Higher opening seen after relatively tame inflation data
Small-cap stocks are expected to open higher as investors digest critical inflation information, while mulling over a mild overnight dip in crude oil prices and a firm tone in the U.S. dollar ahead of consumer sentiment data later this morning. The Russell 2000 (NYSE:IWM) is expected to open right around the 723 mark.
The CPI headline figure came in at 0.6%, just slightly above the forecast for a rise of 0.5%. The “core” figure, which excludes food and energy prices, was in line with expectations at 0.2%. The year-over-year CPI figure was at 4.2%, above the 3.9% forecast. Stock index futures initially pulled back off modest overnight gains immediately after the CPI report was released, but then recovered to grind out new after-hours highs. The Michigan sentiment survey comes out around 10:00 a.m. ET, and could stir volatility for morning stock market trading.
Crude oil futures were off moderately into the stock market opening, hovering near $136 dollars a barrel as the U.S. dollar was at five-week lows against the euro, up about 0.7%, and rose about 0.3% versus the yen to the highest point since mid-February.
Early this morning, the market digested fresh dour news on the housing front as foreclosures in May were up 48% from last year, and up 7% from April, according to RealtyTrac’s U.S. Foreclosure Market Report.
Today marks an important session for small caps from a charting standpoint. A weekly close below 720.50 would suggest an extension of the recent breakdown into a new lower trading range, with a target to 690. Look for support at 712.50, then at 704. Meanwhile, resistance on a bounce is at 726, then at 731 and 735.
Large caps in the news overnight include Lehman Bros. (NYSE:LEH) on talk that Blackstone Group may make a large investment in the company. Anheuser-Busch (NYSE:BUD) was off overnight after a big rise in recent days on takeover talk. Small-cap stock Smith & Wesson Holding (Nasdaq:SWHC) rallied some 12% in after-hours trading on solid earnings.
