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Stocks opened in the green and are continuing their positive trot through midday, buoyed by Tuesday’s news that beleaguered Citigroup (NYSE:C) is operating at a profit.

At 12:27 pm ET, the Russell 2000 (NYSE:IWM) was up 1.39, or 0.38%, at 369.14, while the Dow was up 0.02% at 6,927.77, and the S&P 500 was up 0.22% at 721.18.

Like Tuesday, financial stocks are leading the markets higher today on the Citigroup news, while tech stocks are also seeing a boost after large-cap benchmark Hewlett-Packard’s rating was upgraded.

While the market seems to be in recovery mode, don’t relax just yet. Analysts are warning that the rally will be short-lived and that there remain deep problems etched within the banking industry.

Small-cap stocks trending upward today include On Assignment, Inc. (Nasdaq:ASGN), 23% higher on lower-than-average volume, and YRC Worldwide Inc. (Nasdaq:YRCW), which is 11% higher despite making Moody’s “Bottom Rung List.” Axsys Technologies (Nasdaq:AXYS), a manufacturer of defense surveillance and imaging systems, is up 34% after the small cap put itself up for sale in an auction that drew a first round of bids earlier this week.

Global Markets Up …

Finally, early strength for stocks on Tuesday didn’t turn to weakness. In fact, . . .

Stocks continued their drop from the opening on a pullback in energy prices and on rumors that small-cap General Motors (NYSE:GM) may file bankruptcy.

At 11:30, the Russell 2000 (NYSE:IWM) was down 16.96, or 4.57%, at 354.34, while the Dow is down 3.16% to 6,658.88, and the S&P 500 is down 3.69% to 686.60.

The bad news out this morning weighed on stocks, and included a survey release that showed nearly 12% of mortgage holders are behind on payments or are in foreclosure.

GM auditors have said they have “substantial doubt” as to whether the battered automaker has the ability to continue, and GM said they may have to seek bankruptcy protection if its huge restructuring plan falls through. GM shares slid over 16% and are now under $2 per share.

Small caps bucking the downward trend today include Weight Watchers International (NYSE:WTW), up 18 on heavier-than-average volume. Cornell Companies (NYSE:CRN) is up over 10% after reporting a rise in Q4 profit, and also reporting positive Q4 profit results was Genesco, Inc. (NYSE:GCO), up 10% on the news.

*****Wednesday's rally could have been stronger, though you can't really be surprised that investors aren't jumping head first back in the stock market. Volume appears to have been solid, but not outstanding.

The most encouraging aspect to Wednesday's rally was leadership. We got leadership from technology and oil. If investors are buying in anticipation of an economic recovery, then oil necessarily must trade higher. Because any uptick in economic activity means increased demand for oil. And with OPEC production cuts taking hold and recent reserve draw-downs, the oil market has to be tight. 

*****Jason Cimpl, analyst for TradeMaster Daily Stock Alerts, made 10% on the US Oil Trust ETF (USO) last week. And the USO position he recommended . . .

Small-cap stocks pushed higher Tuesday, shrugging off record low consumer confidence as investors scavenged for bargains on beaten down bank and financial shares, hoping that President Obama’s pick to lead the Treasury will make quick moves to bolster bank balance sheets and mop up toxic assets. The Russell 2000 (NYSE:IWM) closed higher for the third consecutive session, gaining 5.53, or 1.23%, to 455.58. The Russell is still down 8.8% for the year, while the Dow is off 6.8% and the S&P 500 is down 6.3%.

Timothy Geithner – Obama’s nominee to head the Treasury Department – was finally confirmed by lawmakers late Monday and investors are hoping he will move rapidly to utilize government funds to help out banks. Obama himself even said today that the government will need to step up to help out banks with troubled assets, which was the original purpose of the TARP bailout plan before getting sidetracked during the waning days of the Bush Administration. The prospect of a “bad bank” set up to absorb troubled assets was back in play today, with Senate Banking Committee Chairman Chris Dodd saying the idea made “some sense.”

For the day, bank stocks were up 3.3%, while financial shares gained 3.5%. But the upside progress wasn’t necessarily spread all around as retail stocks, airlines and some commodity groups struggled. The S&P Retail Index dipped 1.3%, with home-related retailers struggling. The AMEX Airline Index tumbled 6.9%, with Delta Air Lines Inc. (NYSE:DAL), the world’s largest carrier, going into a 20% tailspin after releasing crummy earnings.

Gold stocks also took a nosedive today, and commodities in general were struggling, even though the U.S. dollar was pretty much flat against the euro and yen. The Commodity Research Bureau Index fell some 3% on the day, powered by a big decline in crude oil prices. The market for “black gold” tumbled 9%, or $4.15 a barrel, to $41.58, pressured by worries about demand amid the recession and . . .

Small-cap stocks edged higher as earnings were a little better than feared (though still weak overall) and as investors are hoping for quick action from the Treasury Department now that the confirmation of Obama’s new Treasury leader has been wrapped up. However, soft readings on consumer confidence appeared to stall buying interest. At 10:05 a.m. ET, the Russell 2000 (NYSE:IWM) was up 2.34, or 0.52%, at 452.40.

The consumer confidence report came in at 37.7, below the forecast of 39, and which pulled equity markets slightly off the early highs. Earlier today, the Case-Shiller Home Price Index fell 2.2% in November from the previous month and was down 18.2% from year-ago levels, which marks a record decline in home values. The month-over-month decline was slightly worse than forecast, but the stock index futures seemed to weather the data well ahead of the opening. Although this data series looks gloomy, Monday’s existing home sales report came in above expectations and helped fuel a rise in equities. On Thursday, new home sales data will help provide further information about the housing market.

Some of the early rise in equities was tied to optimism that the Treasury Department will now act quickly to bolster bank balance sheets and fuel lending now that Timothy Geithner has been confirmed to the top post at the Treasury.

Earnings news this morning was mixed, with Texas Instruments Inc. (NYSE:TXI) missing the forecast, but the stock was holding steady shortly after the opening. Du Pont and Co. (NYSE:DD) lowered the 2009 outlook and was off about 1% this morning, while Verizon Communications (NYSE:VZ) basically met the forecast, but was down 5%. On the upside, United States Steel Corporation (NYSE:X) released strong results and rose 7%.

Crude oil futures fell about $2 a barrel shortly after the opening, pulled down by worries about growing inventories ahead of the weekly stockpile tally from the American Petroleum Institute this afternoon and the Energy Information Association on Wednesday. Oil stocks were a strong performer Monday despite sloppy . . .

Small-cap stocks went into rally mode Tuesday, quickly reclaiming lost ground from Monday’s downward spiral as crude oil tanked and consumer sentiment perked up from the abyss. The Russell 2000 (NYSE:IWM) closed up 18.44, or 2.65%, at 714.55, generating the 10th-largest one-day rally of the year. This also marked the fourth one-day gain in July of 2% or more. The only other month this year that saw that many 2% rally days was in March — when the market forged an important bottom.

During the session, crude oil prices shed more than $3 dollars a barrel, retreating below $121 while approaching three-month lows. By the close, crude was off $2.54 dollars to $122.19. Concern about the demand side of the equation continues to discourage energy bulls, and OPEC president Chakib Khelil said that crude oil prices could tumble to the $70- to $80-range if the U.S. dollar strengthens and if political tensions ease in the Middle East. The U.S. dollar jumped to four-week highs against the euro, heating up talk that the short dollar/long energy hedge fund trade was still being unwound. The greenback was on a roll against the yen, rising to four-week highs, while gaining about 0.6%.

The recent collapse in crude oil prices (crude is off some 17% from the July peak) has been a welcome sign to stock market investors who worried that persistent gains in the energy market would have crippled consumer spending and thwarted any recovery attempts in the U.S. economy — especially with the housing market still reeling.

Speaking of the housing situation, the Case-Shiller Home Price Index came out today. To no one’s surprise, the Index slipped to record low levels and suggested that home prices were at four-year lows. However, the report was in line with expectations, the data is for the May time frame, and was completely overshadowed by the consumer confidence report, which came in well above expectations. The headline figure for consumer confidence was at 51.9, which easily topped the analyst forecast of 50. It should be noted that 51.9 is still a low number historically, but with crude oil sinking, the dollar surging and several key economic numbers still on tap this week, a good sentiment figure simply made it even more difficult for the shorts to . . .

Small-cap stocks pushed higher, recouping some of Monday’s big decline amid lower crude prices and positive economic data. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was up 9.95, or 1.43%, at 706.06.

The consumer confidence report came out at 51.9, which was above the forecast of 50 and which sparked a quick jump in the U.S. dollar while extending the morning rally in equities.

Earlier this morning, the Case-Shiller Home Price Index slipped at a record pace to minus 15.8% in May, which wasn’t a surprise to the market, but is sobering news to home owners who have seen four years of home equity wiped out during the recent downturn in housing.

Crude oil futures were pushing lower this morning, which provided some support to the stock market. The market for black gold was off nearly $2 dollars a barrel into the U.S. stock market open, backing down below $124 amid concerns about the demand picture. OPEC president Chakib Khelil said that current prices for crude were “abnormal” and that prices could fall to $70 to $80 dollars in the long-term picture if the U.S. dollar strengthens and political tensions ease. The greenback was up this morning about 0.6% against both the euro and the yen.

Traders will keep a close watch on the financial arena again today following news overnight that Merrill Lynch (NYSE:MER) announced plans to write-down $5.7 billion in debt and raise $8.5 billion in capital through new stock sales. Shortly after the open, MER shares were down 1%. Also within the financial spectrum, Citigroup (NYSE:C) was the target of negative analyst comments overnight and slumped 2.5% on the open.

Coming into the opening today, stock markets around the world were on tilt, sinking to two-week lows as the MER news sparked renewed fears about the credit crunch. Although European shares bounced off the lows, they were hit hard at times overnight, and Asian markets had a decidedly bearish result, with Japan down 1.4%, Hong Kong down 1.8%, China down 1.8%, Taiwan down 3.0%, Australia . . .

Investors are often blinded by growth, forgetting that intrinsic value is determined by the present value of future cash flows. Some investors consider EBIDTA a reasonable proxy for cash flow, others consider cash flow from operations, and some just use earnings. But why use a proxy, when you can use dividends? After all, your cash flow, not the company's, is what matters.

We think we've found a reliable dividend source in Great Northern Iron Ore Properties (NYSE:GNI), a non-voting trust that owns interests in both mineral and non-mineral lands on the Mesabi Iron Range in northeastern Minnesota.

Great Northern pays virtually all its net income as dividends, a requisite practice among publicly traded trusts. The income is derived form royalties on taconite — an iron-bearing, high-silica flint-like rock that's ground into a fine powder so that the iron ore can be separated by strong magnets. 

Great Northern's royalty income depends on the number of tons of taconite shipped from its properties by its lessees, which include some of the sector's biggest movers and shakers: United States Steel Corporation (NYSE:X), Arcelor-Mittal (NYSE:MT), Cleveland-Cliffs Inc. (NYSE:CLF) and Essar Steel Holdings.

Great Northern is about as pure as a commodity play gets in the steel sector. The company undertakes no value-adding activities and is wholly dependent on the fortunes of its steel-producing customers and their demand for iron ore.

And those fortunes have been in a secular upswing. According to the International Iron and Steel Institute (IISI), world crude steel output reached 1,343.5 million metric tons in 2007, a 7.5% increase over 2006, marking the fifth consecutive . . .

The Russell 2000 (NYSE: IWM) and the Dow Jones Industrial Average (INDU) fell, weighed down by news of disappointing earnings, downcast economic data and concerns that there might be no interest rate cut. The small-cap index lost 5.57 points, or 0.68%, to 816.15. The Dow fell 77.79 points, or 0.56%, to 13,792.47.

On a year-to-date basis, the Russell 2000 has increased 3.65%, while the Dow has added 10.56% and the S&P 500 has gained 8.08%.

Stocks began in negative territory after an article in The Wall Street Journal claimed that the U.S. Federal Reserve, which began its two-day meeting this morning, will likely either cut the federal funds rate 0.25% or leave it unchanged. Investors were looking for a drop of up to 0.50%, but today the futures markets were expecting a decrease of 0.25%.

The federal funds rate, the rate at which commercial banks make overnight loans to each other, currently stands at 4.75%, after the Fed voted on Sept. 18 to lower it from 5.25%.

Also helping the bears was news that United States Steel Corp. (NYSE: X) suffered a 35% drop in third-quarter net income due to costs associated with an acquisition.

The bulls were already down, and the economic news that came out shortly after the opening sent them packing.

The Conference Board reported that U.S. consumer confidence fell for the third month in a row in October. The index of consumer confidence fell to 95.6, its lowest level on two months, from 99.5 in September.

“Consumer Confidence posted its third monthly decline and continues to hover at two-year lows,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. Franco added that the decline could be a precursor to a slowdown in job growth over the next few months.

The index measures American’s future willingness to spend money. With consumption comprising about 70% of gross domestic product, a decline would spell trouble for the U.S. economy.

The Russell 2000 (NYSE: IWM) and the Dow Jones Industrial Average (INDU) are in the red due to news of poor earnings and concerns that interest rates will not fall. At 1:35 p.m. ET, the small-cap index had shed 2.78 points, or 0.34%, to 818.94. The Dow was off 40.88 points, or 0.29%, to 13,829.38.

Investors hoping for a sizeable drop in the U.S. Federal Reserve’s target interest rate may be disappointed, according to an article in The Wall Street Journal. The paper claims that policy makers, who kicked off their two-day meeting this morning, will likely either cut the federal funds rate 0.25% or leave it unchanged.

That was enough to scare away the bulls, and stocks opened in negative territory.

Contributing to the bearish mood was news that United States Steel Corp.’s (NYSE: X) third-quarter net income missed analysts’ projections by falling 35% due to costs associated with an acquisition.

Cincinnati, Ohio-based consumer goods giant The Procter & Gamble Co. (NYSE: PG) also had bad news to report, saying that its profit margin will come under pressure in the coming months due to higher energy costs.

 

The Russell 2000 (NYSE: IWM) opened in the red on concerns that the U.S. Federal Reserve may not move to lower interest rates.

At 10:45 a.m. ET, the small-cap index was down 1.76 points, or 0.21%, to 819.96. The Dow Jones Industrial Average (INDU) had lost 44.38 points, or 0.32%, to 13,825.88.

Investors are turning their attention to the U.S. Federal Reserve today, which begins a two-day policy meeting.

On Monday, observers were confident that the Fed will cut its target interest rate up to 0.50%, but today an article in The Wall Street Journal is casting doubt on that expectation, claiming that policy makers will likely either cut the federal funds rate 0.25% or leave it unchanged.

The federal funds rate, the rate at which commercial banks make overnight loans to each other, currently stands at 4.75%, after the Fed voted on Sept. 18 to lower it from 5.25%.

The central bank will announce its decision on Wednesday.

In economic news, U.S. consumer confidence continued to fall in October. The Conference Board reported after the start of trading that its index of consumer confidence fell to 95.6 from 99.5 in September.

The Russell 2000 (NYSE: IWM) futures are a hair above the close on Monday but the small-cap index will be weighed down by rate cut uncertainty.

Investors will focus on the U.S. Federal Reserve, which begins a two-day policy meeting today. On Monday, observers were confident that the Fed will cut its target interest rate up to 0.50%, but today an article in The Wall Street Journal is casting doubt on that expectation.

The central bank will announce its decision on Wednesday.

In corporate news, shares of United States Steel Corp. (NYSE: X) are hurting after the steel producer reported this morning that third-quarter net income fell 35%.

On the other hand, small-cap company FreightCar America, Inc. (Nasdaq: RAIL) reported a third-quarter profit that beat analysts’ expectations.

Here are the biggest percentage gainers and losers in pre-market trading among companies with a market cap between $100 million and $750 million:

Biggest percentage gainers:

• Packeteer Inc. (PKTR), up 12% on news it has resolved a dispute with the IRS.
• Actuate Corp. (ACTU), up 8% on news that third-quarter profit beat expectations.
• Interactive Intelligence Inc. (ININ), up 7% on news third-quarter profit fell but beat Wall Street’s projections.

Biggest percentage losers:

• LCA-Vision Inc. (LCAV), down 19% on news of a weak fourth-quarter outlook.
• RAM Holdings Ltd. (RAMR), down 18% on news of a third-quarter loss.
• Secure Computing Corp. (SCUR) down 15% on news of a wider third-quarter loss.

Not all microcaps have recovered since the August market meltdown, which could spell opportunity for investors who are looking in the right places and are willing to roll the dice.

Case in point is South Bend, Ind.-based MISCOR Group, Ltd. (OTC: MCGL). Shares of the scrappy $40 million market capitalization industrial services provider have been sliced in half since July. Over this time, the only news out of MISCOR has been the release of its fiscal second quarter earnings report. Earnings weren’t great, but they certainly weren’t bad either.

While microcap MISCOR trades on the lowly OTC Bulletin Board, it has been on our radar for the past year, given that it has a very credible major financial backer in hedge fund group Tontine Associates. Headed by Jeffrey Gendell, Tontine has wracked up 35%-plus net returns per year on average. In January, MISCOR shares began a sharp rally upon the announcement that Tontine had invested $12.5 million in the company as part of a recapitalization.

MISCOR shares hit a high of $0.45 in mid-July before beginning a sharp retreat. As of this writing, MISCOR shares are changing hands for just $0.205, almost in line with the $0.20 a share that Tontine paid for the stock in its January private placement. Tontine isn’t infallible (one of its hedge funds has performed poorly this year), but whenever we can buy a stock near the price a smart hedge fund paid for its position, we generally sit up and take notice.  

Founded in 2000 by industry veteran John Martell, MISCOR has grown into a 450 employee company with 13 service centers in five states through a combination of acquisition and organic-driven growth. Ranked on the Inc. 500 list in 2004 and 2005, MISCOR’s goal is to build a national leader in the unglamorous, but underserved and growing industrial services sector. Blue chip clients include names like United States Steel Corporation (NYSE: X), Luxembourg-based ArcelorMittal, Union Pacific Corp. (NYSE: UNP), CSX Corporation (NYSE: CSX), Marathon Oil Corporation (NYSE: MRO) and France-based Alstom S.A. 

The Russell 2000 (NYSE: IWM) and the Dow Jones Industrial Average (INDU) are down this morning.

At 9:59 a.m. ET the small-cap index had shed 4.49 points, or 0.56%, to 794.44. The Dow was down 33.25 points, or 0.25%, to 13,345.62.

Investors are eagerly awaiting data on existing homes sales for July, which will be released by the National Association of Realtors at 10 a.m. ET. Economists don’t think that the slump in the U.S. housing sector has bottomed out and expects that sales have fallen to an annual pace of 5.7 million from 5.75 million in June.

The Russell 2000 (NYSE: IWM) futures are just a hair below the flat line and the small-cap index will likely open in negative territory ahead of news on July sales of existing homes.

Shares of Gateway Inc. (NYSE: GTW) have added about 50% in pre-market trading following news that the Irvine, Calif.-based computer maker will be purchased by Taiwan’s Acer Inc. for $710 million, or $1.90 a share. That’s 57% above the closing price of $1.21 on Friday.