Flat to mild rise for small caps on open
Small-cap stocks are expected to open flat to slightly higher, underpinned by a mild dip in crude oil prices overnight and by scattered bargain hunting following Wednesday’s decline. The Russell 2000 (NYSE:IWM) was up about 0.2% overnight, which would suggest an opening near 732.
The weekly claims report headline number came in at 381,000, which was above the median forecast of 375,000. The four-week moving average on claims edged higher, which is a mild negative. Coming up at 10:00 a.m. ET, the market will see economic data on leading indicators and the Philly Fed survey, which could impact trading direction for the morning.
In overnight trading, Asia stock prices tumbled, with China down 7.2%, Japan off 2.2%, Hong Kong down 2.2%, Australia down 1.4%, Singapore down 1.5%, South Korea down 2% and India down 2.1%. Despite the plunge in Asian indices, European shares were slightly higher heading toward the U.S. opening.
Financial shares have been slumping this week as the credit crunch continues to spark efforts to raise capital to shore up balance sheets. Oppenheimer analyst Meredith Whitney lowered earnings projections for Morgan Stanley (NYSE:MS), which could keep investment banks and the financial arena on the defensive early today.
Health insurers also appear poised for a difficult day after Coventry Health Care (NYSE:CVH) reduced second-quarter and 2008 earnings, which sparked a 15% slide in the stock. The CVH news rippled through the group, with Aetna (NYSE:AET), WellPoint Inc. (NYSE:WLP) and UnitedHealth Group Inc. (NYSE:UNH) taking a beating in after-hours action.
Other stocks making big moves overnight included Evergreen Solar (Nasdaq:ESLR), which was up about 11% on news that the firm has new contracts in hand. Also, Huntsman (NYSE:HUN) was down some 40% on a lawsuit filed to cancel its merger with Hexion.
Looking at the chart picture, the market appears to be tracking within a broad range between 763 and 717, with important resistance up at 750 and support down at 720.50. As for today’s session, look for mild resistance at 735, then at 741 and 746.50. Meanwhile, support is pegged at 726 ahead of the aforementioned 720.50 line.
