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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 . . .

Starrett LS Co. (Nasdaq:SCX), First Financial Corp. (Nasdaq:THFF) and Sciele Pharma Inc. (Nasdaq:SCRX) are among the new 52-week highs in Tuesday's trading among companies with market capitalizations under $1 billion.         

Also included among the results: CombiMatrix Corp. (Nasdaq:CBMX), Standex International Corp. (Nasdaq:SXI), Home Diagnostics Inc. (Nasdaq:HDIX), Medivation Inc. (Nasdaq:MDVN), DXP Enterprises Inc. (Nasdaq:DXPE) and Datascope Corp. (Nasdaq:DSCP).         

Here are the new 52-week highs among small caps: 

After kicking off September with a bang, small caps remain in positive territory midday, as oil futures plummeted after Hurricane Gustav proved less destructive than previously thought.

At 12:10 p.m. ET, the Russell 2000 (NYSE:IWM) was up 3.92, or 0.53%, at 743.42, but off its highs.

Crude oil prices took a nose dive today after Hurricane Gustav’s arrival over the weekend spared key energy production facilities in the Gulf of Mexico. Midday, a barrel of light sweet crude has deflated $6.38 to roughly $109. Crude prices were down as much as $10 before the market opening. Oil’s sell off was welcome news for the market, as that potentially points to lower gas prices and eases consumers’ allotment for expenditures on energy. Additionally, the summer, which is marked as a high traveling season, has come to a close, marking the beginning of a period for weaker seasonal demand.

As crude sold off, the dollar surged higher. Midday, the greenback has breached new highs at $1.4526. Aside from crude, more signs of a weakening global economy also pushed the dollar higher. The central bank of Australia slashed interest rates by 25 basis points in an effort to aid a worsening economy. In England, the head of the UK Treasury, Alistair Darling, commented that the country’s economic conditions are the worst in 60 years, while the OECD noted that Britain is the closest to recession in Europe.

Sciele Pharma Inc. (Nasdaq:SCRX), International Shipholding Corp. (Nasdaq:ISH) and West Marine Inc. (Nasdaq:WMAR) are among the biggest percentage gainers in Tuesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Union Drilling Inc. (Nasdaq:UDRL), UAL Corp. (Nasdaq:UAUA), PacWest Bancorp (Nasdaq:PACW), Cooper Tire & Rubber Co. (Nasdaq:CTB), DineEquity Inc. (Nasdaq:DIN) and Einstein Noah Restaurant Group Inc. (Nasdaq:BAGL).

Here are the biggest percentage gainers among small caps:

Small-cap stocks shot higher this morning, as the bulls came charging out of the gate when crude oil prices collapsed overnight. At 10:01 a.m. ET, the Russell 2000 (NYSE:IWM) was up 12.03, or 1.63%, at 751.53.

Crude oil prices fell hard today as Hurricane Gustav hit landfall in Louisiana, but appeared to spare key Gulf of Mexico energy production facilities. At one point ahead of the stock market opening, crude oil prices were down some $9 dollars a barrel, tumbling below $107. If the energy market remains under pressure, then prices at the gasoline pump should fall, which would provide relief to consumers and shift money back toward other expenditures.

The ISM Manufacturing Survey came in at 49.9, which was just a tad above the forecast of 49.6. The market reaction to the data was relatively tame, with trader attention focused more on the commodity arena.

Small caps were pacing the early advance in equities this morning, just slightly outperforming the Dow and topping the S&P 500 by about 0.5%. Speaking of the S&P 500, that index product was testing important resistance along the 1,300 line, which has been a difficult hurdle to jump in recent weeks. Definitive price action above 1,300 could trigger some new money into stocks and prod short-covering from traders who have been successfully shorting rallies in stocks in recent weeks.

The U.S. dollar was in full rally mode this morning, parlaying the collapse in energy prices to higher territory. The greenback stormed to fresh move highs against the euro, climbing 0.9% to the highest point since early February. In addition, the dollar was up about 0.8% versus the yen. The combination of a soaring buck and sinking crude tugged at a host of commodity markets, with gold down 4% and cocoa . . .

Shares of Sciele Pharma, Inc. (Nasdaq:SCRX) are rocketing in pre-market trading after the small biopharmaceutical company said Monday that it will be acquired by Japanese pharmaceutical manufacturer Shionogi & Co for $31 per share, or $1.1 billion in aggregate. The buyout price represents a 61% premium over Sciele’s closing price on Friday. This is just another sign that lower stock prices domestically are enticing foreign buyers. 

Shares jumped 59%, or $11.27, to $30.54 in pre-market trading. For detailed price information and news stories on Sciele Pharma, click SCRX.

Sciele Pharma Inc. (Nasdaq:SCRX), Isle of Capri Casinos Inc. (Nasdaq:ISLE) and Ameristar Casinos Inc. (Nasdaq:ASCA) are among the most actively traded companies in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Odyssey Healthcare Inc. (Nasdaq:ODSY), Progenics Pharmaceuticals Inc. (Nasdaq:PGNX), Avid Technology Inc. (Nasdaq:AVID), Salix Pharmaceuticals Ltd. (Nasdaq:SLXP), Morgans Hotel Group Co. (Nasdaq:MHGC) and CV Therapeutics Inc. (Nasdaq:CVTX).

Here are the most actively traded companies among small caps:

Small-cap stocks turned a sleepy morning erosion into a full-blown afternoon debacle, as worries about the financial system renewed concerns about any near-term economic recovery and sparked money flow away from equities. The Russell 2000 (NYSE:IWM) closed down 14.23, or 2%, at 696.11.

The trigger for today’s sell-off appeared to be news that FDIC regulators seized two small banks that failed over the weekend, and sold them off to Mutual Omaha Bank. The immediate beneficiary of these systemic financial worries was the Treasury market, with bond and notes lifted by safe-haven flows out of stocks. The yield on the benchmark 10-year note tumbled over 2% as cash 10s rallied.

With nearly one-fourth of the S&P 500 reporting earnings this week, the early-week focus was expected to be squarely on the profit picture, giving the market time to shift into “macro-economic” gear later this week ahead of Friday’s big employment release. However, key earnings numbers were mixed today, and failed to generate enough of a positive story to counter the bank failure news. It should be noted that volume in most financial instruments — stocks, bonds and currencies combined — was light, which suggests some uneven positioning as investors either wait for some of this week’s heavy economic calendar to play out, or as they hold out for more convincing signs of a turn in the earnings news.

Looking ahead to Tuesday’s session, the market gets the first taste of economic data this week, first with the Case Shiller Home Price Index at 9:00 a.m. ET, then from Consumer Confidence data at 10:00. The Case Shiller data is somewhat dated, but the confidence report is for the July time frame.

Crude oil prices were modestly higher throughout the session, which also played into investor concerns about the growth and inflation outlook heading toward all these key economic reports this week. Crude oil futures gained about $1.50 dollars a barrel today, or about 1.2%, pushing close to $125 by the end of the U.S. trading session. Attacks by Nigerian rebels on pipelines lifted energy prices, but concern . . .