Small Caps making up the Russell 2000 are up 3.76% as of reporting at 1:30 P.M. Eastern today. This leads the Dow Jones Industrials, up 2.85%, and the Nasdaq, up 2.62%.  

Leading small cap gainers today include U-Store-It Trust (NYSE:YSI), up 19.6%, which owns and operators self storage facilities in the United States on news of its establishment of a self storage network to include the company owned 386 facilities as well as 150 locations run with third-party partners, and plans for 250 more in the works to join the network.  

Other small cap leaders include MarineMax (NYSE:HZO) up 22.64%; American Axle (NYSE:AXL) up 22.06%; Russ Berrie & Co (NYSE:RUS) up 19.6%, Celldex Therapeutics (Nasdaq:CLDX), up 32.1%; Green Plains Renewable Energy (Nasdaq:GPRE), up 32.7%.  

Readers from Friday's edition will recall that GPRE was a market leader before the weekend as well. It closed on Friday at $4.40 after flirting with the $4.50 mark having opened at $3.41 in the morning. In Monday's open GPRE gapped up to start at $5.00 and as of press time is at $5.84, up 32.7% for the day. 

Since the opening bell after Memorial Day, GPRE is up 107%. GPRE produces, distributes, and markets ethanol and related products in the United States. GPRE was founded in Omaha, Nebraska in 2006. GPRE recently purchased two ethanol plants previously owned by VeraSun Energy.  

*****Both the Nasdaq and the S&P 500 are hitting new recovery rally highs today. Part of the reason for today's strength is the better than expected construction numbers released this morning.  

The 0.8% gain in construction spending for April was the biggest gain in nearly a year. And it was far better than economists' expectations of a 1.5% drop.  
This is how it will be during an economic recovery. There will be wild swings in data. Don't be surprised if construction contracts for May, and then picks up in June. Or vice versa. It really could go either way. And that won't necessarily be bad news.  
Of course, it would be great to see the numbers continue to steadily improve. But that's not the way it works when an economy is recovering from the type of shocks the U.S. economy has received.  

*****General Motors (NYSE:GM) ended the suspense. As expected, it filed for bankruptcy protection this morning. It's the 4th largest bankruptcy filing in US history. GM has $82 billion in assets and $172 billion in debt.  

GM stock is up +20% in the early going today. I want to know why. My guess is that shorts are covering their positions. Still, I don't know why. It's expected that GM common stock will be cancelled as part of the bankruptcy proceedings.

That would mean that shorts don't have to cover their position. However, shorts may continue to incur borrowing fees from the shares they have sold. In order to be completely free of the trade, maybe covering is the way to go.  

*****I've read that GM may resume trading as a new public company in 6-12 months. I don't see why it should take that long. A motivated bankruptcy judge ought to be able to deal with GMs debt faster than that.  

But I will say that, depending on the terms of the bankruptcy, GM stock should be a good buy when it comes public again. GM will be stripped of one of its major stumbling blocks - pension benefits.  

It's estimated that pension benefits add $1,500 in expenses for GM on each car it builds. Obviously, in today's competitive environment, that's insurmountable.  
However, once these costs are gone, and GM can operate with leaner margins, the stock could be a good buy.  

*****SmallCapInvestor PRO readers are enjoying their second +100% gain this year. The stock is Genco Shipping (NYSE:GNK) and it was recommended on April 9 at $14.20 a share. Please do not by the stock now. We will be taking our profits on it in the near future.  

We're holding our other triple digit winner. This domestic oil and gas stock is up +130%. But the strength in oil prices means that there should be more gains coming. Look to this sector to continue providing winning small caps in the months to come. 
I'm getting ready to increase our exposure to China in SmallCapInvestor PRO. The two Chinese stocks in the portfolio now are up, and China is the best growth story in the world right now (indeed, some analysts and economists are calling for China, not the U.S., to lead us to recovery). For more on SmallCapInvestor PRO, please please click HERE.
*****Graham Corp (AMEX:GHM) reported earnings on Friday. And they were not very good. The stock has lost nearly $3 over the past few days. That's plenty for me. If you bought Graham on my recommendation in Daily Profit, it is now time to take your profits. I hope you did well.  

Small-cap stocks opened sharply lower, pressured by a renewal of the credit crisis fears and reeling from a dramatic surge in crude oil that could crimp consumer spending habits and weigh on sentiment. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was down 4.43, or 0.62%, at 715.12.

Financial shares sparked a wave of overnight selling after American International Group (NYSE:AIG) released earnings that disappointed investors and renewed concerns about debt write-downs among financial institutions. AIG tumbled 5% on the regular opening (which was better than the overnight showing), and the largest bank Citigroup (NYSE:C) was basically flat — also not as bad as overnight action — as the CEO spoke at an investor meeting.

There also was talk of asset allocation plays being back in vogue this morning, with investors shifting money away from equities and into treasury products. The old stock market adage “sell in May and go away” appeared to have a life this first full week of May trading.

In a Goldman Sachs research report released overnight, analysts say that the underlying shock of mortgage credit defaults is large and “still has a ways to go.” Although they say that some of the markets that have been beaten down will normalize and create positive spillover on sentiment in the broader economy, they said that excess housing supply, acceleration of home price declines and over leverage in the U.S. housing market will not go away anytime soon.
 
“We believe that such losses (from over leverage) imply further adverse surprises for balance sheets in parts of the financial sector, with correspondingly adverse effects on lending and economic activity. The focus of the pain is likely to shift away from subprime mortgages, where the markets are already discounting very large losses, to other residential mortgage debt, including prime mortgages. This is one reason why we are expecting a renewed slowdown in economic activity after the stimulus-fueled bounce in mid- to late 2008. In turn, it makes us fairly confident that . . .

The Russell 2000 (NYSE: IWM) is posting heavy losses as concerns about the U.S. economy keep mounting. At 2:33 p.m. ET, the small-cap index had declined 16.90 points, or 2.39%, to 688.82. The Dow Jones Industrial Average (INDU) was missing 294.38 points, or 2.34%, to 12,287.80.

Stocks are sinking following a slew of negative economic and corporate news.

The National Association of Purchasing Managers-Chicago reported after the opening that its index of regional business conditions fell to a lower-than-expected level of 44.5 in February from 51.5 in January. A reading below 50 indicates a contraction.

Elsewhere, the University of Michigan said after the opening that its index of consumer confidence fell to a reading of 70.8 in February. That’s up from the preliminary estimate of 69.6 but still represents the worst result since 1992.

A separate report by the U.S. Commerce Department before the opening showed that spending increased 0.4% in January, above the projected 0.2%.

Investors disregarded that news as the same report also showed that year-over-year inflation is above the U.S. Federal Reserve’s preferred range. The Russell 2000 opened in the red and slid down even further in the early afternoon.

U-Store-It Trust (NYSE: YSI) CEO Dean Jernigan said the real estate investment trust, which owns self-storage facilities, might benefit from the housing market turmoil. Jernigan made the statements during a morning conference call.

“Along with marriage and divorce, I’m ready to add home foreclosures as an additional life-changing event that brings us business,” Jernigan said.

The chief executive said he noticed growth in rental rates in markets with high foreclosure rates, such as Detroit and Las Vegas.

I’m not ready to say there’s a positive correlation yet, because I don’t think we have enough time under observation and I think we will do a study at the appropriate time to look back and see if we can make a positive correlation,” Jernigan said. “I think it’s quite possible.”

For 2008, the firm expects a loss in the range of $0.12 to $0.10 per share. The company expects funds from operations, the most common measure of real estate investment trust operating performance, of $0.31 per share.

“We are affirming the full-year 2008 guidance and the underlying assumptions we introduced in the December release,” CFO Christopher Marr said.

U-Store-It’s January and February rental activity has met expectations, Marr said.

After Thursday’s closing, U-Store-It reported a fourth-quarter loss of $5.9 million, or $0.10 per share, compared with a loss of $5.7 million, or $0.10 per share, a year earlier. Analysts expected a loss of $0.10 per share.

U-Store-It Trust (NYSE: YSI) shares are down after the real estate investment trust and operator of self-storage facilities recorded a third-quarter net loss of $4.1 million, or $0.07 per share, worse than analyst estimates of $0.01 per share and compared with a loss of $2 million, or $0.03 per share, a year earlier.

“We continued to be aggressive to gain physical occupancy. During the quarter, we made significant investments through the use of aggressive discounting, increased our marketing expenditures, and improved the physical appearance of our facilities through both capital investment and increased spending on repair and maintenance,” CEO Dean Jernigan said in a statement. “In the near term, those investments produced strong, same-store occupancy gains and we expect to continue this strategy into 2008. In the long term, our higher occupancies should result in improved top-line and bottom-line growth.”

Quarterly revenue was slightly higher at $58.3 million, above Wall Street projections of $57 million and compared with $56 million during the same period of 2006.

For the fourth quarter, the Cleveland-based firm expects a loss in the range of $0.08 to $0.06 per share, compared with analyst estimates of flat earnings.

In today’s trading, YSI shares were down 11.2%, or $1.34, at $10.62. Over the last 52 weeks, shares have ranged from $10.45 to $23.61.