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Small-cap stocks remained in rally mode today, starting out the week with a bang after staging a remarkable 11.5% rally off the lows late Friday afternoon. Investors rushed in to snap up bargains, buoyed by hope that another round of global rescue measures would fortify recent lows as the recession bottom. The Russell 2000 (NYSE:IWM) closed up 48.41, or 9.26% at 570.89, generating the largest one-day advance of the year. For the year, the Russell is now down 25.4%, while the Dow is off 29.2% and the S&P 500 is down 31.6%. Amazingly, the Russell is now up more than 20% from the low, but I doubt if any market pundits will be rushing to say this is now a bull market.

Investors seemed to be more confident that governments around the world were now approaching the credit crisis with a concerted, determined effort to unthaw frozen lending lines and not just responding to each new failure on a piecemeal basis. Either that, or the market was simply oversold after historic recent declines and ripe for a big corrective bounce.

If you are in the camp that believes the measures are moving into place to protect the global financial system, then weekend news that government bodies in the United Kingdom, France, Germany and the United State would pour billions into teetering banks, guarantee interbank loans and even purchase equity in key financial institutions appeared to be the perfect tonic to soothe fears about a deep recession spawned by an international lending crisis. The Libor has become the litmus test for the lack of trust in the lending community, and rates fell hard overnight after the latest round of worldwide rescue measures were announced. If you’re curious, Libor stands for the London Interbank Offered Rate and it is the rate at which banks lend money to each other in the wholesale money market. It’s supposed to be somewhat comparable to the Fed funds rate, but right now the Fed funds target is at 1.5% while the Libor rate (for the dollar) is closer to 4.7%

Interestingly, financial and bank shares actually lagged the overall market rise today, as commodity, insurance and healthcare stocks powered the rally. Automobile manufacturers were particularly strong, with General Motors Corp. (NYSE:GM) jumping some 28% as talk circulated that GM was considering some . . .

Small-cap stocks extended the rally into midday trading, powered by ideas recent government plans to pour billions of dollars into banking institutions, while mopping up toxic debt with taxpayer coffers would right the ship in equities and avert an even deeper global economic downturn. At 12:45 p.m. ET, the Russell 2000 (NYSE:IWM) was up 32.27, or 6.18%, at 554.76.

The Russell was pushed through minor “figure” resistance at 550, then stalled just shy of 555. While 555 might offer some resistance of note based on previous price action, the key upside test spot from here is actually up at 567. Although the chart patterns have improved dramatically since the big bounce off Friday’s lows, there is still some concern that today’s rally was driven more by oversold conditions than a true sense that clogged credit lines were starting to pry open. In addition, much of the hope for a bottom is tied to a thaw in lending practices and the credit market is closed today for the Columbus Day holiday.

Speaking of additional measures to shore up listing banks, European governments over the weekend said that they would guarantee inter-bank loans, which should help ease the distrust that has seen Libor rates holding high despite interest rate cuts around the world.

In addition to that move, government bodies in the United Kingdom, France and Germany said that they would plow billions of dollars into key banks and the U.S. Treasury Department said that they were considering plans to purchase equity in financial institutions. Some might see that as a “green light” to buy financial stocks present depressed values, but financial shares as seen in the Financial Select Sector SPDR and the PHLX KBW Banking Index were actually underperforming the . . .

Small-cap stocks charged higher Friday, giving beleaguered bulls a happy weekend sendoff. The Russell 2000 (NYSE:IWM) rose 13.07, or 1.85% to 721.07, the highest daily close since mid-February as investors embraced the latest batch of earnings numbers with open arms.

In a sense, it was a perfect storm of broad-based earnings reactions Friday, with Citigroup Inc. (NYSE:C) lifting financials, Google Inc. (Nasdaq:GOOG) fueling technology issues, and Caterpillar Inc. (NYSE:CAT) sparking buying interest in the manufacturing sector.

It perhaps took a little creativity on the part of investors to “spin” the Citigroup story into a positive one, as the company still reported massive debt write-downs and missed the earnings estimate. In essence, investors looked through the headline numbers and decided the story on Citigroup was headed toward happier times.

However, no such rose-colored glasses were needed for Google or Caterpillar. Google shot 20% — or about $90 bucks a share — as earnings topped estimates, and Caterpillar, which climbed about 8%, also beat their forecast despite sluggish economic conditions in the manufacturing sector in recent months. Just to add a little extra good vibes into the mix, another manufacturing giant, Honeywell International Inc. (NYSE:HON) also reported strong earnings and rose nearly 6% on the day.

April options expirations came into play today, and the market appeared to be out of position on the short side, which likely fueled the rally, said Nick Kalivas, vice president of financial research with MF Global, in a phone interview. In addition, “there . . .

Small-cap stocks kicked off Friday’s session with a bang, with the Russell 2000 (NYSE:IWM) leaping 1.49% in early trading in line with overnight gains fueled by investor response to the latest batch of corporate earnings releases. The Russell shot to a morning high of 719.90, just shy of key chart resistance in the 720.50 zone.

The headline earnings reports came from Citigroup Inc. (NYSE:C), Google Inc. (Nasdaq:GOOG) and Caterpillar Inc. (NYSE:CAT), which provided a “good news” feel to the morning’s action from the financial, technology and manufacturing sectors. Peoria, Ill.-based Caterpillar might not have been rocked much by last night’s 5.2-Richter earthquake in southeast Illinois, but strength in the manufacturing arena is a positive signal given sluggish economic conditions. Also on the manufacturing front, Honeywell International Inc. (NYSE:HON) beat the forecast on its earnings release and was up 4% in early trading this morning.

Some of the headline figures from Citigroup were suspect — for instance, earnings were below the forecast, but write-downs from the credit crunch were not as bad as feared, and investors embraced the news from the standpoint that the worst had already been priced into Citigroup’s valuation. It’s a risky leap of faith, . . .

Shares of iGate Corp., (Nasdaq: IGTE), which provides information technology and offshore outsourcing services, reported early this morning that net income surged 71% in the first-quarter due to an increase in higher margin customers, improved bill rates and a reduction in attrition rates.

Shares gained 13.2%, or $0.87, to $7.48 in pre-market trading. For detailed price information and recent news stories about iGate, click IGTE.

The Russell 2000 (NYSE: IWM) swung up and down today but eventually failed to join the other major U.S. indices in the green. The small-cap index lost 1 point, or 0.13%, to 749.33, its fifth consecutive decline. The Dow Jones Industrial Average (INDU) added 51.70 points, or 0.40%, to 13,010.14.

On a year-to-date basis, the Russell 2000 has shed 4.84%, while the Dow has advanced 4.29% and the S&P 500 has gained 1.63%.

A volatile day of trading began on a bullish note following news before the opening that U.S. housing starts unexpectedly increased 3% in October, according to the U.S. Census Bureau. Economists were forecasting a small drop after September’s steep 11.4% decline.

Privately-owned housing starts were at a seasonally adjusted annual rate of 1.229 million in October, compared with September’s slightly upwardly revised level of 1.193 million.

Stocks opened in positive territory, with investors apparently disregarding the part of the government’s report that showed a decrease in buildings permits.

Buildings permits, a sign of future construction, fell 6.6% to an annual rate of 1.178 million.  That’s the lowest level since 1993 and a sign that the housing sector will most likely continue to stagnate. Building permits in September were 1.261 million at an annual pace.

The bulls remained dominant until shortly after 12 p.m. ET, when the rally abruptly ran out of steam and went into reverse. The small-cap index was the first to take a hit, followed shortly later by the other major U.S. indices.

It’s difficult to say with certainty what the catalyst was, but financial stocks declined as investors once again turned their attention to the credit problems stemming from the meltdown in the subprime mortgage sector.

The Russell 2000 (NYSE: IWM) has fallen far below the flat line as the morning rally on Wall Street goes into reverse. At 2:16 p.m. ET, the small-cap index had fallen 7.04 points, or 0.94%, to 743.29. The Dow Jones Industrial Average (INDU) was down 56.49 points, or 0.44%, to 12,901.95.

At about 12 p.m. ET, small-cap stocks abruptly lost steam and nosedived into negative territory, where they have since been joined by the other major U.S. indices.

The apparent reason for the sharp drop is a decline in financial stocks as investors once again turned their attention to the credit problems stemming from the meltdown in the subprime mortgage sector.

Before the start of trading today, Freddie Mac (NYSE: FRE), a government-chartered company that buys U.S. mortgages, reported a record quarterly loss and warned that it may have to cut its dividend.

A number of financial institutions have taken a hit in recent months as declining house prices and a wave of foreclosures and delinquencies made securities backed by subprime mortgages essentially worthless.

Morning trading was dominated by the bulls following news of a report from the U.S. Census Bureau that housing starts surprisingly increased 3% in October, after a fall of 11.4% in September.

Elsewhere, the price of oil has added $3.39 to $98.03 a barrel.

The Russell 2000 (NYSE: IWM) is posting gains following news of a surprise rise in October U.S. home construction.

At 10:32 a.m. ET, the small-cap index had added 2.92 points, or 0.39%, to 753.25. The Dow Jones Industrial Average (INDU) was up 86.66 points, or 0.67%, to 13,045.10.

Housing starts surprisingly increased 3% in October, the U.S. Census Bureau reported before the start of trading. That came as a surprise to economists, who were forecasting a small drop. Housing starts fell 11.4% in September.

Builders broke ground on 1.229 million homes at an annual rate, above the 1.193 million annual pace reported in September.

However, it’s doubtful that the news signifies an improvement in the U.S. housing sector.

Buildings permits, a sign of future construction, fell 6.6% to an annual rate of 1.178 million, the lowest level in more than a decade.

Nevertheless, investors were feeling mildly bullish, particularly after Monday’s sell-off exposed bargain buying opportunities.