Lower opening on tap for small caps
Small-cap shares are expected to open lower following modest losses in overnight action. The Russell 2000 (NYSE:IWM) was down about 0.3% heading into the regular opening, which would translate into a cash opening in the 718.90 range for the index. Initial chart support for the Russell is near 718. Below there, mild support for short-term day traders is at 714, then down near the gap fill point from Friday’s opening near 709. If the market can mount a turnaround, look for resistance near Friday’s high along the 724 zone, then at 731.
Given a dearth of economic news this week, the market appears set to juggle various earnings releases while keeping an eye on credit issues for trading direction early this week. The Bank of England announced a plan to swap U.K. government bonds for mortgage debt, in a move to take some fear out of the credit/Libor issue, but the initial take from European equity traders was lukewarm.
European stock indices were down about 1% for most of the major trading markets, but markets in Asia saw solid gains overnight. Japan’s Nikkei was up 1.63%, Hong Kong’s Hang Seng gained 2.17% and Australia shares surged 2.91%.
Within the earnings sphere, the big news so far this morning was from Bank of America (NYSE:BAC), Eli Lilly (NYSE:LLY) and Merck & Co. (NYSE:MRK). Among this trio, the news was mixed, with Bank of America up slightly in after-hours action despite large credit write-downs as the market continues to be willing to look past sloppy numbers in the financial arena. As for the big drug makers, Eli Lilly was down about 1.6%, but Merck was up about 2.5%.
