3 a barrel back above $118 as the market braced for Gustav to slam into the Louisiana coast sometime within the next four days. The killer storm ripped through Caribbean, taking nearly 70 lives in the process, and has already prompted a shutdown of energy platforms in the Gulf ahead of the holiday weekend.

Speaking of the holiday, cash trading on stocks will hold normal hours today ahead of Monday’s holiday, but foreign exchange and interest rate futures will close early today at 1:00 p.m. ET, which could start to further taper off volume this afternoon.

The U.S. dollar was weak this morning, down about 0.8% against the yen and about 0.2% versus the euro, which will act as a positive for commodity markets and a negative for equities.

Tech stocks were struggling this morning, with the second-largest PC . . .

Small-cap stocks continued to climb Thursday, powered by a solid performance in financial, retail and airline stocks, by yet another “good news” economic report and by a sudden downdraft in crude oil prices. The Russell 2000 (NYSE:IWM) gained 14.85, or 2.03%, to 747.79 and is now down 2.38% on the year.

Small caps were strong relative to the S&P 500 and also broke free of a close pattern they had been keeping with tech stocks. The S&P 500 was up 1.48% and is down 11.4% for 2008, while the Nasdaq was up 0.78% and is off 8.1% for the year. Meanwhile, the Dow was up 1.85% and is down 11.6% for the year.

On the financial front, investors continue to gain confidence in government-sponsored enterprises Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), which has become a source of great relief for banks, insurance firms and a host of other financial shares. FNM rose another 22% today has recovered over 50% from last week’s lows when investors were concerned that all the share equity in GSEs would be rendered worthless. A shakeup in management at FNM and talk that the firm’s balance sheets were not as bleak as feared powered the latest recovery move today.

The ripple effect throughout financials was easy to see, with the Financial Select Sector SPDR Fund climbing 3.8% and the PHLX KBW Banking Index up 4.0%. Big-name firms such as Citigroup Inc. (NYSE:C) and Bank of America Corp. (NYSE:BAC) both registered gains in the 5% range.

Some of the bullish psychology for today’s action was tied to this morning’s upside surprise on the GDP report, which came in at 3.3%, well above the forecast for a rise of 2.7%. The GDP report was just the latest in a friendly string of data surprises this week, including consumer confidence Tuesday and durable goods Wednesday. On its own merit, second-quarter GDP is somewhat dated since we’re nearly two-thirds of the way through the third quarter, but when the market is rallying, it’s . . .

Small-cap stocks extended the morning rise into mid-session, receiving a boost from a sudden reversal in course on crude oil prices. The day was already off to a solid start when economic data on growth came in above expectations. At 12:50 p.m. ET, the Russell 2000 (NYSE:IWM) was up 6.31, or 0.86%, at 739.26.

The volatile world of energy prices made an about face from morning highs near $120 dollars a barrel, slipping back to the $115 zone on reports that strategic petroleum reserves could be released if Tropical Storm Gustav crashed into key energy production zones in the Gulf of Mexico, stunting supplies out of that key region. Gulf output accounts for some 25% of U.S. crude production and about 15% of natural gas output.

The stock market got things off in rosy fashion this morning when second-quarter GDP came in at 3.3%, which was well above the forecast for a rise of 2.7%. The GDP report became yet another in a string of bullish data surprises this week, following consumer confidence Tuesday and durable goods orders on Wednesday. That said, some of these data series are volatile (durables and confidence) and others are relatively out of date (GDP), so clearly there are other forces at play providing a boost to the stock market.

One of those forces would appear to be month-end short-covering from hedge funds, and that buying interest has been magnified by thin volume conditions ahead of the final big summer holiday weekend in the United States. In addition to the short-covering push, financial stocks appear to be on more stable footing this week, with government-sponsored enterprises Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) bouncing on management changes at FNM and on ideas that the mortgage funding giants might not be in as bad a sharp as feared. FNM was up 12% at midday, while FRE was up 11%. Financial stocks in general were up nearly 3% . . .

Small-cap stocks pushed higher in morning action, underpinned by a stronger-than-expected GDP report, which continued a string of recent bullish data surprises. However, gains were limited by a soft tone in the U.S. dollar and by climbing crude oil prices. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was up 1.74, or 0.24%, at 734.69.

The headline figure on GDP was at 3.3%, quite a bit better than the projection for a rise 2.7%, boosted by a 13.2% rise in export activity and by a bump in consumer spending from the release of tax stimulus checks. The latter is a temporary lift and it should be noted that this GDP report is for the second quarter, and we’re nearly two-thirds of the way through the third quarter now. Economic activity has slowed again … if the market wants to rally in the shadow of this GDP report, then there are probably other stories driving the push. The most likely story is that hedge funds are booking profits on shorts for month-end purposes, and that short-covering push is taking place at a time when volume is very thin ahead of the last summer holiday weekend in the United States.

In addition to the GDP report, weekly unemployment claims out this morning, and hit the forecast on the noggin at 425,000. While the headline number was in line with expectations, the continuing claims figure was at 3.42 million, which marks the highest point since November 2003. The number might not have been a surprise, but it also wasn’t anything for the bulls to get excited about either.

It is worth noting that economic data has been the story of late, starting with an upside surprise on consumer confidence Tuesday, continuing with durable goods orders Wednesday and then hitting another high note on GDP numbers this morning.

The morning focus on economic releases did manage to shuffle crude oil to the background, if only for a moment. That said, crude oil prices remain in rally mode, churning toward $120 dollars a barrel into the stock market open. Crude prices continue to climb as traders fret about the need for a risk premium as Tropical Storm Gustav is on a path that could threaten energy production in the Gulf of Mexico. As Gustav treks into the Gulf, it is expected to regain hurricane status; . . .

Small-cap stocks are expected to open higher, boosted by an upside surprise on economic growth for the second quarter, which will help investors once again look beyond another surge in crude oil prices. The Russell 2000 (NYSE:IWM) pushed from flat to up about 0.4% after the data, which suggests an opening near 735.50.

GDP was pegged at plus 3.3% for the second quarter, well clear of the 2.7% forecast, boosted by strong exports, which were up 13.2%. At the same time that GDP numbers came out, the market also received data on weekly unemployment claims, which met the forecast at 425,000.

The immediate market response to the numbers was a five-handle upside rise in S&P 500 futures, which moved from slightly lower territory to higher ground. In addition, the dollar firmed from down 0.2% against the euro and yen to near unchanged levels. Perhaps the biggest move was seen in Treasury markets, with bonds and notes sinking in response to the stronger-than-expected GDP number.

Crude oil futures continued to push higher overnight, climbing toward $120 dollars a barrel amid concerns about the path of Tropical Storm Gustav, which could threaten energy production in the Gulf of Mexico. Although the weather system was downgraded to a tropical storm, it is expected to regain hurricane status soon and appears to be trekking toward key crude oil and natural gas areas in the Gulf.

Stocks on the radar screen overnight included Sears Holdings Corp. (Nasdaq:SHLD), which was down about 1.3% after quarterly profits missed the forecast . . .

Small-cap stocks started out the week with a thud, sinking hard and fast amid concerns about the relentless credit crisis and a potential slowdown in global growth. The Russell 2000 (NYSE:IWM) tumbled 17.06, or 2.31%, to 720.54, generating the largest one-day decline in about four weeks. The Russell is now down 5.93% for the year, while the Dow is down 14.1% after slipping 2.08% Monday. The S&P 500 lost 1.96% today and is off 13.7% for the year.

Financial stocks were once again bloodied, as investors are not confident in bank, brokerage or insurance shares amid slumping economic conditions and uncertainty about the extent of debt write-downs emanating from the mortgage and housing swoon. American International Group (NYSE:AIG) tumbled to 13-year lows today, sinking 5.7% on analyst downgrades, and other financial stocks were also pummeled. The up-and-down (mostly down) world at Lehman Brothers Holdings Inc. (NYSE:LEH) took a turn for the worse today as concerns were voiced about the proposed Korean buyer that emerged late last week. LEH slumped 11.2% on the talk. The Financial Select Sector SPDR Fund shed 3.3% and the PHLX KBW Banking Index was off 3.2%. Nearly every large name bank was in the red today, and that selling momentum spread easily into small-cap financial stocks as well.

Fresh data on the housing arena failed to instill confidence in the bulls that things were ready to improve. Even though the headline figure on existing home sales came in above the forecast (plus 3.1% versus plus 0.9%), there were still troubling elements in the report, included a record high supply of homes on the market and steep price declines from last year. The market will get more data on the housing picture with Tuesday morning’s Case-Shiller Home Price Index, and then later in the morning from the New Home Sales report.

Financials and the never-ending credit crisis weren’t the only worries facing investors today. Talk that the International Monetary Fund was lowering global growth projections was troubling for technology, small-cap and industrial names, and today’s index losses were paced by the tech-laden Nasdaq 100 and the Russell 2000. Within the tech sector, big firms like Apple Inc. (Nasdaq:AAPL) and Research in Motion Ltd. (Nasdaq:RIMM) lost 2.3% and 3.1%, respectively. On the industrial front, Caterpillar Inc. (NYSE:CAT) and 3M Company (NYSE:MMM) were . . .

A spike in crude combined with a depreciating dollar, financial sector woes and disconcerting economic data sunk small caps lower on the session midday.

At 12:12 p.m. ET, the Russell 2000 (NYSE:IWM) was down 5.98, or 0.82%, to 725.62, while the Dow had sold off 35.83, or 0.31%, to 11,381.60.

After stabilization within the $115 range, oil has broken out in a volatile spike, climbing almost $6 a barrel, as a weaker dollar and jitters that bubbling contention with Russia over its penetration of Georgia could disrupt oil deliveries. With oil's spike the market sold off further, as a rise in the commodity means greater inflation, crippled profits for businesses and usurped consumer spending power.

While oil climbed the greenback sold off against both the euro and the yen. “The U.S. dollar [has] tank[ed] on the soft data along with the rise in oil,” Andy Busch, foreign exchange strategist for BMO Capital Markets said in an email. “With a firm bottom in oil at $112 and continued focus on GSEs, the dollar has peaked.”

The financial sector has yet again brought the broader market down, as Citigroup slashed its earnings outlook for Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Lehman Brothers (NYSE:LEH). Fear of a collapse in government-sponsored enterprises Freddie Mac (NYSE:FRE) and Fannie Mae (NYSE:FNM) continue to enrapture equities, as the market speculates the government is near to bailing them out.

Lehman Brothers has sold off on reports from the Financial Times that Korean and Chinese investment groups have backed away from taking a stake in the embattled Wall Street brokerage/banking firm. Additionally, the Wall Street Journal is reporting today that the Federal Reserve is said to have called Credit Suisse in July to ascertain if it had indeed yanked a line of credit from Lehman Brothers in response to a rumor. If indeed the Fed did do this, its actions only serve to confirm the rampant fears in the market.

Small-cap stocks opened lower, pressured by slumping financial shares, a dramatic surge in crude oil prices and a slide in the U.S. dollar. At 10:06 a.m. ET, the Russell 2000 (NYSE:IWM) was down 3.03, or 0.41%, at 728.56.

A fresh batch of economic data this morning offered a mixed bag for investors and market analysts, with weekly claims a tad better than feared, while leading indicators were worse than forecast and the Philadelphia Fed Survey came in soft, but better than expected. The leading indicators report came in at minus 0.7%, which was quite a bit worse than the forecast for a slide of 0.2%, and the indicators index fell to 101.2, the lowest reading since October 2004.

Earlier today ahead of the opening, the weekly claims report came in a little better than expected, but failed to stir much more than a brief mild bounce off overnight lows in stock index futures. The headline figure on unemployment claims was at 432,000, which was below the forecast of 440,000 and a decline from last week’s 445,000 number. The four-week moving average on claims rose to 445,750 while continuing claims dipped to 3.362 million. Even though the headline figure on weekly was a better number than feared, it should be noted that the four-week moving average was the highest since December 2001.

The early mood today has been darkened by fresh analyst downgrades within key large-cap financial stocks, as the big Street analysts take turns lowering the outlook on their competitors. This time around, Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) were the targets, and their stock slipped 1.5% and 2%, respectively, shortly after the open.

In addition, Lehman Brothers Holdings Inc. (NYSE:LEH) was down 6.3% on reports from the Financial Times that Korean and Chinese investment groups have . . .

Small-cap stocks are expected to open lower, pulled down by worries about financial stocks, a jump in crude oil prices and a sharp downward thrust in the U.S. dollar. The Russell 2000 (NYSE:IWM) was down about 0.6% in after-hours trading, which would suggest a regular open near 727.20.

This morning’s weekly claims report finally wasn’t a big bearish surprise for the market, with the headline figure coming out at 432,000, below the forecast for 440,000. The immediate reaction in stock index futures was a two-handle bounce in S&P 500 futures, but the market was still in negative territory in the first few minutes after the report came out.

The credit crisis has re-emerged as a trouble spot for the U.S. economy and for the financial sector in general this week. In Wednesday’s trading, government-sponsored enterprises (GSEs) were hammered, and both Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) were lower again overnight.

The fresh news on the financial front this morning were a batch of analyst downgrades for several large financial stocks, including Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS), both of which were lower overnight. Also, the Financial Times said that Lehman Brothers Holdings Inc. (NYSE:LEH) would . . .

Small-cap stocks finished out an up and down session Wednesday with a mild profit after spending much of the day getting bounced around by turbulent price action in crude oil futures. The Russell 2000 (NYSE:IWM) eventually closed up 1.54, or 0.21%, at 731.60 and is now down 4.49% for the year. The Dow closed up 0.61%, while the S&P 500 was up 0.62%. The Dow is off 13.9% for the year, while the S&P 500 is down 13.2%.

The frenetic action in crude oil overshadowed a positive story in the tech arena following upbeat results by the world’s largest computer maker and shuffled big overnight gains in Asian stocks into the backdrop as well.

Crude oil prices plunged to a morning low at $112.61, as the weekly inventory report showed a surprising increase in stockpiles, but then the market reversed course as the energy traders were uneasy with Russia’s response to a missile deal between the United States and Poland, especially with tensions rising between the U.S. and Russia over the Georgian conflict. For the day, crude oil traded in a wildly wide range between $112.61 and $117.03 and closed up $0.45 at $114.98. Goldman Sachs analysts also reiterated their call for $149 crude oil prices by the end of the year, which probably won’t sit well with long-term equity market bulls if it pans out.

The U.S. dollar remained firm against the euro despite the afternoon surge in crude oil, and a strong tone in the greenback remains a potential positive for equities — reflecting global confidence in U.S. assets, even if some of that confidence is really more a lack of faith in other economies around the world. Elsewhere on the commodity inflation front, corn, soybeans and wheat shot higher and the Commodity Research Bureau Index of 19 key physical markets rose about 0.7%.

Although financial shares performed much better today than they fared Monday and Tuesday, it was hard to look past the dramatic free fall in government-sponsored enterprises (GSE), with Fannie Mae (NYSE:FNM) collapsing 25% and Freddie Mac (NYSE:FRE) tumbling 21% as investors decided that a government bailout of the 1mortgage financing giants could crush current shareholder value. Both stocks were at their lowest levels in nearly two decades as everyone scrambled for the exit door at the same time. Despite the wipeout in GSEs, major bank stocks and many . . .

Small-cap stocks took a hard turn south Monday as a revival of credit crunch fears turned a sleepy morning opening into an aggressive afternoon slide. The Russell 2000 (NYSE:IWM) shed 11.40, or 1.51%, to 741.97, while the Dow lost 180.51, or 1.55%, to 11479.38 and the S&P 500 was down 19.60, or 1.51% to 1278.60. For the year, the Russell is off 3.1%, the Dow down 13.4% and the S&P 500 down 12.9%.

The charts provided a caution sign Friday that the bull run might be on fumes when the Russell made new move — and yearly — highs but closed in negative territory. With the short-term bulls content to take profits amid overbought momentum readings, it left the market vulnerable to any bad news, and today’s credit fears filled that void with a vengeance.

For the better part of a year now, the credit crisis has never really gone away, but remained simmering in the background until another flare-up would bring those fears to the forefront. Today’s flare-up was tied to concerns that Treasury funding and recapitalization of government-sponsored enterprises (GSEs) would work to the detriment of current stockholders in mortgage lending giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). It wasn’t the kind of news that investors in those firms wanted to hear, and FNM shares tumbled 21%, while FRE was down 24%. Those fires were then fanned by talk that Lehman Brothers Holdings Inc. (NYSE:LEH) could be facing massive losses in the next earnings release and that the firm might pre-release earnings. LEH shares slipped 5%.

The investor psyche surrounding financial shares is quite fragile, and the GSE/LEH woes spread like wildfire through the entire sector. The Financial Select Sector SPDR Fund was down 3.6%, while the PHLX KBW Banking Index was down 3.6%. Top U.S. banks such as Citigroup Inc. (NYSE:C) and Bank of America Corp. . . .

Small-cap stocks remained lower into midday trading, pulled down by renewed jitters over the credit crunch, which weighed on the financial arena and siphoned some money away into safe-haven Treasury instruments. At 12:35 a.m. ET, the Russell 2000 (NYSE:IWM) was down 3.98, or 0.53% at 749.39. Large-cap index products were attracting more aggressive selling, with the Dow off 0.98% and the S&P 500 down 0.85%.

A weekend story in Barron’s intimating that the Treasury Department would have to recapitalize government-sponsored mortgage lending giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) at the detriment to current shareholders sparked a rout in mortgage financing stocks, with FNM tumbling 13% and FRE also down 13%. Credit default swaps on GSE, or government-sponsored enterprises, debt widened to record highs, which reflects unease with assuming paper on the firms.

The concerns about GSEs cascaded into the entire financial arena, with the Financial Select Sector SPDR Fund down 2.7% and the PHLX KBW Banking Index down almost 3%. Lehman Brothers Holdings Inc. (NYSE:LEH) tumbled nearly 4% following a report in The Wall Street Journal that the brokerage firm could post $1.8 billion losses and may pre-announce its earnings...

After opening in the red, the Russell 2000 has broken into the green and remains at its highs on the session, as traders shrugged off inflation data, higher crude prices and an increase in jobless claims and bargain hunters scoured for beaten down financials and embraced news that larger loans financed by Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) will be permitted to trade.

At 12:19 p.m. ET, Russell 2000 (NYSE:IWM) had climbed 7.12, or 0.95%, to 754.8, while the Dow surged 125.55, or 1.09%, to 11,658.51.

The Securities Industry and Financial Markets Association said today that larger home loans financed by Freddie and Fannie would now be permitted to trade in the bond market causing both mortgage lenders to jump some 6% midday.

Stocks initially opened lower on worse-than-anticipated inflation data and an uptick in weekly jobless claims.

Ahead of the opening, the Consumer Price Inflation report showed no relief on the price front, clocking in at a hefty 0.8%. The number was substantially higher than the forecast of 0.4% and rose to a whopping 5.7% year-over-year — the highest since January 1991. Even the “core” inflation rate, which excludes food and energy prices, rose faster than projected. Although, excluding food and energy prices isn’t an accurate gauge at the current time, as both have surged in price this year and are the main areas to which consumers are now deploying the majority of their disposable income.

“With core inflation drifting back up to its upper range, and the shorter-term metrics still rising, this report is a little unsettling,” BMO Capital Markets economist Jennifer Lee wrote in a note today. “However, we've likely seen the end of the energy price spike and we do know that consumers have generally stopped spending. This could be the high-water mark for inflation. But we'll need a couple of months of data to confirm that.”

The weekly claims report wasn’t reassuring either, coming in at 450,000, which was down from 460,000 last week, but still above the forecast of 432,000. Looking at a four-week moving average, claims remain on an upward trajectory and at the highest level in six years. Rising inflation coupled with weak labor market stats only serve to solidify the stagflation picture with which the Federal Reserve is grappling.

Small-cap stocks took flight Friday, soaring amid a huge rally in the U.S. dollar, which helped deflate commodity prices, thereby brightening the inflation picture. The Russell 2000 (NYSE:IWM) jumped 20.89, or 2.93% to 734.30, notching the eighth-largest one-day gain of the year.

The U.S. dollar jumped 318 basis points, or more than 2% against the euro, which lifted the greenback to the highest daily close since late February. With many of the world’s key commodity markets priced in dollar terms, a strengthening buck often pulls down physical markets because they become more expensive to purchase. A great case in point is the crude oil market, which collapsed 4% Friday, slipping to $115.20 dollars a barrel. Crude oil prices are now down 21% from the record highs set in July – and remember, a 20% decline off the highs is recognized as entering bear market territory. After consumers had to fork out more than $4 dollars a gallon for gasoline at times this summer, a bear market in energy would be a welcome relief to pocketbooks. That relief extends to the grocery store as well, where soaring commodity prices were also biting into consumer spending capabilities. Corn prices hit a 5-month low today, and the Commodity Research Bureau Index, which tracks 19 commodities markets, tumbled to 4-month lows.

The dramatic move in the dollar and in crude oil prices helped ease investor worries about the credit crisis moving back to the fore. Financial stocks were hammered during Thursday’s stock market decline, but fought back today, with the Financial Select SPDR rising 3.4% and the PHLX Banking Index rising 3.4% as well. Clearly, retailers smiled at the thought of a consumer who wasn’t in a dour mood from a trip to the gas station, as the S&P Retail Index jumped 6.2%. The story surrounding a reversal in commodities isn’t just one for the consumer, either; the downtrodden airline business embraced the slide in jet fuel costs with a hearty 8.3% surge on Friday. In fact, about the only equity sectors that weren’t in the plus column revolved around the commodities theme, with coal, gold, oil exploration, oil drillers and gas utilities all in the red...

Small-cap stocks are expected to open near steady levels as investors digest another bout of the credit crunch blues that emerged Thursday. However, a big rally in the U.S. dollar carries supportive elements that could counter those concerns today. The Russell 2000 (NYSE:IWM) was little changed in overnight trading, suggesting an open near 713.25.

The credit crunch came back into the spotlight Thursday after American International Group Inc. (NYSE:AIG) posted massive losses spurred by debt write downs. The big financial news so far this morning came from government-sponsored mortgage giant Fannie Mae (NYSE:FNM), which posted a big loss and announced it would slash dividends. FNM shares were off more than 10% during after-hours trading.

The productivity report this morning came in below expectations, with the headline number at 2.2%, vs. the forecast for 2.5%. The soft productivity release had very little immediate impact on the market, and the wholesale inventory data later this morning should be pretty much ignored by the trading community, which will leave the market free to focus on other issues outside of economic data.

The U.S. dollar took flight overnight, soaring a stunning 230 basis points, or 1.50% against the euro, reaching the highest point since late February against the eurozone currency. Around the world, demand for U.S. dollars was percolating, as the greenback hit a 1-year peak against the Canadian dollar, 11-month highs vs. the kiwi, 5-month highs against the Singapore dollar, 6-month highs vs. the Aussie, 5-month highs against the Swiss franc, and 17-month highs vs. the British pound. Normally, that kind of surge would reflect worldwide confidence about the U.S. economy and investments here, but in this case the move appeared to be powered by dovish comments from European Central Bank president Jean-Claude Trichet, which touched off fears about a worldwide economic slowdown...

Small-cap stocks reversed course Thursday, pulling back into the recent range as the credit crisis moved to the forefront, punishing financial stocks. The selling mood was also stirred by soft economic data and worries about consumer spending after sluggish sales at benchmark retailer Wal-Mart Stores (NYSE:WMT). In the end, the Russell 2000 (NYSE:IWM) shed 12.48, or 1.72%, to 713.42.

Large-cap financial stocks were getting hammered in the afternoon today, extending a gloom that began after Wednesday’s close when insurance giant American International Group (NYSE:AIG) reported hefty quarterly losses amid write-downs of bad mortgage loans. The whole mess with AIG rekindled fears about the credit crunch and investors dumped shares in a wide swath of financial names. AIG tumbled some 18% on the day. The nation’s top bank, Citigroup Inc. (NYSE:C) stumbled amid news that the firm would buy back some $7 billion in auction-rate securities and pay a $100 million civil fine to settle a suit that it misled investors on the risk of the investments. Citigroup lost about 6% on the day. Merrill Lynch & Co. (NYSE:MER) lost 8%, Lehman Bros. Holdings, Inc. (NYSE:LEH) tumbled 13%, JP Morgan Chase Co. (NYSE:JPM) was down 4% and mortgage finance firms Fannie Mae (NSE:FNM) and Freddie Mac (NYSE:FRE) were down 14% and 9%, respectively. The Financial Select SPDR was down 5%--and it’s not as if those declines are limited to the large-cap banks and brokerage houses. There are dozens of small- and mid-cap banks out there, and they have even more trouble accessing credit during the crunch than the big firms.

As you might expect...

Small-cap stocks pushed higher Wednesday, bolstered by a rally in tech stocks and another soothing pullback in crude oil prices. The Russell 2000 (NYSE:IWM) gained 4.85, or 0.67%, to 725.90, the highest daily close since June 19.

Importantly, small caps finally broke free of the recent trading range. Sustained action above 726 is still needed to validate the upside breakout. Today’s rally also confirmed a breach of trendline resistance from both the June peak and the previous July high, which adds to the chart-related glow.

Crude oil prices slipped to 3-month lows today when the weekly inventory report showed a larger-than-expected build in crude oil stocks. The report reflected an increase in stocks of 1.7 million barrels, well beyond the forecast for a rise of 300,000. Still, gasoline stocks had a surprisingly large drawdown of inventory, which took some of the bearish sting out of the crude data. Overall, the weak tone in crude oil continues to provide a cushion for equity markets, providing some hope that consumers will spend less at the gas pump and more on other endeavors...

Small-cap stocks tried in vain to dodge some serious data land-mines Thursday as investors anxiously await the big data bomb released with Friday morning’s employment report. Amid choppy seas, the Russell 2000 (NYSE:IWM) eventually finished down 4.34, or 0.60%, at 714.52, unable to shrug off dreadful unemployment claims, soft GDP numbers and a cautious tone from former Federal Reserve Chairman Alan Greenspan.

Day traders looking for a definitive direction in small caps today may have gotten a little seasick as the market see-sawed up and down, carried on the whims of economic data crunchers. The opening salvo (and the most dynamic move of the day) was a bearish tilt as weekly unemployment claims went through the roof. Although the survey period for Friday’s monthly jobs report was over before this week’s claims survey, it’s not exactly reassuring to see unemployment numbers spike way beyond expectations.

Just how bad was the claims report? The number came in at 448,000, swamping the forecast for a dip to 395,000 following last week’s already uncomfortably big 404,000 figure. To give it a little better perspective: it was the largest one-week claims figure for any week, of any month, in more than five years. If nothing else, the weekly claims report certainly shot more holes in Wednesday’s ADP employment report, which forecast job growth, nevermind recent reports of layoffs in financial and . . .

Small-cap stocks had an up and down session, grappling with the promise of an upbeat private employment survey versus the reality of a sudden updraft in energy prices. In the end, the Russell 2000 (NYSE:IWM) closed up 4.31, or 0.60%, at 718.86.

Small-cap stocks and tech stocks noticeably lagged the Dow and S&P 500, both of which benefited more from a jump in financial and consumer product large caps as well as money moving into big energy names. Exxon Mobil Corp. (NYSE:XOM) rallied 4% as energy markets staged a sharp recovery rally.

Crude oil prices shot some $4 dollars a barrel higher today, reversing course from recent sharp declines. The buying frenzy was set off when the weekly inventory tally showed a surprising drop in gasoline stocks. While a boon to some energy stocks, the jump in crude prices sent a chill through the overall stock market.

On the financial side of things, large caps embraced news that the Federal Reserve would extend access to its primary dealer credit facility window through Jan. 30, which helps to access cheap money needed to combat the credit crunch and raise low-cost capital amid debt write-downs. In addition, President Bush inked the rescue plan for mortgage financing firms, which will support Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), as the two firms own or guarantee nearly 50% of the country’s $12 billion in home mortgage debt. While both FNM and FRE posted solid gains today, they finished well off the morning highs. The SEC also extended a short-selling curb through Aug. 12, so when you combine that with the Fed extending the credit facility and the White House stamping approval on GSE funding measures, it sends a pretty clear message that government officials want to stabilize the financial landscape. Investors could easily see through that message and as a result, several large-cap financial firms were attractive to buyers today. Merrill Lynch (NYSE:MER) was up 2%, Bank of America (NYSE:BAC) up 3% and Citigroup (NYSE:C) up nearly 2%.

The day started off with an unexpected bullish surprise as the ADP Employment Report showed a stunning increase in non-farm payrolls of 9,000 jobs in July, which . . .

Small-cap stocks pushed higher this morning, buoyed by a positive surprise on the ADP Employment Report, which heightened investor expectations for a bullish number on this Friday’s big Labor Department monthly employment release. At 9:56 a.m. ET, the Russell 2000 (NYSE:IWM) was up 5.91, or 0.83%, at 720.46.

The headline figure on the ADP report was at plus 9,000, which was well above the forecast for a decline of 58,000 non-farm payroll jobs. The ADP report used to have a fairly nice correlation to the more extensive Labor Department release, but that correlation has broken down over the last year and the ADP figure has tended to only be a good predictor when it falls near the consensus estimate. Given that the market is looking for a slide of 75,000 jobs in Friday’s employment report, most economists viewed the ADP data this morning with skepticism. Still, it did spark a bounce in the U.S. dollar and stock index futures this morning while generating a slide in Treasuries. The yield on the benchmark 10-year note was up about 1.6% this morning, suggesting money flow away from “safe-haven” products and toward stocks.

Lost in the positive glow of the ADP report was this morning’s MBA Mortgage Applications Survey, which was pegged at minus 14.1, the lowest level since December 2001. The combination of weak home sales and slumping home equity continue to take a toll on mortgage applications, despite moderating mortgage rates.

The greenback was up about 0.3% against the euro, rising to the highest point in four weeks. At the same time, crude oil prices were hovering near three-month lows and gold prices were near four-week lows, so the inflation picture was projecting a better tone this morning, and a strong dollar can attract foreign investors into U.S. assets.

Speaking of crude oil, the market was down about $1 dollar a barrel, slipping below $122, awaiting the weekly inventory data, which is expected to show a build in crude oil stocks. Rhetoric surrounding the direction of crude oil prices later this year is all over the map, with some pundits saying that crude oil could slide below $100 dollars, while some research firms are still calling for $150 dollars. Given recent stock market behavior, when prices get above $135 dollars, the stock market becomes . . .

After opening lower, small-cap stocks have continued their steady decent, as concerns surrounding the financial sector, a rebound in crude oil prices and dismal corporate earnings overshadowed the Senate’s passage of the housing bill. 

At 12:22 p.m. ET, the Russell 2000 (NYSE:IWM) was down 7.73, or 1.09%, to 702.61, while the Dow was down 125.46, or 1.1%, to 11,245.23.

Federal regulators seized two small banks over the weekend, which has cast a rain cloud over the financial sector today. The FDIC took over the First National Bank of Nevada and First Heritage Bank NA of California and sold the banks to Mutual Omaha Bank. Small banks dominated the list of largest percentage losers on the Nasdaq Exchange early this morning.

The bank seizures overshadowed the Senate’s passage of a housing bill on Saturday that creates a backstop for Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) should the mortgage lenders fall off a ledge. The legislation calls for an extension of a limitless line of credit for both firms for a year and a half and bestows authority to the Treasury department to purchase shares should the companies find themselves faced with insolvency.

Crude oil prices are pushing higher on the session, up $1.19 to $124 a barrel in midday action. The commodity is gaining ground on account of reports of attacks on oil pipelines in Nigeria and a fire at a Kuwait refinery.

Small-cap stocks are expected to open near steady levels after a relatively tame overnight session. Concerns on the financial side of things could be countered by solid earnings news. The Russell 2000 (NYSE:IWM) was basically flat in after-hours trading, so an opening near Friday’s close in the 710 zone appears likely.

Even though Congress approved the rescue plan for government-sponsored mortgage firms Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) on Saturday, enthusiasm from that news was overcome by other news that regulators seized a couple of small U.S. banks this weekend.

Crude oil futures were up about $1 dollar a barrel heading toward the U.S. stock market opening, lifted by attacks on oil pipelines in Nigeria. Grains prices were also called solidly higher, so commodity price inflation will start the week out on a firm note.

On the earnings front, Kraft Foods Inc. (NYSE:KFT) topped the Street’s estimate and raised forward guidance, which sparked a 3% rally in the stock during overnight trading. There will be plenty of big name companies to study this week, . . .

Small-cap stocks spent most of the day in the green, but closed well off the intraday highs as a slide in crude oil prices was countered by mixed returns on the earnings front. The Russell 2000 (NYSE:IWM) edged up 2.36, or 0.33%, to 719.19, the highest close in four weeks.

The market also may have been ripe for a little bit of a consolidation “breather” session today as the Russell has rallied 12% off the July 15 lows in just seven sessions. Short-term intraday momentum readings were overdone coming into today’s action, which could easily have sparked some long profit-taking from traders who caught the recent bounce. Also, it’s a little easier to find the silver lining in the news when the market is oversold.

In recent days, the dominant upside theme has been the financial story. Big-name banks have had a string of upside earnings surprises, and that momentum easily spilled over into the small- and mid-cap financial names as well. While GSEs were a strong performer today, the overall financial landscape was a little more cautious, with the Financial Select Sector SPDR hovering near breakeven levels late in the session.

Large-cap stocks that dominated the picture today included McDonald’s (NYSE:MCD), Pfizer (NYSE:PFE), Boeing (NYSE:BA), AT&T (NYSE:T) and Washington Mutual (NYSE:WM). Those stocks reflected the mixed signals investors had to navigate when trying to read through earnings results to get a feel for consumer spending, economic turmoil and macro trends. Washington Mutual was clobbered 19%, which took some of the wind out of the financial sails, but was countered by optimism on the GSE horizon, as hope for a quick passage of the Treasury rescue plan lifted both Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). As for the aforementioned names, MCD was down about 0.9% after reporting earnings, PFE was up over 3%, BA was down nearly 4% and T . . .

After falling off slightly after the opening, small-cap stocks staged a swift rally but then deflated somewhat as oil continued to pull back for a second straight trading session amid mixed corporate earnings reports and as President Bush and the House came to an agreement on a housing bail-out plan.

At 12:30 p.m. ET, the Russell 2000 (NYSE:IWM) was up 0.68, or 0.09%, at 717.50 amidst a broad market rally. The Dow was up 4.39, or 0.04%, to 11,606.89, while the tech heavy Nasdaq gained 9.1, or 0.39%, to 2,313.06 as investors welcomed the deflation in oil prices, which may ease pressure on the consumer and businesses.

Crude oil prices slipped roughly $0.60 dollars a barrel to $127 midday, marking the second consecutive day the commodity has lost its mojo. Today, an increase in U.S. gasoline stockpiles added to the downward pressure on crude. The energy market has been sinking this week as Hurricane Dolly veers away from key production areas in the Gulf of Mexico and on worries about demand for high-priced crude oil amid sluggish economic conditions in the United States and new usage curbs in China.

As crude oil prices have slipped in recent sessions, the U.S. dollar is turning green again, rising against the euro and the yen in mid-day action. The assent in oil, has contributed to the dollars demise this past year, so naturally that correlation has reversed itself today. A stronger dollar often has a bearish impact on global commodity values since so many products are priced in dollars. Also on the commodities front, grains markets are expected to trade sharply lower today amid improving Midwest weather and the firm dollar tone.

President Bush dropped his veto against the House’s housing package that bails out struggling homeowners by offering $3.9 billion for areas containing the most foreclosures. The House is expected to vote on the bill as early as today. Additionally, lawmakers came to a mutual agreement that permits Treasury Secretary . . .

After a rocky morning for small caps, stocks edged higher, lifted by plunging crude prices and gains in consumer and retail companies. At 12:46 p.m. ET, the Russell 2000 (NYSE:IWM) was up 8.85, or 1.27%, at 706.48.

The price of crude oil sank $5 per barrel to $126 at mid-session to a six-week low. Weather forecasts predicted Tropical Storm Dolly will likely miss oil fields and refineries along the Gulf Coast. Previous reports warned the storm would come close to the area, possibly disrupting oil production.

Airline companies jumped on the news with Continental Airlines Inc. (NYSE:CAL) and JetBlue Airways Corporation (Nasdaq:JBLU) soaring more than 20% as the fuel costs showed the first signs of decreasing.

Financial stocks took a hit today after the Congressional Budget Office said it could cost the government as much as $25 billion to help troubled Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). Congress will vote this week on whether Fannie and Freddie will receive government assistance. U.S. Treasury Secretary Henry Paulson said today that action must be taken to boost consumer confidence while strengthening the housing market.

Mortgage losses brought down Wachovia Corporation (NYSE:WB), which posted an unexpected second-quarter loss today of $8.9 billion and announced plans to eliminate 6,350 workers. Investors took solace in the fact that $6.1 billion of that was from a goodwill impairment charge.

Among broad market sectors on the rise are airline transportation; recreational activities; accident and health insurance; and home improvement retailers. Heading downward are coal; oil and gas operations; computer hardware; and computer storage devices.

Small caps leading the pack include Bluegreen Corporation (NYSE:BXG), which is up 90% today’s trading after announcing ahead of the opening its plans . . .

Small-cap stocks are treading higher in afternoon trading, boosted by healthy earnings on the banking front and mergers and acquisitions news. At 2:07 p.m. ET, the Russell 2000 (NYSE:IWM) was up 2.96, or 0.43%, at 696.04. As oil prices rose and two pharmaceutical blue chips delayed reporting their quarterly results, the broader market was down in afternoon trading. The Dow lost 36.88, or 0.32%, to 11,459.69.

The leading indicators report, which came out at 10:00 a.m. ET, was in line with the forecast for a dip of 0.1% and had almost no immediate impact on the market. Overall, this is a very light week for economic data, but it will be a huge week for earnings results.

Pharmaceutical giants Merck & Co. (NYSE:MRK) and Schering-Plough Corp. (NYSE:SGP) delayed releasing their second-quarter earnings until after the closing to let researchers report results from a study of a cholesterol drug marketed by the two companies in a joint venture.

In what has become an ongoing trend, a major U.S. bank has posted better-than-expected earnings. This time around, the good news was from Bank of America (NYSE:BAC), as the nation’s largest retail bank topped the Street earnings forecast and jumped 7% in the afternoon session. The earnings surprise follows on the heels of better-than-expected results last week from Wells Fargo & Co. (NYSE:WFC), JP Morgan (NYSE:JPM) and Citigroup (NYSE:C).

Within the financial spectrum, government-sponsored mortgage lenders Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) were solidly higher this morning in the wake of weekend comments from Treasury Secretary Henry Paulson, who said that he expects Congress to quickly pass his bail-out program for GSEs. Paulson . . .

Small-cap stocks pushed slightly higher on the open, lifted by positive earnings news on the banking front and by fresh M&A developments. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was up 2.59, or 0.37% at 695.68.

The leading indicators report, which came out at 10:00 a.m. ET, was in line with the forecast for a dip of 0.1% and had almost no immediate impact on the market. Overall, this is a very light week for economic data, but it will be a huge week for earnings results.

In what has become an ongoing trend, a major U.S. bank has posted better-than-expected earnings. This time around, the good news was from Bank of America (NYSE:BAC), as the nation’s largest retail bank topped the Street earnings forecast and jumped 7% shortly after the open. The earnings surprise follows on the heels of better-than-expected results last week from Wells Fargo & Co (NYSE:WFC), JP Morgan (NYSE:JPM) and Citigroup (NYSE:C).

Within the financial spectrum, government-sponsored mortgage lenders Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) were solidly higher this morning in the wake of weekend comments from Treasury Secretary Henry Paulson, who said that he expects Congress to quickly pass his bail-out program for GSEs. Paulson also said that 99% of the nation’s banks were healthy, but that the U.S. economy could be in a period of slow growth for “a while.”

Traders will keep a close watch on crude oil price movement this morning as the market for black gold was on the rise into the stock market opening, up about $1.50 dollars a barrel near $130.50. The energy market was walking a tightrope between soft demand concerns vs. holding a weather premium as Tropical Storm Dolly . . .

Small-cap stocks are expected to open higher, underpinned by another positive earnings surprise on the banking front. Gains could be limited, however, by rising energy values. The Russell 2000 (NYSE:IWM) was up about 0.5% in after-hours trading, which would suggest an open near 696.

Crude oil futures were in rally mode ahead of the stock market opening, climbing nearly $2.50 dollars a barrel back above $131. Despite the negative impact on stock market psychology here in the United States, oil and other commodity-based shares were a supportive factor in European stock trading, with copper and gold also higher overnight.

On the earnings front, several big name companies will be under the results radar today, but the early key appears to be Bank of America (NYSE:BAC), which was up some 10% in overnight trading as investors embraced quarterly figures. In other large-cap news, Genentech Inc. (NYSE:DNA) rallied more than 10% overnight on news that Swiss firm Roche Holdings made an offer to buy all outstanding shares for more than $43 billion.

Over the weekend, Treasury Secretary Henry Paulson said that 99% of U.S. banks were on solid footing, but that the economy could be in a slow growth period for some time. He was also confident that Congress would approve a bailout plan for GSEs, and both Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) were higher . . .

Small-cap stocks pushed lower, pulled down by losses in the tech sector and profit-taking from traders who caught the recovery rally off the lows. Today’s action represented a relatively calm finish to a frantic, volatile week that saw equities recover from the doorstep of desperation. For Friday, the Russell 2000 (NYSE:IWM) closed down 3.54, or 0.51%, at 693.08.

Despite the modest pullback today, small caps closed out the week with a gain of 18.13, or 2.68%, which is no small accomplishment considering the market made four-month lows on Tuesday when panic about the solvency of government-sponsored mortgage lenders hit a crescendo. At one point earlier this week, there seemed to be a swelling sense of doom about potential systemic risk within the entirety of the financial system, so the dramatic bounce off the lows swept in an important calming influence into things. What’s more, the nice rally off those lows turned the chart picture from a bear market path into a potential bullish reversal, which is an encouraging signal.

As for today’s action, financial stocks continued to seduce investors back into the fold, with the financial SPDR rising 3.5% despite the pullback in other sectors. Clearly, tech stocks were out of favor with stock market traders today, as soft earnings from key players such as Microsoft (Nasdaq:MSFT) and Google (Nasdaq:GOOG) overwhelmed bright spots such as IBM Inc. (NYSE:IBM). For the day, GOOG was down 9.7% and MSFT lost 6%.

Crude oil prices actually closed out Friday in negative territory after spending most of the session in the green, which kept a lid on buying enthusiasm in small caps throughout much of the day. Crude oil prices collapsed some 15% off last week’s record highs, which should bring some relief at the gas pump for consumers if prices will only stay contained looking forward. Although a late wave of selling pulled crude oil lower on the day, there was some reluctance to press . . .

Small-cap stocks generated another solid rally Thursday, boosted by decent earnings from key bellwether stocks and a downward spiral in crude oil prices. The Russell 2000 (NYSE:IWM) closed up 9.88, or 1.44%, at 696.63.

For the second consecutive session, investors were willing to dip their toes back into what had been chilly water surrounding the financial arena. The Financial Select Sector SPDR Fund rose 5.3% and pushed through the 20-day moving average for the first time since mid-May. Within the financial sphere, JP Morgan (NYSE:JPM) was the big catalyst for the bulls today, jumping 10% after reporting solid quarterly earnings that topped the forecast. Once again, embattled government-sponsored mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) produced a stout rally, which calmed investor fears about the banking system and lent a supportive tone as well.

Crude oil prices tanked again today, crumbling some $5 dollars a barrel to slip through $130 dollars as options expirations heightened a selling mentality that was already in play amid concerns about softer demand from the higher price structure. Lower energy costs would be a welcome sign not only to consumers already pinched from higher food and gasoline prices, but also from many businesses that have seen margins sliced away by higher input fuel costs. Elsewhere on the commodities inflation front, soybeans, corn, wheat, sugar and cocoa all were sharply lower, and the iPath GSCI Total Return commodities index tumbled 3.0%.

While JP Morgan’s strong results appeared to be a driving force behind today’s stock market rally, there was a raft of big name companies that had surprisingly stout quarterly earnings on display. For example, United Technologies Corp. (NYSE:UTX), the world’s largest maker of elevators and air conditioners, climbed a cool 5.8% after beating the Street’s forecast. Within the capital-goods industry, UTX . . .

Small-cap stocks took flight Wednesday, as investors embraced a spate of relatively positive earnings results and another slide in crude oil as a sign that the market may have weathered the worst of the summer storm. The Russell 2000 (NYSE:IWM) jumped 24.39, or 3.68%, to 686.75, notching the fourth-largest one-day advance of the year, powered by gains in financial and tech stocks.

The impressive rally topped off a picture perfect validation of a bullish chart pattern from Tuesday’s recovery bounce off fresh move lows, and further upside action this week would cement the most powerful technical analysis bullish signal in months. In addition, the heightened volatility in recent days fits with similar whipsaw price action at the lows back in January and March.

The market was also able to carve out today’s sizable gains despite another serving of bearish economic headlines. When the market starts to work higher in the face of bearish news, it is considered a classic show of strength — especially if the move is powered by more than just short-covering amid oversold conditions. While we wait for further confirmation of the recovery off Tuesday’s lows, let’s recap what the market overcame on the data front today.

The big report this morning was the Consumer Price Index release. For the second consecutive day, the market was slapped in the face with sobering inflation news. The headline figure for CPI came in at plus 1.1%, which was the largest monthly advance in 26 years. What’s more, the year-over-year increase was at a whopping 5%, which is the largest rise in consumer prices since 1991. In short, the CPI news was every bit as troubling as Tuesday’s Producer Price Index report, where the year-over-year figure was the highest since June 1981. And the inflation data simply adds to the woes from slumping housing, GDP and labor market reports of recent months.

So, if we are truly mired in a slow growth, rising unemployment, escalating inflation world, then why on earth did small caps put together such an impressive rally today? The easy part of that question is that crude oil prices tumbled down to . . .

After a brief pull back after the opening, small caps staged a welcome upward trajectory, breaking this week’s red streak as better-than-expected earnings from Wells Fargo (NYSE:WFC), the SEC’s initiation to taper the shorting the financial sector has experienced year-to-date and deflating crude served to lift the market.
 
At 1:51 p.m. ET, the Russell 2000 (NYSE:IWM) was up 14.65, or 2.21%, at 677, while the Dow is up 153.96, or 1.4%, at 11,116.50.

Federal Reserve Chairman Ben Bernanke was back on Capitol Hill for day two of his six-month economic progress report. Following a Q&A session in front of the Senate on Tuesday, the Fed Chair told the House a similar version. In testimony in front of the House, Bernanki told regulators that the central bank aims to attain price stability, as inflation in the United States “is too high.”

“Bernanke is stuck between a rock and a hard place right now regarding the economy,” said Bill Greiner, chief investment officer for UMB Asset Management and UMB Bank, and chief economist for Scout Investment Advisors. “The Fed’s priority has been trying to maintain stability in the financial system this year. The collateral damage of that focus now is that they’re going to try to keep the system liquid and not pay strict attention to what’s going on in the inflation world … I think they will be [hawkish] into 2009. They started jawboning about six weeks ago — trying to talk interest rates up, talking about the idea of tightening money supply by increasing interest rates some time in the not so distant future. But then Fannie Mae and Freddie Mac happened.”

As the Fed Chair again addressed slower growth coupled with inflationary pressures that confront the economy, his comments proved timely in the face of troubling consumer price index data.

The headline figure for CPI clocked in at plus 1.1%, which was the largest monthly advance in 26 years. What’s more, the year-over-year increase was at a whopping 5%, which is the largest rise in consumer prices since 1991. Today’s CPI figure, which was in line with the forecast, came on the heels of Tuesday’s unsettling PPI report.

“We’re starting to see signs that headline inflation—and what’s been driving headline inflation on the upside (i.e. transportation costs and food costs) are starting to bleed into other areas of the economy,” Greiner said. “We’re starting to see some serious contagion with energy and commodity price inflation into other segments in the economy. Now I don’t think it’s gotten to a point where we’ll see wage-price spiral inflation. [However,]…if we’re starting to see labor costs move up dramatically in relation to productivity gains then I think we have a much more serious problem on our hands than we do today.”

Small caps have been on a rollercoaster ride in Tuesday’s trading, falling in morning trading on soft economic data, a global rout in equities and a record-low U.S. dollar, but rebounding in afternoon trading after crude oil plunged more than $8. Continuing worries over the health of the American economy prompted a widespread sell-off in stocks, which sent oil dropping. At 1:10 p.m. ET, the Russell 2000 (NYSE:IWM) was up 6.5, or 0.98%, at 671.

In a highly volatile session, crude oil has fallen $8.14 from its intraday high to $137.04 a barrel in recent trading.

In testimony this morning, Federal Reserve Chairman Ben Bernanke told Congress that the U.S. economy is faced with "numerous difficulties.” Bernanke’s comments came on the heels of the Fed and Treasury’s announcement that it would financially support Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) if necessary. The Fed chairman said that the financial markets remain under “considerable stress” and that consumer spending was likely to be “restrained” in coming quarters.

On the inflation front, the PPI headline figure came in at plus 1.8%, which was well ahead of the forecast for a rise of 1.3% and the year-over-year figure was a sobering plus 9.2%, the largest rise since June 1981. On the consumer spending ledger, the news was also dour, with June retail sales up just 0.1%, well down from the median forecast for a rise of 0.4% as car sales notched their biggest drop in more than two years. Even when excluding autos, June sales were up just 0.8%, which also missed the forecast for a rise of 1%.

Retail sales in May were strong, and although this month’s figure missed the estimate, it was still a decent number. The problem is that May and June sales were temporarily boosted by government stimulus checks and the strength is seen as temporary from most analysts. “Despite recent strength, consumers are slowly and grudgingly succumbing to job losses, high energy prices, the housing meltdown and the financial market turmoil,” Steven Wood, chief economist with Insight Economics, said in an email.

The U.S. dollar was dumped en masse as global investors elected to steer clear of financial uncertainty. The greenback has recovered some losses during . . .

Small-cap stocks fell hard this morning, pulled down by soft economic data, a global rout in equities, record lows in the U.S. dollar and a sobering outlook from central bank leaders. At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was down 13.92, or 2.09%, at 650.59, the lowest level seen since March.

In Senate testimony this morning, Federal Reserve Chairman Ben Bernanke will address the economy and monetary policy. In a release of the advance text, Bernanke said that the financial markets remain under “considerable stress” and that consumer spending was likely to be “restrained” in coming quarters. The immediate response to the Bernanke text headlines was that stock markets extended the morning slide.

The stock market was already taking a beating in after-hours trading before a fresh batch of economic data came out on the weak side ahead of the opening. On the inflation front, the PPI headline figure came in at plus 1.8%, which was well ahead of the forecast for a rise of 1.3% and the year-over-year figure was a sobering plus 9.2%, the largest rise since June 1981. On the consumer spending ledger, the news was also dour, with June retail sales up just 0.1%, well down from the median forecast for a rise of 0.4% as car sales notched their biggest drop in more than two years. Even when excluding autos, June sales were up just 0.8%, which also missed the forecast for a rise of 1%.

Retail sales in May were strong, and although this month’s figure missed the estimate, it was still a decent number. The problem is that May and June sales were temporarily boosted by government stimulus checks and the strength is seen as temporary from most analysts. “Despite recent strength, consumers are slowly and grudgingly succumbing to job losses, high energy prices, the housing meltdown and the financial market turmoil,” Steven Wood, chief economist with Insight Economics, . . .

Small-cap stocks endured another sizable decline Monday, pulled down by tension over the health of the financial arena at a time when the economy is already struggling with rising unemployment, slumping housing markets and soaring energy costs. The Russell 2000 (NYSE:IWM) shed 10.45, or 1.55%, to 664.50, the third lowest daily close since mid-March.

The closing slide in small caps was a stark difference from this morning as the market appeared poised to begin the week with a relief rally. Stock index futures jumped some 1.6% during overnight action as investors embraced a plan by government authorities to shore up the balance sheet — and market confidence — in government-sponsored mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). However, that overnight rally failed to gain traction relatively quickly once the market opened today, and a wave of selling swept through banking stocks, especially within the regional banking sector and smaller banks, which took a toll on small-cap index products. Despite opening up amid 20%-plus gains this morning, FNM and FRE eventually closed down 4.2% and 5.8%, respectively.

Elsewhere on the banking front, National City Corp. (NYSE:NCC) plunged 17% after trading was halted briefly on concerns about unusual trading activity. NCC was downgraded by analysts, and the stock dropped anchor, as the unsettling tide of selling coursed through financials a day after IndyMac Bancorp Inc. (NYSE:IMB) failed, becoming the third-largest U.S. bank failure on record.

There was some sense that investors are beginning to fret about all the special bail-out programs needed to avert systemic risk on the financial landscape. After all, there are only so many rabbits that magicians at the Federal Reserve and Treasury Department can pull out of their hats. What’s more, there are some concerns that these recovery efforts could flood the debt market with so much paper that supply issues could hamper funding, or even that the world could balk at “being the buyer of last resort for U.S. government debt,” as noted in a research report . . .

After opening higher on the government’s plan to ease going concerns surrounding Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), small caps came under pressure 30 minutes into the session and remain submerged midday, as apprehension concerning the financial sector took the forefront.

At 1:23 p.m. ET., the Russell 2000 (NYSE:IWM) skidded 11.29, or 1.67%, to 663.66, while the Dow lost 58.54, or 0.53%, to 11,042.

In an effort to restore confidence in the nation’s largest mortgage insurers Fannie Mae and Freddie Mac, the U.S. Treasury and the Federal Reserve devised a plan over the weekend in which an increase in a treasury line of credit would be extended temporarily. Additionally, as part of the plan the Fed would take on a consultant role. After both mortgage giants saw their share prices lopped off by some 45% last week, midday, Fannie shares were off a slight 2.44% midday, while Freddie stock has reversed course to slip 4.65%. 

However, the plan constructed to pacify an otherwise panicked market soon gave way to concerns about the government’s ability to battle further financial debacles. Investors worry how many potentially more innovative or practical backstops the government has up its sleeve. 

The plan comes on the heels of IndyMac’s (NYSE:IMB) failure on Friday. IndyMac was repossessed by the federal regulators after one of the largest thrift/mortgage banks failed to cover a run by depositors, becoming the third largest banking failure in U.S. history.

In corporate news, the nation’s largest brewer Anheuser-Busch Co. (NYSE:BUD) said that it will embrace a takeover from Belgian brewer InBev NV for approximately $52 billion, one of the few positive market indicators of the day. Merger activity typically creates bullish momentum among investors, as seen in the wake of the booming deal days of 2007. If there are deals in the making among large caps, . . .

First Horizon National Corporation (NYSE:FHN) is down more than 24% today to hit a new low for the year. The Memphis-based bank holding company is among many financial stocks down on jitters in the mortgage and financing industry, largely due to concerns on mortgage insuring giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). First Horizon is down more than 71% since January and fell to a low for the year at $4.52 shortly after today’s open. The stock has rebounded some to reach $5.09 at 12:50 p.m. ET, down $1.61 from Friday’s close. Volume is double the average at more than 12 million shares.

Small-cap stocks dipped into the red about 30 minutes after opening solidly higher, pulled down by ongoing jitters in the financial arena despite hope stirred by a Treasury Department plan to help shore up troubled government-sponsored mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). At 10:00 a.m. ET, the Russell 2000 (NYSE:IWM) was down 3.73, or 0.55%, at 671.22.

The rescue proposal for GSEs was a scenario that reminded many investors of the stock market bottom that accompanied the bailout of Bear Stearns. There was a hope among many that the government would ensure the health of FNM and FRE, a calming influence in the wake of last week’s failure at IndyMac (NYSE:IMB), which became the third largest banking failure in U.S. history when the bank could not cover a run by depositors. Shortly after the open, FNM shares were up 22%, while FRE stock was up 17%. The advance in GSEs was expected to provide a lift to the overall financial sector, but that wasn’t playing out in early trading today.

Anheuser-Busch Co. (NYSE:BUD) announced that it would embrace a takeover from Belgian brewer InBev NV for approximately $52 billion, which is yet another large M&A deal put together in recent days. Merger activity typically creates bullish momentum among investors, and if there are deals to be done in large caps, then there are also bargains to be found in the small-cap arena. BUD shares were up only 1.2% shortly after the open as this takeover has been in the news and priced into the stock for weeks now.

The overnight bounce in U.S. equities pulled the greenback along for the ride, halting a dramatic slide in the buck that hit a crescendo late last week as the GSE crisis spiked. Shortly after the open, the dollar was up 0.2% against the yen, and almost . . .

Small-cap stocks were expected to jump higher on the opening, lifted by a government rescue plan for embattled mortgage lending giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) and by a large acquisition of iconic American brewer Anheuser-Busch Co. (NYSE:BUD). The Russell 2000 (NYSE:IWM) was up over 1% in overnight trading, which suggests an opening near 682.

The Treasury Department this weekend announced plans to temporarily increase credit to the government-sponsored credit firms (GSEs) in addition to other measures to ensure the health of FNM and FRE. As a result, stock in the two firms rallied aggressively overnight, and the move appeared to calm stock markets, which also were climbing ahead of the regular stock market open.

Still, the failure late last week of IndyMac (NYSE:IMB) and the freefall in GSE stocks underscores the precarious position right now for the banking system. IMB’s failure ranks as the 3rd largest in history.

In addition to the GSE rescue plan, investors were heartened this morning by the announcement of an acquisition of Budweiser by Belgian firm InBev NV for . . .

Small-cap stocks led an afternoon recovery charge in the stock market, grabbing a budding bid and running with it when Federal Reserve Chairman Ben Bernanke confirmed talk that government-sponsored mortgage firms would qualify for cheap money through the Fed’s discount window. The comeback push was impressive given a huge rally in crude oil futures to record highs above $147 dollars a barrel. In the end, the Russell 2000 (NYSE:IWM) closed up 4.51, or 0.67%, at 674.95.

It was a roller coaster session for stocks, with a morning downside rout triggered by steep losses in mortgage lending giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), which ignited another bout of fear tied to the credit crunch and the slumping housing market. There was talk in the morning that the GSEs were on the cusp of insolvency and shares in both agencies were down nearly 50% as investors bailed out. However, by the end of the day, FNM pared losses down to the 20% range, and FRE to the 7% zone — still nothing to dismiss — but far more palatable to investors worried about systemic issues. Volume on FNM and FRE was humongous to say the least, and individual stocks often carve out major tops or bottoms in conjunction with volume spikes.

“The key significance of Fannie Mae and Freddie Mac in the current economic climate is their ability to soften the impact of the credit crunch,” Goldman Sachs analysts said in an email earlier today. The Goldman research note even predicted ahead of time that the Fed would extend outright credit support to GSEs. The notion that bringing the GSEs onto the Federal balance sheet would “raise government debt by $5.3 trillion” and thereby sharply worsen the U.S. government’s creditworthiness was misleading, Goldman said. “The $5.3 trillion refers to the GSE’s holdings of mortgages and loan guarantees, which is not at all the same thing as outright liabilities. The government would have to cover any GSE losses, but this would be a much, much smaller number under any reasonable set of assumptions,” Goldman analyst Jan Hatzius wrote.

Small-cap stocks were noticeably strong relative to large-cap index products, a theme that has been in play for the last few weeks. Even though the Dow is at two-year lows, and the S&P 500 slumped to near two-year lows today as well, . . .

Small-cap stocks plunged shortly after Friday’s opening, showed resilience during the first hour of trading but have exhibited a downward trend in afternoon trading. The uncertainty surrounding Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) combined with record-high crude oil prices have spurred a sell-off today. At 2:17 p.m. ET, the Russell 2000 (NYSE:IWM) was down 2.07, or 0.31%, at 668.37.

Investors responded tepidly to Treasury Secretary Henry Paulson’s short statement that the U.S. government is committed to “supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission.”

Fannie Mae has fallen some 24% this afternoon, and similar losses were pinned on Freddie Mac on high volume. Selling fury was fueled overnight by an article in the New York Times suggesting the government was considering a takeover of the embattled mortgage lending giants as the housing slump and credit crisis wallop the firms.

The freefall in federally chartered corporations, or GSEs, spilled over to the rest of the financial sector, with large caps such as Wachovia Corp. (NYSE:WB) down 9%, Merrill Lynch down 5% and Lehman Bros. (NYSE:LEH) off 15% in afternoon trading.

“Retail and credit issues sparked selling Thursday and remain a concern today. Volatility is high right now,” Nick Kalivas, vice president of financial research with MF Global, told SmallCapInvestor.com in an email interview. “I think FNM and FRE are vulnerable to further losses, but the market is thinking that the government will aid the GSEs in some way and keep the financial system whole.”

Small caps were able to outperform large caps during Thursday’s bounce, but Kalivas said the move was powered more by a recovery in oil and natural gas that sparked money pouring back into small-cap energy firms. “I think it is more a beta trade or a sector trade than a sign of the market’s overall health. I’m not reading . . .

Small-cap stocks plunged early Friday as a downward spiral developed among government-sponsored mortgage firms and record high crude oil prices sent equity bears on a stampede. At 10:00 a.m. ET, the Russell 2000 (NYSE:IWM) was down 3.09, or 0.46%, at 667.35, an ugly start to the day, but well off the initial morning lows.

The Michigan sentiment survey came in better-than-expected, with the headline figure at 56.6, compared with the median forecast of 55.5. The stock market appeared to bounce mildly off the lows in conjunction with the Michigan figures, but the market was already trying to mount a recovery move even before the data came out.

Fannie Mae (NYSE:FNM) collapsed some 40% shortly after the open, and similar losses were pinned on Freddie Mac (NYSE:FRE) on huge trading volume. Selling fury was fueled overnight by an article in the New York Times suggesting the government was considering a takeover of the embattled mortgage lending giants as the housing slump and credit crisis wallop the firms.

The freefall in GSEs spilled over to the rest of the financial sector, with large caps such as Wachovia Corp. (NYSE:WB) down 9%, Merrill Lynch down 6% and Lehman Bros. (NYSE:LEH) off 17%. Small-cap index products are peppered with regional and small banks, and they often have even more trouble gaining access to credit than the bigger banks, so heightened fears on the credit crunch could slice into the outperformance seen in the Russell 2000 versus large-cap index products (although in early trade, losses in the Russell 2000 were on a slower pace than its big-cap brethren).

“Retail and credit issues sparked selling yesterday and remain a concern today. Volatility is high right now. I think FNM and FRE are vulnerable to further losses, but the market is thinking that the government will aid the GSEs in some way and keep the financial system whole,” Nick Kalivas, vice president of financial research with MF Global, told SmallCapInvestor.com in an email interview.

“I think earnings news should be the main focus and Thursday’s DOW/ROH deal was bullish, but the credit environment is so uncertain and the market does not see the financing available for a host of deals. The market is cheap based on the M&A, but there may not be the liquidity or money to actually push it higher. That . . .