Higher open set for Russell
Small-cap stocks are expected to open solidly higher, buoyed by short-covering ahead of this afternoon’s FOMC policy announcement amid ideas the market is oversold on short-term indicators. The Russell 2000 (NYSE:IWM) was up 0.6% overnight, which suggests an opening near 711.50.
Durable goods orders for May came in unchanged, which was slightly softer than the median forecast for a rise of 0.1%. Equity index futures were able to hold sway with overnight gains despite the soft number. Durables have a history of being volatile, so it typically is going to take a bigger surprise than 0.1% to spark a meaningful move in the market.
Earlier this morning, the MBA mortgage application survey came in at minus 9.3%, which was the lowest level since July 2001. In addition, the report showed that the purchasing index fell 7.4% to the lowest point since February 2003. Also, the refinance index tumbled 12.1% to the lowest level since July 2001. With the housing market still soft and rates firming, mortgage activity has slowed to a crawl. Data on new home sales is slated for release later this morning at 10:00 a.m. ET.
The crude oil market was down ahead of the stock market open, waiting for today’s weekly inventory data. The market is anticipating a drawdown on crude oil stocks. The U.S. dollar was up marginally overnight, gaining about 0.2% against both the euro and the yen. The greenback will likely be influenced by this afternoon’s FOMC statement toward the inflation picture.
Equities markets overseas were primarily higher overnight, which should lend a little support to U.S. stocks this morning. Europe shares were lifted by comments from ECB President Jean-Claude Trichet that he did not envision a series of rate hikes. In Asia, China stocks were up 4.1%, while Hong Kong rose 0.8%, Taiwan 1.5%, Singapore 0.8% and India 0.8%. Japan was down 0.1% and Australia off 0.9%.
Look for mild resistance on a bounce today in small caps at 712, then a more important test lies at the previous move lows at 717.50. On the downside, look for support along 704 and the “figure” at 700 if the market starts to wobble again today.
Individual stocks on the move overnight included Merck (NYSE:MRK), which gained 0.7% as JP Morgan analysts rated the stock “overweight.” Jabil Circuit (NYSE:JBL) topped the earnings forecast and rallied 9%; 3Com (Nasdaq:COMS) jumped about 3% while beating the earnings projection and Evergreen Solar (Nasdaq:ESLR) was down about 3% on news that they were launching a large convertible note to sell.
