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Small caps closed up nearly 2%, embracing the Fed’s rate cut, a thaw in credit markets and a bounce in commodity-tied stocks. Today’s small-cap gainers are Savient Pharmaceuticals (Nasdaq:SVNT), Savvis (Nasdaq:SVVS) and Hercules Offshore (Nasdaq:HERO).

Other Market Watch highlights today included:

• The rate cut by the Fed coincides with global easing; just last night, central bank officials in China cut rates by 0.27% and European leaders hinted that further rate cuts are possible. 
• It’s possible that the bulls were corralled a little bit today, leery to take a big bullish stand ahead of Thursday’s GDP report.
• Commodities were a key part of the story today, which may explain some of the relative strength in small caps, which have shown a tendency to more closely track commodity trends in recent weeks.
• Crude oil prices jumped some 9%, or more than $5 a barrel, bolstered by oversold conditions and a slide in the U.S. dollar, which tumbled some 1.4% against the euro.
• Copper has soared some 14%, which is particularly interesting because copper is often seen as a proxy for economic activity around the globe. Copper has collapsed in recent weeks, but a stabilization in that market would be a positive sign for the global economy.

Small Cap Gainers:

• BioMimetic Therapeutics reports promising clinical results using injectable bone graft. Shares close up 21%. See (Nasdaq:BMTI).  
• Tessera Technologies shares surged 30% after arbitration ruling. See (Nasdaq:TSRA).  
• Savient Pharmaceuticals announces data in treatment-failure gout . . .

The Russell 2000 (NYSE:IWM) closed up nearly 2% on Wednesday, embracing signs of a thaw in credit markets, another rate cut by Federal Reserve officials, a bounce in commodity-tied stocks and another rise in global equity prices.

The Federal Open Market Committee elected to slash 50 basis points off the Fed funds target, which was right in line with market expectations. The immediate reaction from stocks was a mild slide off the highs, but the move was relatively tame, especially within the context of recent volatile swings. Small caps were able to hold in positive territory immediately after the rate cut, outperforming large caps in a switch from the trends we’ve seen in recent weeks.

The rate cut by the Fed coincides with global easing; just last night, central bank officials in China cut rates by 0.27% and European leaders hinted that further rate cuts could be right around the corner. Even in Japan, where low rates have persisted forever, central bankers are expected to cut rates.

That environment of cheaper money is seen as supportive to businesses and helped spark a rally in overseas equities. Japan shares were higher for the second consecutive session, trying to bounce after hitting 26-year lows on Monday.

It’s possible that the bulls were corralled a little bit today, leery to take a big bullish stand ahead of Thursday’s GDP report, which is widely expected to show the nation’s economy slipping into negative territory, consistent with a recession.

Also on the data front, earlier today the durable goods report came in at plus 0.8%, which was better than the forecast for a decline of 1.1%. Durable goods orders tend to be volatile, so the market wasn’t that eager to make too big a deal of the surprising strength. In addition, before the market opened, the MBA Mortgage Application Index jumped 16.8%, recovering nicely after hitting eight-year lows last week. Still, the index remains mired nearly multi-year lows and is down 30% from year-ago . . .

Small caps are trading in a narrow range between positive and negative territory following a 50 basis point cut in the fed funds rate. At 2:33 p.m. ET, the Russell 2000 (NYSE:IWM) was up 1.64, or 0.34%, at 484.38.

The Federal Reserve concluded its two day federal open market committee meeting today with a widely expected 50-basis-point cut in the federal funds rate.

The Fed’s cut comes on the heels of a 0.27% rate cut in China. In Europe, the European Central Bank hinted that rate cuts are possible in the near-term. Rate cuts globally would help thaw the still tight credit markets around the world, easing the flow of credit.

Libor slipped for the 13th consecutive trading day, and commercial paper activity picked up dramatically following the Fed’s new program to purchase commercial paper. Evidence that the credit markets are showing signs of marginally loosening boosted the U.S. markets Tuesday and pushed overseas markets higher today.

In economic news, durable goods orders clocked in above expectations, with a gain of 0.8%, compared with the forecast for a drop of 1.1%. However, the favorable surprise couldn’t boost the market, as traders remain cautious on the dreary economic outlook...