The weekly jobless claims rose again and remained above 400,000, which is not a good sign. But that didn't stop Dutch staffing giant Randstad from offering $771 million for SFN Group (NYSE: SFN), an American competitor.

The deal will double Randstad's U.S. presence. SFN's stock led all small caps with a 51.1 percent increase on the day.

Expecting other consolidations in the staffing business, traders also bid up On Assignment (Nasdaq: ASGN) 10.9 percent, making it one of the better-performing small caps.

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, . . .

The market slipped to the lowest intraday and closing levels of the year and the Russell 2000 (NYSE:IWM) is now down 9.2% for 2009, on target to eclipse January of 2008, which tumbled 6.8% and was the worst January in at least 15 years. Some of today’s small-cap gainers were Rubicon Technology (Nasdaq:RBCN), Eagle Rock Energy Partners (Nasdaq:EROC) and LaBranche (NYSE:LAB).

Other Market Watch highlights today included:

• The retail sales report came in at minus 2.7%, which was well below the projected decline of 1.2%.
• The troubling retail sales report this morning clearly sparked money flow away from stocks and into Treasury markets.
• Earlier this morning the import price series tumbled 4.2%, well below the forecast for a drop of 0.5%.
• Traders say that concerns over the appointment of Timothy Geithner to Treasury Secretary has played into the overall market malaise.
• There were no S&P sector groups up 1% on the day, but there were 10 groups with losses of 7% or more.
• Energy shares were off 4% today, while coal, metals and mining stocks were also clobbered.
• Investors took flight from riskier fare, plopping money down into Treasury markets accepting a yield in 10-year notes of only 2.2%.

Small Cap Gainers:

• Rubicon Technology Inc. rallied 15% as the electronics manufacturer rose to the highest close since Oct. 24. See (Nasdaq:RBCN).
• Eagle Rock Energy Partners, L.P. closed up 15% after announcing hedge transactions, intention to maintain current distribution level. See (Nasdaq:EROC).
• Goldman Sachs upgrades LaBranche; shares rise 16%. See (NYSE:LAB).

Small Cap Losers:

• FNB Corp. fell 23% as the lender announced preliminary quarterly results that included a loss stoked by bad loans and non-cash charges. See (NYSE:FNB).
• Modine Manufacturing Co. tumbled 19% as the maker of heating and cooling systems for tractors fell back below the 20-day moving average. See (NYSE:MOD).
• On Assignment Inc. fell 18% as the human resources firm gave back a huge chunk of recent gains from the December lows. See (Nasdaq:ASGN).

Small-cap stocks got dragged through the mud again today, as renewed worries about the health of the international banking system came back to the forefront. Concerns about the financial and credit crisis clearly have spread into the consumer psyche as well, as retail sales posted a record plunge in December. The Russell 2000 (NYSE:IWM) closed down 20.61, or 4.35%, at 453.17, generating the largest one-day drop of the New Year. The market slipped to the lowest intraday and closing levels of the year and the Russell is now down 9.2% for 2009, on target to eclipse January of 2008, which tumbled 6.8% and was the worst January in at least 15 years. The Dow is now off 6.5% for the year, while the S&P 500 is down 6.7%.

The market was already on the defensive this morning following a bout of bank selling in Europe overnight. Big players such as HSBC, Deutsche Bank and Commerzbank were all hit hard heading into the U.S. session, and Citigroup Inc. (NYSE:C) picked up the selling baton with fury, sinking 22% amid worries about debt writedowns into quarterly reports, sales of assets to raise cash and a bump up in the earnings release date. While Citigroup was the most obvious whipping boy of the batch, bank stocks in general were not coping well, with the KBW Banking Index down 5%.

And into that maelstrom came this morning’s retail sales report for December. We all knew it was a crummy month, individual stores already told us that; but the market was looking for a decline of 1.2% and got blindsided with a whopping decline of 2.7% in the headline figure and a record plunge in the ex-auto sales of 3.1%. The “glass half full” crowd will note that sales were exaggerated by a huge decline in gasoline prices, but even taking that into account, it was a troubling number for an economy that is dependent on ringing sales registers.

“Consumer spending is clearly in recession, driven by accumulating job losses, falling housing prices, the financial market turmoil, and the recent seizing up of the credit markets,” Steven Wood, chief economist with Insight Economics, said . . .

On Assignment Inc. (Nasdaq:ASGN) has a hire calling, preaching the gospel of contract employment among health-care and technical professionals. Despite the gloomy U.S. jobs picture, On Assignment continues to eke out surprising results.

Rather than trying to find work for everyone - including manufacturing or manual labor that Manpower Inc. (NYSE:MAN) and others provide - On Assignment has chosen to aim higher. It focuses on specialty skills for short-term and sometimes permanent assignments in health care, including physicians and nurses, life sciences and clinical research, engineering and IT staffing. It has just a smattering of international operations.

Founded in 1985, the Calabasas, Calif., company has 60 branches in the United States. On Assignment went public 16 years ago.

Of the five analysts surveyed by Thomson Reuters, two have On Assignment rated "strong buy," two call it a "buy," with the other ranking "hold." The median price target is $11.50 - just above the 52-week high of $11.42, hit on Aug. 22. On Assignment dropped to $4.32 on Jan. 24, but closed Friday at $9.27, down from its recent highs but up roughly one-third year-to-date.

"The overall job market has not been good for a while, but On Assignment has been squeaking out some improvement each quarter," said Tobey Sommer, a SunTrust Robinson Humphrey analyst who rates the stock a "buy," in an interview.

For the quarter ended June 30, On Assignment beat analysts' expectations, as revenue increased 8.5% to $156.1 million, and net income more than doubled to . . .

ParkerVision, Inc. (Nasdaq: PRKR), Lincoln Educational Services Corp. (Nasdaq: LINC) and Learning Tree International, Inc. (Nasdaq: LTRE) are among the most actively traded companies in Monday pre-market trading among those with market capitalizations under $750 million:

The Russell 2000 (NYSE: IWM) is moving erratically this afternoon as trading is choppy halfway through the session. At 1:23 p.m. ET, the small-cap index had added 2.45 points, or 0.31%, to 797.63. The Dow Jones Industrial Average (INDU) was down 10 points, or 0.07%, to 13,557.87.

Small-cap stocks went on a rollercoaster ride during the first half of today’s session as investors reacted to both bullish and bearish news.

The bulls appeared first, encouraged by news before the opening that non-farm payrolls increased 166,000 in October, according to the U.S. Labor Department. That’s more than double the projected rise of 80,000, a sign that the labor market remains tight and that the U.S. economy will most likely avoid recession. Payrolls increased a downwardly adjusted increase of 96,000 in September.

The unemployment rate stayed at 4.7%.

But the bulls relished for just a few minutes before yielding the floor to the bears.

Investors turned their attention to an article in The Wall Street Journal that claims that Merrill Lynch & Co. Inc. (NYSE: MER) has made deals with hedge funds to postpone when it records losses due to bets made on securities backed by subprime mortgages. The New York-based financial services giant may have to write down $10 billion in losses.

News of the article, which was published before the start of trading, spooked investors and spread fears concerning the extent of damage from this summer’s credit squeeze. Financial stocks immediately took a hit and dragged down the rest.