Today's session is a reversal from the first two days of the week with stocks on the major indices all trading up ahead of the conclusion of the Federal Reserve's meeting today. Analysts and traders expect the Fed to hold rates near zero. Investors are taking advantage of the buying opportunity created by two consecutive down days under the premise that the rally that started on July 12th will continue. Since that time Dow is up nearly 14%.

As of file time, 12:15 P.M. eastern, the Dow is trading at 9,364, up 1.33%; the Nasdaq is at 2,003, up 1.67%; and the S&P 500 is holding over 1,000 at 1,007, representing a 1.29% gain for the day.

The Russell 2000, the leading index reflecting the health of small-cap stocks, is up 2.07% and holding 574.

Small-cap leaders for today include RAIT Financial Trust (NYSE:RAS) up 30%; Wuxi Pharmaceutical (NYSE:WX) up 24%; and Helicos BioSciences Corporation (Nasdaq:HLCS) up 19%. Also up big is a former SmallCapInvestor PRO holding, Brigham Exploration (Nasdaq:BEXP) up 20%. 

The next 12 months look great. Economists are now raising their GDP expectations for the U.S. economy to a minimum of 2% growth for the next four quarters. That's a significant improvement to what they were expecting just a few weeks ago. (One thing to keep in mind however, is that this is moving target, one week they're doom and gloom and the next it's all sunshine.)

The reason should be clear - cheap money and stimulus spending is kick starting both lending and spending, albeit from low levels.

*****The FOMC concludes its latest meeting today and everyone expects interest rates to remain where they are. The stage is being set for inflation to start working prices higher.

And that means oil prices, and prices for other commodities, will start moving even higher. In fact, as I write this oil is over $71 after gapping down yesterday to as low as $69.

Oil has been trading around $70 for a few months, even with growth expectations very low. Now that expectations are rising, we should see oil prices start to move higher, too. This is particularly true as emerging economies begin soaking up supply.

If you haven't started buying commodity stocks to prepare for higher inflation, it's not too late. My Global Commodity Investing advisory service can get you started with profitable recommendations of top commodity stocks from around the world. Click here to find out which stocks will protect and grow your wealth as inflation picks up.

*****Once again, I'd like to thank Daily Profit readers for your t-shirt slogan ideas. As you know, my first book, The Small Cap Investor: Secrets to Winning Big with Small Cap Stocks, is released on September 14. And I'm holding a t-shirt slogan contest on the SmallCapInvestor Facebook page to help kick things off. The winning slogan gets a full year subscription to ALL my advisory services. The voting starts today, click here to cast your vote right now.

As they say, vote early and vote often. Thanks!

Best Regards,

Ian Wyatt
Editor
SCI Daily

ADC Telecommunications Inc. (Nasdaq:ADCT), WuXi PharmaTech Cayman Inc. (Nasdaq:WX) and Lydall Inc. (Nasdaq:LDL) are among the biggest percentage gainers in Wednesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Brigham Exploration Co. (Nasdaq:BEXP), Jazz Pharmaceuticals Inc. (Nasdaq:JAZZ), Internet Initiative Japan Depository Receipt (Nasdaq:IIJI), ArvinMeritor Inc (Nasdaq:ARM), China TransInfo Technology Corp. (Nasdaq:CTFO) and E House China Holdings Ltd. (Nasdaq:EJ).

"Shanghai-based Wuxi PharmaTech (NYSE:WX), a new addition to our model portfolio, is a bargain," says China region expert Jim Trippon.

In his The China Stock Digest, he explains, "In a nutshell, WuXi performs pharmaceutical R&D on a contract basis for paying clients; it provides services to nine of the top ten pharma companies in the world."

"\WuXi PharmaTechprovides laboratory and manufacturing services throughout the drug and medical device R&D process to pharmaceutical, biotechnology and medical device companies worldwide.

"Because Chinese researchers receive much smaller paychecks than their Western counterparts, WuXi is able to assist its global partners in shortening the drug discovery cycle and lowering the cost of drug and medical device R&D.

"Although WuXi has deep expertise in biotechnology, there’s no need to be concerned about the risky and failure-prone arena of entrepreneurial drug discovery.

"WuXi has more than 3,300 employees in China and several U.S. cities. The firm’s senior management team consists of Ph.D.s and MBAs; management has more than 200 patents pending or granted, and has published more than 800 scientific publications.

"WuXi’s U.S.-based facilities are all FDA-registered, including a 63,000 square-foot R&D and manufacturing facility in St. Paul, Minnesota, a 46,000 square-foot testing facility in Atlanta, and a 75,000 square-foot R&D and testing and manufacturing facility in Philadelphia.

"WuXi boasts that most of its customers return to the firm after the completion of a research contract for additional and often larger and longer-term projects.

"Indeed, each of WuXi’s top 10 customers over the last three years continues to be its customer today, a fact that speaks well of the firm’s skill, efficiency . . .

Crosstex Energy Inc. (Nasdaq:XTXI), Landec Corp. (Nasdaq:LNDC) and Atlas Pipeline Holdings L P (Nasdaq:AHD) are among the biggest percentage losers in Wednesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Petroleum Development Corp. (Nasdaq:PETD), American Capital Ltd. (Nasdaq:ACAS), Perry Ellis International Inc. (Nasdaq:PERY), Pyramid Oil Co. (Nasdaq:PDO), Ezcorp Inc (Nasdaq:EZPW) and WuXi PharmaTech Cayman Inc. (Nasdaq:WX).

Small caps closed up about 2% today, outperforming the Dow for the day yet still lagging the big-cap index for 2008, with the Russell 2000 (NYSE:IWM) off 41%, the Dow down 35% and the S&P 500 down 41%. Some of today’s small-cap gainers are QC Holdings (Nasdaq:QCCO), Polypore International (NYSE:PPO) and Furniture Brands International (NYSE:FBN).

Other Market Watch highlights today included:

• The ADP headline figure suggested the nation lost 250,000 payroll jobs in November, which was below the forecast for a decline of 200,000.
• The ISM Non-Manufacturing Survey came out at 10:00 a.m. ET, with the headline figure at 37.3%, which was way below the forecast of 42.8%.
• The ability to rally after a bad reading on the ADP Employment Survey ahead of Friday’s big monthly employment report was a positive sign. 
• Yields on Treasury products were higher as demand clearly was more focused on riskier fare today.
• The weekly MBA Mortgage Application index jumped 112% today to the highest level since mid-February, encouraging the rally.
• The ISE Homebuilders Index jumped 10% and small-cap homebuilders were among the best performers in the group.
• Crude slipped $0.17 a barrel to $46.79 and notched 3-1/2-year lows during the U.S. trading session despite a drop in inventory levels.
• Banks, brokerages and other financial firms were clearly a source of strength for stocks today.
• Energy stocks were a drag on stocks for most of the day, and the Energy Select Sector SPDR was basically flat right before the close. 

Small Cap Gainers:

• QC Holdings Inc. (Nasdaq:QCCO) jumped 54% on a volume spike without any apparent fresh news from the payday loan firm.
• Polypore International Inc. (NYSE:PPO) jumped 31% as the lithium-ion battery company announced that one of their subsidiaries received a $2.3 million contract.
• Furniture Brands International (NYSE:FBN) closed up about 26% . . .

Small-cap stocks pushed higher Wednesday, overcoming a glut of gloomy economic reports as investors snapped up bargains on homebuilder, financial and retailer shares. The Russell 2000 (NYSE:IWM) closed up 11.93, or 2.70%, at 453.76. Small caps outperformed the Dow for the day, but still lag the big-cap index for 2008, with the Russell off 41% for the year, while the Dow is down 35%. The S&P 500 is off 41%.

The fact that small caps finished off the day with a positive print is a minor victory for a downtrodden market. Early on today investors were greeted with a larger-than-expected decline on payroll jobs from the ADP Employment Survey and then hit with an unnerving drop in services sector activity in the ISM Non-Manufacturing Survey. The weak economic reports took a toll on prices early, as some traders fretted about Friday’s upcoming employment release.

However, the market rallied into midday trading as a rush for homebuilder stocks paced the comeback move. It should be noted as well that not all of today’s economic numbers were downbeat. In fact, the weekly MBA Mortgage Application index jumped 112% to the highest level since mid-February, sparking some hope that sinking mortgage rates will generate fresh activity in the housing arena.

“The mortgage purchase and refinance data are seen as friendly, and Radian said that October mortgage claims were less than expected,” Nick Kalivas, vice president of financial research with MF Global, said in an email interview. “The idea of cheap gasoline and the potential for refinance activity is helping to stoke interest in homebuilders and retailers. Finally, we’re seeing signs of something that could spark a rally and defaults could ease if people can refinance and pay less for gasoline.”

Speaking of gasoline, crude oil prices slipped $0.17 a barrel to $46.79 and notched 3-1/2-year lows during the U.S. trading session despite a drop in inventory levels. Energy stocks were a drag on stocks for most of the day, and the . . .

XenoPort Inc. (Nasdaq:XNPT), Sierra Wireless Inc. (Nasdaq:SWIR) and Stewardship Financial Corp. (Nasdaq:SSFN) are among the new 52-week lows in Monday's trading among companies with market capitalizations under $1 billion.

Virtual Radiologic Corp. (Nasdaq:VRAD), BankAtlantic Bancorp Inc. (Nasdaq:BBX) and FirstFed Financial Corp. (Nasdaq:FED) are among the biggest percentage losers in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Cal-Maine Foods Inc. (Nasdaq:CALM), A Power Energy Generation Systems Ltd. (Nasdaq:APWR), James River Coal Co. (Nasdaq:JRCC), Canadian Solar Inc (Nasdaq:CSIQ), Maguire Properties REIT (Nasdaq:MPG) and WuXi PharmaTech Cayman Inc. (Nasdaq:WX).

Here are the biggest percentage losers among small caps:

Shares of WuXi PharmaTech (NYSE:WX) slid 19% this morning to a new 52-week low after the biopharmaceutical company announced it will no longer pursue a joint venture with Covance Inc. (NYSE:CVD) on a project in China.

In an early morning announcement, Shanghai, China-based WuXi PharmaTech said it will maintain its original plans to build, own and operate a 323,450 square-foot GLP facility in China.

The facility is being built through the firm’s already-budgeted capital expenditures and WuXi will not require additional funding, according to CEO Dr. Ge Li.

By mid-morning, WuXi Pharmatech is at $12.65, down $3.03 from Friday’s close, after trading as low as $12.31. Previously, the stock had traded as low as $13.89 and as high as $45.65 in the past 52 weeks.

Volume was heavy — more than 620,000 shares had changed hands compared with a three-month average volume of 472,317 shares.

For detailed price information and news stories on WuXi PharmaTech, click WX.