Flat to lower start; CAT news weighs
U.S. stocks are expected to open flat to lower, with the Dow pulled down by a profit warning from Caterpillar Inc. (NYSE:CAT), as the heavy equipment maker said profits in 2009 will fall far shy of 2008 and the firm said it will slash 20,000 workers. Also, Dow component Pfizer Inc. (NYSE:PFE) will acquire Wyeth for $68 billion, which will likely weigh on the drug maker. The Dow is expected to open about 50 points lower, while the Russell 2000 (NYSE:IWM) is seen flat, near 444.35.
Crude oil prices slipped about $0.50 a barrel ahead of the opening, which could weigh on energy and various commodity stocks if that weak tone prevails. Energy prices have been choppy and volatile around the stock market opening in recent days, so there is a risk that things could turn quickly. The U.S. dollar was flat against the euro and Treasury products were mildly lower, neither of which should be a big early factor for equities.
The market will have to navigate the first batch of data on the housing market this morning, with existing home sales coming out at 10:00 a.m. ET. Existing home sales account for the lion’s share of homes sold in America. As the week progresses, the market will also see data on new home sales on Thursday. In addition, leading indicators numbers also come out at 10:00 a.m., and the combination of existing home sales and indicators could have an impact on early trading.
Last week, the Russell 2000 slumped to the lowest weekly close since the November bear market lows were forged, which means very few buyers in this elongated sideways consolidation are holding profits, which heightens risk for panic selling if the market starts to falter again this week. The chart picture shows the Russell bouncing off the 432 zone in recent days, so that area must hold up this week or risk a much deeper pullback. For today, there is support at 439 and 431. On the upside, resistance comes in at 450, 454 and 461.
