Higher open on tap on crude dip, durable good surprise
Small-cap stocks are expected to open higher, underpinned by a decline in crude oil prices during overnight trading and a stronger-than-expected showing on durable goods orders. The Russell 2000 (NYSE:IWM) was up about 0.3% in after-hours action, which would translate to a cash opening near 736.
The durable goods report came in at minus 0.5%, better than the forecast for a loss of 1%. In addition, the ex-transportation component was up 2.5%, well above the median analyst expectation for a rise of 0.5%. The ex-trans figure was the best showing since last July. In the immediate aftermath of the report, stock index futures products extended overnight gains. The MBA Mortgage Application survey also came out this morning, and reflected slack demand, with the index down 4.6% and the purchase index off 17.4%. This is a volatile data base and appeared to be overshadowed by the durables surprise.
Large-cap stocks of note overnight included UPS (NYSE:UPS), which was up about 2.8% on an analyst upgrade. In addition, Southwestern Energy (NYSE:SWN) was expected to climb after being named to move into the S&P 500. On the downside, JetBlue Airways Corp. (Nasdaq:JBLU) was off about 1% as the company said it will delay delivery of additional aircraft because of high fuel costs, and Archer Daniels Midland (NYSE:ADM) was down over 2% on plans to sell $2 billion in equity to pay off debt.
In overseas trading, equities markets were mixed, with Europe up about 0.6% heading toward the U.S. open, while Asian markets were primarily lower. Japan was off about 1.3%, while Australia was down 1.1% and Taiwan was down 1.2%. China was up about 2.8%.
Looking at the chart picture for small caps, the Russell appears set to open up through technical resistance at 735, which then leaves resistance at 740, 744 and 750. A rise through 744 would be an important show of strength in the wake of last week’s decline. On the downside, support will be at 731, 726 and 720.50.
