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Small-caps stocks drifted lower Friday, weighed down by losses in the tech sector and by troubling economic data on the personal income report. The Russell 2000 (NYSE:IWM) closed down 8.29, or 1.11%, at 739.50. The Russell finished off the month of August with a solid gain of 3.5%, but is still down 3.46% for the year. The down slipped 1.46% Friday and is down 12.9% for the year, while the S&P lost 1.37% Friday is off 12.6% for 2008.

The biggest moves today were seen in tech stocks, with the Nasdaq 100 sinking 2.22%. Dell Inc. (Nasdaq:DELL) reported a stiff loss for the quarter overnight, but what really sent shudders through the tech arena was that the number two computer maker was projecting a worldwide slowdown on tech spending. DELL shares tumbled 13% Friday, and semiconductor and chipmaker shares were also wincing as Marvell Technology Group Ltd. (Nasdaq:MRVL) slumped 4% as the firm issued a very cautious outlook for the coming quarter.

While the tech concerns set the tone for a soft day in equities, additional selling was likely inspired by the personal income report this morning, which broke a string of upside data surprises this week. The personal income figure itself was down 0.7%, well below the 0.0% forecast, and an inflation sub-index on the report was at 17 year highs. After three consecutive days of data-inspired rallies (Tuesday — consumer confidence; Wednesday — durable goods; Thursday — GDP) perhaps just a touch of lukewarm data was enough to generate some pre-weekend profit-taking.

Volume was thin all week as it became apparent many money managers were comfortable extending the upcoming holiday weekend into a bigger . . .

Small-cap stocks are expected to open slightly lower, pressured by pre-weekend profit-taking from short-term traders who caught this week’s updraft. In addition, the first batch of a data trifecta this morning came in soft, stalling some of the economic “good news” that has been in play so far this week. The Russell 2000 (NYSE:IWM) was seen opening near 746.50.

The personal income report came in at minus 0.7%, which was below the forecast of 0.0%. The immediate market response was a mild dip in stock index futures in after-hours trading, but the move was fairly muted. Still on tap on the data front this morning are the Chicago Purchasing Manager’s Survey at 9:45 a.m. ET and the Michigan sentiment survey, which typically leaks out a little before 10:00 a.m. ET.

Crude oil prices were higher overnight, climbing about $1.60 a barrel back above $117 as traders remain concerned about the path of Gustav heading into the extended holiday weekend.

The U.S. dollar was soft, which was seen as a positive element for commodities and a mildly negative component for stocks this morning. The dollar was down 0.6% against the euro and about 0.1% versus the yen.

Stock markets around the world were mostly higher overnight, with India up 3.7%, China up 2.7%, Japan up 2.4%, Malaysia up 2.8%, Singapore up 1.8%, Indonesia up 1%, Hong Kong up 1.9% and the Philippines up 1.2%. Despite the strong final day of trading for August, most Asian stock markets had a difficult month, with Hong Kong hitting a one-year low last week and China slumping 13% even while hosting . . .

Small caps edged higher Friday, underpinned on buying in the tech sector, benign economic data and by traders eager to put money back into stocks after a solid showing this week. Buying interest was curbed however, from those willing to book month-end profits and by lingering concerns about lofty energy and commodity prices. The Russell 2000 (NYSE:IWM) finished out the day up 2.73, or 0.37%, at 748.28.

For the month of May, the Russell rose 4.5%, climbing to the highest monthly close since December. Small caps trounced many of the large-cap index products this month. The Dow was actually down 1.4% in May, while the S&P 500 was up 1%.

The star performers today came from the tech arena, buoyed by impressive earnings from bellwether stock Dell Inc. (Nasdaq:DELL) and by chip designer Marvell Technology Group (Nasdaq:MRVL). The two stocks jumped 6.8% and 23.5%, respectively. The rise in tech stocks today bolstered investor psychology about consumer spending issues amid a difficult economy. Other big-name tech firms attracting buyers today included Cisco (Nasdaq:CSCO) and Hewlett-Packard (NYSE:HPQ). The Philadelphia Stock Exchange’s key index on semiconductor shares (CVE:SOX) jumped 2.3%.

Although tech generated much of the power for today’s move (the Nasdaq was up 0.6%, while the Dow was down 0.06% and the S&P 500 up 0.15%), the insurance business got a lift from American Insurance Group (NYSE:AIG), which gained 2.3% on an upgrade from analysts at Morgan Stanley.

Retailer and beverage shares weren’t joining the buying party however, with Costco (Nasdaq:COST) down 2.4%, Target (NYSE:TGT) down 0.4% and Pepsi (NYSE:PEP) off 0.5%. The S&P Retail Index was off about 0.5% for the day.

The market managed to dodge any potential data pitfalls today, as economic reports on income, inflation, manufacturing purchases and consumer sentiment all basically came in benign. Perhaps the biggest relief was on the inflation front, as today’s personal income report showed that the PCE deflator — considered the . . .

Small-cap stocks edged slightly lower shortly after a brief opening bid, pulled down by profit-taking from short-term traders who caught this week’s surge to the highest prices since January. Still, the market managed to dodge several data landmines this morning, as a batch of economic figures were basically in line with expectations. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was down 2, or 0.27%, at 743.55.

The Chicago Purchasing Manager’s Survey came in at 49.1, which was above the forecast at 48.5. Although the reading was slightly above expectations, it had only a muted impact on stock prices as the number was still below 50 for the fourth consecutive month.

Also, the Michigan sentiment survey came in at 59.8, just slightly above the forecast of 59.5, but still at 28-year lows.

Before the opening, the personal income headline figure and the core PCE deflator both were in line with analyst projections, which supported both stocks and bonds in pre-opening activity. The core PCE is considered to be the Federal Reserve’s preferred inflation gauge, and the moderation in the number should allay some inflation fears that have stoked up lately.

Tech stocks were expected to get a lift today from positive earnings news from Dell Inc. (Nasdaq:DELL) and Marvell Technology Group (Nasdaq:MRVL), both of which were seeing impressive  percentage gains this morning after topping earnings estimates overnight. In the financial sector, American Insurance Group (NYSE:AIG) was up 3.3% early after Morgan Stanley upgraded the insurer. Although good news dominated the market so far today, there were some sour notes to be found for large caps, including J. Crew Group (NYSE:JCG), which was off about 20% after reducing guidance and being downgraded by Citigroup.

Month-end window dressing could be a factor in the markets again today, and there could also be a push from some fund managers who are under invested . . .

Small-cap stocks are expected to open higher Friday, extending Thursday’s rise to the highest point since January after personal income and inflation data this morning were in line with expectations and in the wake of positive earnings news overnight from a couple of key tech stocks. The Russell 2000 (NYSE:IWM) was expected to open about 0.4% higher, which would translate to an opening near 748.

The personal income headline figure hit the forecast at a rise of 0.2% and the core PCE price index, which is said to be the Fed’s preferred inflation gauge, also nailed the forecast with a rise of 0.1%. The immediate reaction in stocks was about a three-handle rise in S&P 500 futures.

Dell Inc. (Nasdaq:DELL) topped the earnings forecast after the close Thursday and shares for the pc maker jumped about 10% overnight, setting the tone for a solid start to the day in the tech sector.

Crude oil was up and down overnight after Thursday’s slide back below $127 dollars a barrel. There is a sense among some traders that news of a sweeping CFTC investigation into energy market trading could help spur an exit of long energy . . .

Small-cap stocks took flight Thursday, soaring to the highest daily close since Jan. 2, powered by a rally in the downtrodden financial sector and by money flow away from commodities and debt markets into stocks. The latter trends were likely boosted by a tumble in crude oil, which slipped below $127 dollars a barrel, and by a rally in the U.S. dollar, which climbed about 0.8% against both the euro and the yen. The Russell 2000 (NYSE:IWM) rose 7.09, or 0.96%, to 745.55, but did slip late off the highs when a test of key resistance near 750 attracted sellers.

Shortly after the regular market close, Dell Inc. (Nasdaq:DELL) reported earnings above the forecast, and the stock climbed about 5% on the immediate response in after-hours trading, which could provide a boost to stocks in general overnight if the buying interest remains in place.

Small-cap stocks assumed a leadership role on the rally Thursday compared with large-cap index products, and have in fact held up better recently even on down days — a possible sign that stocks are not as vulnerable at these levels as was feared.

“Small caps have been outpacing large caps on the open corporate debt market and firm credit conditions,” Nick Kalivas, vice president of financial research at MF Global told SmallCapInvestor.com in an email interview. “Risk-taking has picked up over the past two months given the dynamics in the corporate bond market.” He noted that the rest of the rise versus large caps is more index-related, tied to the underlying stocks in each product.

Kalivas also said that month-end window dressing had a role in the rally today in stocks, with pharmacy and financial shares attracting buyers while energy and commodity markets, which had been the hot zone, were pulled down by profit-taking. What’s more, Kalivas said that small caps have a timing tendency to rally at the turn of the month, and that appeared to be taking place once again.

The Commodity Futures Trading Association today announced a sweeping investigation into crude oil futures trading, and Kalivas said that news could be helping out . . .