US SMALL/MIDCAPS-Midcaps on track for best run in 3 years

Tue Mar 9, 2010 3:00pm EST

* Mid cap stocks on track for record winning streak

* Trucking shares power ahead

* Credit Suisse upgrades Warnaco Group

* S&P MidCap 400 up 0.2 pct, S&P SmallCap 600 up 0.5 pct

By Edward Krudy

NEW YORK, March 9 (Reuters) - Mid cap and small cap stocks rose on Tuesday, with mid-sized shares set for their best run in more than three years, as investors continue to bet on an improving economy.

Mid caps were set for 10 days of gains, their best run since January 2007, while small caps were on track for their seventh day of increases. Both indexes have risen for 17 of the last 20 days and are at their highest levels in more than 17 months.

Shares in U.S. trucking firms outperformed the wider market. Old Dominion Freight Line Inc (ODFL.O) and Con-Way Inc (CNW.N), both highly leveraged to the U.S. economy, rose between 5 and 6 percent.

The Dow Jones U.S. trucking index .DJUSTK rose 2 percent.

"It (trucking) is as pure U.S. economic activity as you can get," said Kent Croft, chief investment officer at Croft Funds in Baltimore. "Mid caps have been as strong as any ... because they are more leveraged to an economic recovery (than large caps)."

The S&P MidCap 400 index .MID rose 0.2 percent while the S&P SmallCap 600 index .SML advanced 0.5 percent. In comparison, the benchmark S&P 500 .SPX gained 0.3 percent.

Stocks in smaller companies can do better in the early stages of a recovery because they generally fall further in a recession. They are also seen as a way to exploit local growth, given their greater exposure to the domestic economy.

Since the beginning of the year the MidCap 400 index is up 6.7 percent, the Small Cap 600 has gained 7.2 percent, while the large cap S&P 500 is up only 2.7.

Citigroup said small and mid-cap leadership is set to continue in the near term as access to credit increases and corporate earnings improve.

"We continue to think that small and mid cap performance will be better than large in 2010 and are not looking for a shift out of this trade until later in the year," said Citigroup analyst Lori Calvasina in a note to clients.

Positive broker comments and earnings reports also helped put the wind in the sales of smaller companies.

Credit Suisse raised Warnaco Group Inc WRC.N to "outperform" from "neutral," citing rebounding global growth at its key business -- Calvin Klein -- and a potential tie-up with Phillips-Van Heusen (PVH.N). Warnaco's stock rose 2.8 percent to $46.55.

Robert W. Baird upgraded Cerus Corp (CERS.O), a blood safety products maker, to "outperform" from "neutral," and said the market is undervaluing the company's Intercept red blood cell system. The shares rose 12.3 percent to $2.65.

Systemax Inc (SYX.N) rose 16.8 percent to $20.65, a day after the company reported better-than-expected results, including all-time record sales. Systemax, a direct marketer of brand name and private-label products, posted earnings of 49 cents per share in the fourth quarter. (Editing by Padraic Cassidy)

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