Higher open on tap for Russell as crude oil dips
Small-cap stocks are expected to open higher today, bolstered by ideas that Friday’s massive downside rout was overdone and by a dip in crude oil prices overnight. The Russell 2000 (NYSE:IWM) was up about 0.2% in after-hours trading, which would translate to an opening near 741.85.
Crude oil pulled back about $1 dollar a barrel overnight and was near $137, which might be a relief to the market after Friday’s surge to fresh record highs. Still, gasoline pump prices pulled north of $4 dollars a gallon on a national basis this weekend, which threatens to crimp consumer discretionary spending this summer.
Traders will keep a close eye on how Lehman Bros. (NYSE:LEH) trades today after the embattled brokerage firm announced plans to raise $6 billion in capital overnight. The stock was down about 7% in after-hours trading on the news. Banking stocks could be on the defensive following analyst downgrades for Citigroup (NYSE:C), Wachovia (NYSE:WB) and JP Morgan (NYSE:JPM).
On the merger and acquisition front, Willis Group Holdings (NYSE:WSH), the world’s third-largest insurance brokerage, announced a deal to buy rival Hilb, Rogal and Hobbs Co. (NYSE:HRH) for $1.7 billion, news that sent HRH shares soaring some 40% overnight.
The chart picture looks heavy after Friday’s big reversal, but short-term momentum indicators are oversold, which could spark a corrective bounce. The key line to watch early this week is still at 750. Also, the 20-day moving average is near 739.17 and is worth keeping an eye on throughout the week. In addition to 750, resistance is at 746.50 and 754 today, while support is pegged at 741 and 735.
