Small-cap stocks rallied Monday, but most of the fireworks took place in the morning as the market awoke to news that government-sponsored enterprises Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) had been taken into conservator status by the government. There was an initial euphoria that pushed small-caps up some 3% in after-hours trading, but the market drifted well off the highs through midday as tech stocks continued to fret about the possibility of a global slowdown. An afternoon push in the final 30 minutes of trading helped lift the Russell 2000 (NYSE:IWM) to a gain of 14.01, or 1.95%, at 732.86; the small-cap benchmark is now down just 4.3% for the year. Meanwhile, the Dow was up 2.58% and the S&P 500 was up 2.05%. For 2008, the Dow is down 13.2% and the S&P 500 down 13.6%.

The market spent much of the day trying to decide if the Treasury Department’s takeover of Fannie Mae and Freddie Mac represented a long-term positive, or just a short-term stop-gap measure. Clearly, the outside world loved the news, as equity markets in Asia and Europe posted strong rallies overnight. There was a sense among investors that the government was basically forced to take this action, and that it would help pull some of the uncertainty out of the equation when it comes to trusting mortgage-related debt issues. Still, it’s a big leap from shoring up paper mortgage-backed securities debt to finding a bottom in the housing market slump.

In a research report earlier today, strategists at Goldman Sachs said that the GSE plan was a short-term bullish factor for equities and the U.S. dollar. “The move is consistent with the U.S. administration’s main aim to secure financial stability first, in the spirit of the Bear Stearns bailout in March and the declaration of the unusual and exigent circumstances by the Federal Reserve Board,” Goldman said . . .

Gehl Co. (Nasdaq:GEHL), Nevada Chemicals Inc. (Nasdaq:NCEM) and Champion Enterprises Inc. (Nasdaq:CHB) are among the biggest percentage gainers in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: PHH Corp. (Nasdaq:PHH), Drew Industries Inc. (Nasdaq:DW), Anworth Mortgage Asset Corp. (Nasdaq:ANH), SI Financial Group Inc. (Nasdaq:SIFI), Meritage Homes Corp. (Nasdaq:MTH) and Heritage Oaks Bancorp (Nasdaq:HEOP).

Here are the biggest percentage gainers among small caps:

Delta Apparel Inc. (Nasdaq:DLA), Champion Enterprises Inc. (Nasdaq:CHB) and Staar Surgical Co. (Nasdaq:STAA) are among the biggest percentage gainers in Friday's trading among companies with market capitalizations under $1 billion.    

Also included among the results: Lithia Motors Inc. (Nasdaq:LAD), QCR Holdings Inc. (Nasdaq:QCRH), Tween Brands Inc. (Nasdaq:TWB), Deltek Inc. (Nasdaq:PROJ), Oplink Communications Inc. (Nasdaq:OPLK) and Ricks Cabaret International Inc. (Nasdaq:RICK).        

Here are the biggest percentage gainers among small caps:     

Small-cap stocks pushed higher in morning trade, carried on the wings of a renewed rally in the U.S. dollar and a slide in global commodities — particularly crude oil. At 9:59 a.m. ET, the Russell 2000 (NYSE:IWM) was up 5.24, or 0.69%, at 759.62; the morning peak in the Russell marked the highest intraday price since Jan. 2.

Small-cap stocks are on the verge of posting the highest weekly close of 2008, a remarkable achievement considering the Dow and S&P 500 are still suffering losses in the 11% range so far this year. Any close today above 747.38 would do the trick. If the Russell were to really catch fire today and push above 766.03, then small caps would actually be in positive territory for the year. The reason it takes a big leap from current yearly high weekly closing levels to positive territory is because the market got hammered the very first trading day of the year and also fell hard when staking the June peak.

Back to the big news today — the U.S. dollar stormed to fresh move highs overnight against both the euro and the Japanese yen, climbing about 0.6% versus both currency markets. The strong upside push in the greenback clearly had a bearish impact on commodities, most notably the crude oil market. Crude oil tumbled some $2 dollars a barrel back below $113 and was hovering just above three-month lows early this morning. The story in commodities wasn’t just an energy tale, however; palladium was down 5% this morning, cocoa was off 2.5%, sugar was down 2.2%, copper tumbled 2.7% in London trading and aluminum prices hit a six-month low. The recent collapse in commodities markets (the Commodity Research Bureau Index has tumbled 17% from the July high) has provided some relief on the inflation front and bolstered investor psychology that consumer spending won’t be crushed by higher gasoline and food prices.

In addition to the dollar/commodities theme, the market also got some bright news this morning on the manufacturing front. The NY Manufacturing Survey came out at plus 2.77, which was much stronger than the forecast for minus 4.4, and marked the first positive reading since April. This survey is for August and marks one of the earliest manufacturing reports of the month, setting a positive tone going forward. When the NY report came out ahead of the opening, stock index futures and the . . .

Shares of Champion Enterprises Inc. (NYSE: CHB) are rising following news after the close on Thursday that the maker of factory-built housing has acquired Canadian modular homes maker SRI Homes for $114 million.

“This acquisition, which will be accretive to Champion’s 2008 earnings, represents another exciting step in our growth and diversification strategy by expanding our presence in a geographic region which continues to experience economic growth and robust residential and commercial construction markets,” said president and CEO William Griffiths in a statement.

Auburn Hills, Mich.-based Champion Enterprises will add SRI Homes’ three manufacturing facilities to its existing web of 31 plants in North America and the United Kingdom. The buyout will also allow Champion Enterprises to take advantage of SRI Homes’ retailer-based distribution channels and improve its market position in western Canada.

SRI Homes’ has a total of 38 dealers, the majority of them located in the western Canadian provinces of British Columbia and Alberta.

The deal is expected to be finalized by the close of business today. The combined company will have a Canadian factory-built housing market share of an about 39%.

At 1:47 p.m. ET, shares of Champion Enterprises (CHB) had climbed $0.88, or 11%, to $9.13. The 52-week high of $14.59 was reached on Oct. 17, while the 52-week low of $7.18 was set on Mar. 6.