US SMALL/MIDCAPS-Stocks rebound on EU rescue plan

NEW YORK Mon May 10, 2010 5:12pm EDT

NEW YORK May 10 (Reuters) - Mid- and smallcap stocks posted their best day in more than a year on Monday, as risk appetite swelled after European officials agreed to a nearly $1 trillion emergency rescue package to avert a sovereign debt crisis that was threatening to spread through parts of the euro zone.

Euro zone central banks started buying up government bonds in a reversal of the European Central Bank's resistance to asset purchases as it fights to contain Greece's debt crisis.

The rally was broad and deep, with most sectors on the Standard & Poor's mid- and smallcap indexes up more than 5 percent.

M/I Homes Inc (MHO.N) was among the top performers, up 22 percent to $14.40. The S&P smallcap homebuilding subindustries index .6GSPHOME shot up 11.1 percent.

Dynegy Inc (DYN.N) rose 13.4 percent to $1.35 after the electric energy company posted a surprise quarterly profit, helped by higher operating margins, and retained its outlook for 2010 adjusted earnings before interest, taxes, depreciation and amortization.[ID:nSGE6490NN]

"Stocks that were strong before the correction the last couple of weeks started performing again and that is because their earnings were so strong," said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.

"The U.S. economy is improving faster than most people think. This overseas chaos can be very good for the U.S. stock market."

The S&P MidCap 400 index .MID and the S&P SmallCap 600 index .SML both advanced 5.2 percent, their largest daily advances since early April 2009. In comparison, the benchmark S&P 500 .SPX gained 4.4 percent. (Editing by Leslie Adler)

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