Flat to firm open seen for small caps
Small-cap stocks were expected to open flat to slightly higher Wednesday morning as the market digests Tuesday’s collapse, which registered as the largest one-day downdraft of the year. The Russell 2000 (NYSE:IWM) was up about 0.2% in after-hours trading, which would suggest an open near 708.60.
Stocks index futures price direction was choppy in after-hours trading with the Dow and S&P 500 slipping into negative territory, then bouncing back after trading higher much of the night. Nasdaq futures were up about 0.5%. Stock markets around the world were mixed to lower overnight, with Japan off 0.4%, Hong Kong down 2.4%, Australia down 1.5%, Singapore down 1.9%, India down 1.6%, China up 0.1%, South Korea up 0.8% and Taiwan up 0.5%.
A big part of the story during Tuesday’s collapse was an unraveling of Lehman Brothers Holdings Inc. (NYSE:LEH), as LEH shares tumbled some 44% and triggered a wave of selling throughout the financial landscape. This morning LEH released earnings, which were awful, but the market was already expecting awful news anyhow. LEH confirmed they were planning to sell off prized assets to raise capital, as the fourth-largest U.S. investment bank posted losses nearing $4 billion for the quarter. LEH shares were turning higher ahead of the open.
Crude oil prices tipped lower, slipping about $0.30 a barrel toward the $103 zone. The market spent much of the overnight session on a mild rally after OPEC surprised the market by voting to cut production 500,000 barrels a day in response to the recent slide in prices. The temporary bump in energy prices helped lift gold off 11-month lows that were set in Asian trading. The U.S. dollar was firm against the euro and basically flat versus the yen heading toward the stock market open.
Stocks in the news overnight include FedEx Corp. (NYSE:FDX) which was up about 3% on earnings results. Another firm getting an earnings boost was Texas Instruments Inc. (NYSE:TXN), which was up about 4%. TXN made new move lows during Tuesday’s market slide. Salesforce.com Inc. (NYSE:CRM) and Fastenal Co. (Nasdaq:FAST) could get a boost from news that they will replace Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) in the S&P 500. On the downside, Pnc Financial Services Group (NYSE:PNC) was off about 3% on earnings news.
The chart picture looks bleak after Tuesday’s rout, with the most dynamic patterns clearly on the bearish side of things … and it doesn’t matter if you study daily, weekly or intraday charts. For today’s session, look for support at 704, 701 and 694. If the market starts to rally today, resistance should be seen at 716.60, 720.50 and 726.
