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 remained sharply lower into mid-session, pressured by fresh worries about the health of the banking sector as we enter into earnings season and by dreadful retail sales numbers this morning. The Russell 2000 (NYSE:IWM) pulled off the morning lows, but was still down 17.56, or 3.71%, at 456.23, slipping to the lowest level since mid-December.

The sell-off today was broad based, with financials, commodities, retailers and manufacturer companies all taking a hit, but the slide in bank stocks clearly was the major spot of bother.

Bank stocks took a hit in European trading ahead of today’s opening and those concerns continued to play out during the U.S. session. Citigroup Inc. (NYSE:C) has been pelted today, losing nearly 19% as the embattled bank sales off assets to raise cash and announced plans to release earnings figures early. In Europe, major banks like HSBC, Commerzbank and Deutsche Bank all suffered losses of 8% or more as investors fret about the possibility for another wave of debt write-downs.

In addition, snags in the appointment of Wall Street alum Timothy Geithner to the Treasury Secretary post have worried investors about bank stocks and the bailout plans. Recently, Federal Reserve officials have pushed for the next release of TARP funds to target toxic assets, but with the Geithner appointment issues and a Congress that isn’t happy with how the first batch of money was allocated, it could hold up distribution of $350 billion in TARP funding.

This morning’s retail sales report suggested that the recession that was started by the housing crisis has now seeped into a general consumer recession as well, . . .

FNB Corp. (Nasdaq:FNB), BPZ Resources Inc. (Nasdaq:BPZ) and Under Armour Inc. (Nasdaq:UA) are among the biggest percentage losers in Wednesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: TBS International Ltd. (Nasdaq:TBSI), Palm Inc. (Nasdaq:PALM), ICT Group Inc. (Nasdaq:ICTG), VisionChina Media Inc. (Nasdaq:VISN), Safe Bulkers Inc. (Nasdaq:SB) and Cascade Bancorp (Nasdaq:CACB).

The Russell 2000 (NYSE: IWM) moved lower today on news from Wachovia Corp. (NYSE: WB) of more than $1 billion in losses due to the credit crunch. The small-cap index dropped for the third time this week, retreating 8.52 points, or 1.09%, to 772.38. The Dow Jones Industrial Average (INDU) shed 223.55 points, or 1.69%, to 13,042.74.

On a year-to-date basis, the Russell 2000 has lost 1.92%, while the Dow has advanced 4.56% and the S&P 500 has added 2.62%.

The bears dominated the session today following news that Wachovia Corp. expects to suffer additional losses of $1.1 billion in the third quarter due to collateralized debt obligations.

The Charlotte, N.C.-based bank, the fourth largest in the United States, also said that it will write down collateralized debt obligations of about $1.11 per share for the month of October and expects to see loan losses of over $500 million in parts of the country that have been most severely affected by the slump in the housing sector.

The news comes as the latest reminder that the subprime mess continues to plaque the financial system.

The small-cap futures were pointing south and the Russell 2000 joined the other major U.S. indices in opening with a drop.

There was some upbeat economic news today, coming in the form of a surprise narrowing of the U.S. trade deficit. The Commerce Department reported that the deficit declined 0.6% to $56.5 billion in September, the lowest level since May 2005, as exports increased due to a weak dollar and strong growth overseas. In August the deficit stood at $56.8 billion.

Shares of Omega Financial Corp. (Nasdaq: OMEF) are rising following news before the start of trading that the bank holding company is being purchased by F.N.B. Corp. (NYSE: FNB) for about $393 million.

State College, Penn.-based Omega Financial and F.N.B. jointly announced that that they have signed a merger agreement according to which Omega will be acquired in an all-stock transaction. Omega’s shareholders will receive 2.022 shares of Hermitage, Penn.-based F.N.B.’s common stock.

“Uniting with F.N.B. is an exciting strategic opportunity given its like-minded culture of strong localized customer service, exceptional array of financial service products for commercial and household customers and commitment to providing a strong cash-based return in its value proposition for shareholders,” said Omega president and CEO Donita Kaval in a statement.

The combination of the two companies, which has been unanimously approved by both boards and is scheduled for completion in the second quarter of 2008, will create the fifth largest bank holding company based in Pennsylvania, with approximately $8 billion in total assets.

Omega Financial currently operates through its subsidiary, Omega Bank and four active non-bank subsidiaries.

At 3:50 p.m. ET, shares of Omega Financial Corp. (OMEF) had added $4.30, or 16%, to $30.52. The 52-week high of $34.49 was reached on Jan. 31, while the 52-week low of $20.97 was set on Aug. 6.

The Russell 2000 (NYSE: IWM) is plummeting on news of more fallout from the meltdown in the subprime mortgage sector.

At 10:22 a.m. ET, the small-cap index had lost 8.23 points, or 1.05%, to 772.67. The Dow Jones Industrial Average (INDU) was down 134.29 points, or 1.01%, to 13,132.

The bears are out in full force today following news before the opening that Wachovia Corp. (NYSE: WB) expects to suffer additional losses of $1.1 billion in the third quarter due to subprime mortgage-related debt. The Charlotte, N.C.-based bank, the fourth largest U.S. bank, said that it will write down collateralized debt obligations of about $1.11 per share for the month of October.

Wachovia also announced that it expects to see loan losses of over $500 million in parts of the country that have been most severely affected by the slump in the housing sector.

The news came as a nasty reminder that the subprime mess continues to ripple through the financial system.

In economic news, the U.S. Commerce Department reported that the trade deficit unexpectedly narrowed in September. The deficit came to $56.5 billion, the lowest level since May 2005 and a decline of 0.6% from $56.8 billion in August. A weak dollar and strong growth overseas helped exports grow more than imports.

The prices of U.S. exports rose 0.9% October from 0.3% in September, according to the Labor Department.