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The Obama reign got off to a rocky start today – at least as far as the market was concerned – with small-caps generating the largest one-day slide of the New Year, the worst inauguration day decline ever and the worst overall decline in some two months as bank stocks continued to reel and the profit picture retained storm clouds. The Russell 2000 (NYSE:IWM) closed down 32.80, or 7.03% at 433.65 and is now down 13.1% for the year. Meanwhile, the Dow is off 9.4% for 2009 and the S&P 500 is off 10.8%.
 
The market was already coming off an extended holiday weekend, and today’s action was considered another “partial” day for investors with so much attention diverted to the historic inauguration ceremonies.

Even before the inauguration the market was backpedaling amid another bout of worries over the health of the world’s banking system. And the selling fury picked up steam when Obama declined to divulge much in the way of specifics about his fiscal stimulus plans.

Coming in to this morning’s stock market open, investors had to deal with news that the Royal Bank of Scotland would post the largest annual loss of any corporation in U.K. history, which only served to heighten the ongoing panic tied to banks here in the U.S. Investors are now worried that banks simply will not survive without in essence being “nationalized” at the expense of shareholders, ala the fate of American International Group a few months ago.

The KBW Banking Index fell a jaw-dropping 19% today, a stunning move for an index product. The nation’s #1 bank, Bank of America Corp. (NYSE:BAC) tumbled 26%, while Wells Fargo & Co. (NYSE:WFC) shed 23% and Citigroup Inc. (NYSE:C) fell 18% and slipped below $3 dollars a share. Within the financial spectrum, money management firm State Street Corp. (NYSE:STT) collapsed 58% after reporting disappointing profit news.

The selling mood was so prevailing today that a recovery bounce in crude oil prices failed to drum up buying interest for energy or other commodity stocks. Crude oil rose some 6% into the expiration of the February futures contract, but energy stocks were down about 5% in sympathy with the decline in overall equities. Even the dramatic slide in stocks failed to lift credit markets, which are worried about overcoming a mountain of supply that will be issued to fund various stimulus projects and the ongoing rescue/bailout plans.

Small-caps on the move today included Aspen BioPharma Inc. (Nasdaq:APPY), which tumbled 82% amid disappointment over a trial for a drug tied to appendicitis and abdominal pain. VSE Corp. (Nasdaq:VSEC) slumped 45% on news that the U.S. Army had rejected a new contract bid from the firm Natus Medical Inc. (Nasdaq:BABY) fell 25% as the maker of baby care products revised their outlook downward.

The chart picture for small-caps deteriorated in a big way today, sinking through important short-term support at 453, which obliterated the hope for last week’s late recovery move. Once through 453 support, the market also made short work of the recent lows along 439, which makes a retest of key support at 416 more likely in the days to come. After the close today, various corporate profit reports were coming in mixed, but tech bellwether IBM did beat the forecast and was up about 3% in extended trading, which might foster some goodwill moving into Wednesday’s session.

Selling interest in small-cap stocks picked up momentum in mid-session, stoked by investor concerns that President Obama’s inauguration speech did not provide details of his fiscal stimulus plans. Those concerns simply added to a market already bludgeoned by steep declines in the banking sector. Some of today’s small-cap gainers were UDR (NYSE:UDR), GTx (Nasdaq:GTXI) and TiVo (Nasdaq:TIVO).

Other Market Watch highlights today included:

• Energy shares were lower so far today, but the selling fury trailed that in other sectors as crude oil prices bounced some 3% as cold weather draped a large portion of the Northern and Eastern U.S. and on signs that OPEC is serious about production cutbacks.  
• The only S&P sector groups on the rise were gold, insurance stocks and tobacco companies.  
• The biggest losses were seen for asset management firms, regional banks, diversified financial services companies, diversified banks and real estate services firms.

Small Cap Gainers:

• UDR Inc, GTx Inc, and TiVo Inc open as lead gainers on Tuesday's session.  See:(NYSE:UDR), See: (Nasdaq:GTXI), See: (Nasdaq:TIVO)

Small Cap Losers:

• VSE Corp. lowers 43% on news that the Army rejected a new contract bid from the firm. See: (Nasdaq:VSEC)  
• Small-cap company AspenBio Pharma Inc,which gapped lower and collapsed some 84% on unusually heavy volume as investors did not embrace news of preliminary results on the firm’s pain drug test. See: (Nasdaq:APPY)  
• Money management firm State Street Corp. was tumbles around 48% on huge volume after reporting disappointing results. See:(NYSE:STT)  
• The KBW Banking Index takes a beating, falling some 13% at midday as steep losses were posted for many of the nation’s most prominent banks. 

Selling interest in small-cap stocks picked up momentum in mid-session, stoked by investor concerns that President Obama’s inauguration speech did not provide details of his fiscal stimulus plans. Those concerns simply added to a market already bludgeoned by steep declines in the banking sector. At 1:43 p.m. ET, the Russell 2000 (NYSE:IWM) was down 19.28, or 4.24% at 446.67.

The KBW Banking Index was hammered today, down some 13% at midday as steep losses were posted for many of the nation’s most prominent banks. Money management firm State Street Corp. (NYSE:STT) was down some 48% on huge volume after reporting disappointing results.

Looking at sector activity so far today, anything tied to bank or financial stocks were struggling. The biggest losses were seen for asset management firms, regional banks, diversified financial services companies, diversified banks and real estate services firms. The only S&P sector groups on the rise were gold, insurance stocks and tobacco companies. Gold is often seen as a safe-haven refuge, and with stocks and credit instruments on the slide today, investors were attracted to gold as a spot to park cash.

Energy shares were lower so far today, but the selling fury trailed that in other sectors as crude oil prices bounced some 3% as cold weather draped a large portion of the Northern and Eastern U.S. and on signs that OPEC is serious about production cutbacks. In addition, the dollar pared earlier gains shortly after the Obama speech triggered the fresh selling wave in equities.

Individual small-caps on the slide were highlighted by AspenBio Pharma Inc. (Nasdaq:APPY), which gapped lower and collapsed some 84% on unusually heavy volume as investors did not embrace news of preliminary results on the firm’s pain drug test. VSE Corp. (Nasdaq:VSEC) tumbled 43% on news that the Army rejected a new contract bid from the firm. MercadoLibre Inc. (Nasdaq:MELI) fell 20% as the Latin American online commerce platform reported results.

The chart picture for small-caps turned sour today with the breach of support in the 453 zone. The next support area to watch is around 440-439; a push through that area could spark a quick slide toward 416.

Small-cap stocks pushed lower on the opening, pulled down by a familiar worry of late –sinking bank and financial shares. Additional selling was fueled by losses in overseas markets as the U.S. catches up with the world following Monday’s holiday. It should be noted that action today could be spotty and uneven with the nation’s attention on the inauguration of Barack Obama as the 44th President of the United States. Some of today’s small-cap gainers were UDR (NYSE:UDR), GTx (Nasdaq:GTXI) and TiVo  (Nasdaq:TIVO).

Other Market Watch highlights today included:

• Additional selling was fueled by losses in overseas markets as the U.S. catches up with the world following Monday’s holiday.
• During the U.S. holiday Monday, the Royal Bank of Scotland said they would report an annual loss of some $41 billion dollars for 2008, which would stand as the biggest loss ever in UK corporate history.  
• The greenback was up about 1% versus the euro; in early commodities trade, cotton and cocoa were taking a big hit.  
• Crude oil prices were lower overnight, but relatively flat into the stock market open.  
• The key early this week will be whether or not the market can hold up against 453 support. 

Small Cap Gainers:

• UDR Inc, GTx Inc, and TiVo Inc open as lead gainers on Tuesday's session.  See:(NYSE:UDR), See:( Nasdaq:GTXI), See: (Nasdaq:TIVO)

Small Cap Losers:

• State Street Corp. an institutional money manager tumbles 52% on Tuesday's opening. See:(NYSE:STT) 
• Citigroup Inc. down 5%. See: (NYSE:C)  
• Wells Fargo & Co. falls 11% on opening. See: (NYSE:WFC)
• Bank of America Corp. was off some 16% right after the opening. See: (NYSE:BAC)

Small-cap stocks pushed lower on the opening, pulled down by a familiar worry of late –sinking bank and financial shares. Additional selling was fueled by losses in overseas markets as the U.S. catches up with the world following Monday’s holiday. It should be noted that action today could be spotty and uneven with the nation’s attention on the inauguration of Barack Obama as the 44th President of the United States. At 9:47 a.m. ET, the Russell 2000 (NYSE:IWM) was down 12.62, or 2.71% at 453.83. Historically, the odds favor a losing day for stocks as the market slips about 70% of the time on inauguration day.

The banking arena has been back in the spotlight – in a very harsh light – for the past couple of weeks and remains a worry spot for the market following dreadful profit news from European banks and early declines for U.S. banks this morning.

During the U.S. holiday Monday, the Royal Bank of Scotland said they would report an annual loss of some $41 billion dollars for 2008, which would stand as the biggest loss ever in UK corporate history. The woes for UK bank stocks sent the sterling currency to 7-year lows against the dollar.

Looking at big U.S. banks, Bank of America Corp. (NYSE:BAC) was off some 16% right after the open, while Wells Fargo & Co. (NYSE:WFC) was down 11%. Citigroup Inc. (NYSE:C) was down 5%, while JP Morgan Chase and Co. (NYSE:JPM) was down 9%. State Street Corp. (NYSE:STT) an institutional money manager, reported terrible results and tumbled 52% on the open.

Crude oil prices were lower overnight, but relatively flat into the stock market open. That said, a strong tone in the U.S. dollar could weigh on commodity prices today and therefore on commodity-themed stocks. The greenback was up about 1% versus the euro; in early commodities trade, cotton and cocoa were taking a big hit.

Taking a peek on options activity from Friday’s January options expirations, Scott Fullman, director of derivatives investment strategy with WJB Capital Group said that unusual activity was seen for small-cap firms UDR Inc. (NYSE:UDR), GTx Inc. (Nasdaq:GTXI) and TiVo Inc. (Nasdaq:TIVO), so it could be interesting to keep tabs on those firms for a couple of weeks to see if they have any news developments.

The chart structure for small-caps remains in an elongated sideways consolidation mode. The rollover last week off logical resistance might have been troubling for short-term traders, but was consistent with the dominant sideways theme. The key early this week will be whether or not the market can hold up against 453 support. If so, then there is a modest chart bias to resume the upward path to retest last week’s failed resistance lines. However, a breach of 453 opens the door to an abrupt slide back to 442-439. Below there, the market really doesn’t have a safety net until 416.

Small-cap stocks pushed higher on the opening, supported by a modest dip in crude oil prices, ideas that Monday’s slide was overdone, solid factory orders data and comments from Federal Reserve Chairman Ben Bernanke. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was up 4.28, or 0.58%, at 745.30.

Bernanke said that monetary policy was well positioned to promote growth and price stability, but that until the housing market stabilizes, growth risks remain on the downside. In addition, Bernanke said that financial market conditions have improved, but are still strained. Bernanke made a rare comment about the dollar, which sparked a dramatic reversal in the dollar’s value against the euro, sending the greenback to a gain of about 0.6% versus the euro after being lower before the U.S. stock market opening. This was Bernanke’s first public policy statements in about a month, and the market appeared to embrace his comments, with stock futures edging up a couple of handles from the overnight price, in addition to the dollar rally.

The factory orders report came out at 10:00 a.m. ET, with the headline figure at plus 1.1%, well above the median forecast for a dip of 0.1%. Stock index futures markets pushed higher immediately after the release of the numbers.

Crude oil prices tumbled more than $2 dollars per barrel in response to the rise in the U.S. dollar. Billionaire investor George Soros said today that the rise in oil prices and other commodities resembles some bubble moves. He also said that a crash in oil prices is not imminent and that commodity index trading is inflating the speculative bubble in physical markets.

There is a perception among some traders that if the energy market starts to sink, we could see a massive unwinding of a short dollar/long crude oil trade that would stand to benefit the greenback and equities as traders shift funds away from energy and back into stocks. However, that theory is just speculation at this stage. There is also a firestorm of jawboning from regulators and elected officials about market oversight and speculative commodity buying as everyone scrambles for a scapegoat . . .

Small-cap stocks are expected to open moderately higher Tuesday, lifted by a dip in crude oil prices overnight, and by ideas that Monday’s declines were overdone. The Russell 2000 (NYSE:IWM) was up 0.3% in after-hours trading, which would translate to a cash opening near 743.25.

Gains should be curbed by losses in overseas stock markets, and by lingering concerns about financial shares following renewed credit crunch issues Monday and talk of large players raising capital again this morning.

Global equity markets were lower overnight, catching up with the big decline in U.S. prices on Monday. Japan was off 1.6%, Hong Kong down 1.8%, Singapore lost 1%, South Korea shed 1.5%, Taiwan lost 1.6%, Australia was down 1.5% and Bombay was off 0.6%. European shares also were slightly lower ahead of the U.S. opening, but got a mild boost from an upward revision in first-quarter GDP.

The market now awaits comments from Federal Reserve Chairman Ben Bernanke. He is slated to talk about the economy and field audience questions as he gives a speech via satellite to the Central Bankers’ Panel at an IMF conference in Barcelona. Bernanke is expected to deliver the speech around 9:00 a.m. ET.

Following the Bernanke speech, the market also faces factory orders data at 10:00 a.m. ET, and vehicle sales numbers throughout the day. General Motors Corp. (NYSE:GM) announced plans to close four truck plants and shift production away . . .