NEW YORK, Aug 21 (Reuters) - Mid- and smallcap stocks rallied on Tuesday, led by cyclical shares on the hope that central banks would act soon to stimulate the economy.
Central banks are meeting next month, and investors expect policymakers to take action designed to ease Europe's debt crisis and boost economic growth.
Sectors tied to the pace of economic growth, including energy and material names, led the day's gains.
"These groups have been very far behind because of concerns about growth, but now they're starting to catch up," said Tom Donino, co-head of trading at First New York Securities in New York. "We're breaking out of recent ranges, and that's indicative that nearly everyone is expecting some kind of plan."
Small-cap material shares climbed 2 percent while energy stocks rose 1.6 percent. The mid-cap energy equivalent rose 1.3 percent.
Among the most active names, Cloud Peak Energy rose 3.8 percent to $18.65 and Stone Energy Corp added 3.4 percent to $25.29. Forest Oil gained 3.6 percent to $7.95.
The S&P MidCap 400 index rose 0.8 percent while the S&P SmallCap 600 index added 1.1 percent, outperforming the S&P 500, which was up 0.5 percent to a four-year high. Small cap stocks have been showing weak performance compared to bigger cap stocks for weeks, contributing to their outsized gains on Tuesday.
In company news, SuperMedia Inc soared 53 percent to $3.95 while Dex One Corp climbed 45 percent to $1.80 after the companies said they would merge in a stock-for-stock deal.
Daktronics Inc soared 20 percent to $9.69 after reporting earnings that topped expectations.
On the downside, Raven Industries Inc dropped 5.1 percent to $30.47 after reported quarterly earnings that fell from the prior year.