Election day to start with a big market rise
Small-cap stocks are expected to open solidly higher, bolstered by gains overnight in Europe and Asian equity markets and another dip in inter-bank lending rates as the U.S. finishes off voting for a new president and a multitude of open representative slots. Stock index futures were up 2% in after-hours trading, which suggests a Russell 2000 (NYSE:IWM) open near 549.00.
European shares were up more than 2% ahead of the U.S. open, while markets in Asia posted solid gains overnight, lifting the World Index to a sixth consecutive daily gain. Japan’s Nikkei was up some 6% and Libor rates slipped to the lowest point in five months, extending the recent slide that suggests the freeze in lending has thawed.
Central bank leaders in Australia slashed rates by 75 basis points, which was a bigger cut than expected and extended the worldwide push to lower rates and battle a global economic slowdown. Manufacturing data in the United States on Monday tumbled deep into recession territory and today the market will receive information on factory orders at 10:00 a.m. ET. In addition, the market will get a chance to respond to another litany of earnings reports. So far this morning, bullish results have been seen for soybean processor Archer Daniels Midland Co. (NYSE:ADM) and financial company MasterCard Inc. (NYSE:MA). Results from entertainment studio Viacom Inc. (NYSE:VIA.b) were awful, but arguably not as bad as feared and the stock looked set to trade higher on the opening. Principal Financial Group Inc. (NYSE:PFG) was down in pre-market trading after releasing earnings.
Of course, all of those elements will likely be little more than background chatter today as the national vote takes center stage. It is estimated that a large chunk of the vote has already been cast via early voting access, but the polls will officially close later this evening across America. Barack Obama is ahead in the polls, and market watchers are already debating the potential impact of an Obama stimulus package. Even if front-runner Obama wins the election today, there is still debate about how sweeping Democrat wins will be across the United States.
Looking at the chart picture for the Russell, the market appears set to test a key resistance zone from 546 to 551 on the open. A clear push through that resistance line would help set the stage for another leg up for the recovery rally. If 546 can be converted into support, then a run toward 580 seems likely (with minor intraday resistance along the way at 559 and 571). If the market starts to falter, look for support on a pullback at 534.50, 525 and 520.
