Higher open on tap after positive earnings reaction despite sloppy econ data
U.S. stocks are expected to open higher, underpinned by gains in European shares and optimism ahead of this afternoon’s FOMC meeting, where the Fed is expected to slash rates once again. A Treasury-led bailout of the auto industry appears set for either today or Wednesday, also providing support. In addition, Goldman Sachs (NYSE:GS) and Best Buy (NYSE:BBY) earnings reports appeared to lift stock index futures in pre-market trading. The Dow is expected to open up about 60 points, while the Russell 2000 (NYSE:IWM) is seen opening up 0.7% to 455.70.
The housing starts report came out at an annualized rate of 625,000 units, which was well below the forecast of 730,000. Housing starts tumbled 18.9%, the largest drop since March 1984 and the lowest unit rate on record. Meanwhile, the CPI came in at minus 1.7%, which was even lower than the minus 1.2% projection, but not a surprise given steep declines in energy costs.
European shares were higher heading toward the U.S. open, but equities were off in Asia overnight. Energy shares were higher in Europe in line with a rise in crude oil prices as the market braces for another output cut from OPEC members this week.
Even though energy markets were on firm footing this morning, industrial metals were lower, including copper, lead, tin and nickel. Coal stocks took a beating overseas, putting a microscope on those firms early today.
Best Buy Co. Inc. reported solid quarterly results and was higher in pre-market trading. Also, Goldman Sachs Group Inc. earnings reported its first quarterly loss since going public in 1999, but the news perhaps wasn’t as bad as feared, and GS shares were climbing in pre-market trading, providing a lift to stock index futures as well.
Looking at the chart picture, small caps have basically been tracking sideways, which breaks a pattern of quick upside rallies off bear market lows that are short-lived and give way to new lows. Just breaking any of those recent patterns is likely a good thing. Look for resistance today at 461, 473, 481.50 and 491. If the market falters, then initial support is at 450, then at 442, 434.50 and the big point is down at 416.
