Dollar climb, oil retreat to support small caps
Small-cap stocks are expected to open higher, bolstered by a rally in the U.S. dollar and a slide in crude oil prices in after-hours trading. The Russell 2000 (NYSE:IWM) was expected to open 0.3% higher, which would translate to an open near 756.60.
Once again, the big story overnight was a surge in the U.S. dollar, which climbed to fresh move highs against both the euro and the yen, rising some 0.6% against both currency markets. The rally in the greenback clearly pulled down commodity markets overseas, with crude oil slipping more than $2 dollars a barrel back below $113, near three-month lows.
The NY Manufacturing Survey came in at 2.77, which was well above the forecast for a slide of 4.4. This marked the first positive reading for the report since April and is a nice upside surprise for the manufacturing sector ahead of several more data releases coming up over the next few weeks. Stocks extended overnight gains as did the dollar on the news.
Still ahead this morning is the industrial production report at 9:15 a.m. ET and the Michigan sentiment survey at 10:00 a.m. ET. Also, Chicago Federal Reserve President Charles Evans will talk about the economic outlook at 1:30 p.m. ET.
Stocks in the news overnight included Lehman Brothers Holdings Inc. (NYSE:LEH), which rallied about 3% on news that billionaire investor George Soros increased his stake in the beleaguered brokerage firm to some 9.5 million shares. NRG Energy Inc. (NYSE:NRG) also attracted a famous investor, with Warren Buffett adding some 3.24 million shares, which sparked a 6% rise in the stock. SunPower Corp. (Nasdaq:SPWR) jumped more than 6% overnight on news that the firm was won a contract to build a solar power plant. Both General Motors Corp. (NYSE:GM) and Ford Motor Co. (NYSE:F) were higher in response to the oil slide.
Looking at the chart picture, there is a little bit of a risk for a double top to form near the recent highs along the 757 zone. If the market can push through that area, then the highs from June at 763 stand as key resistance. On the downside, support is pegged today at 750, 742 and 734.
