Lower start on tap with WMT news, overseas losses
U.S. stocks are expected to open solidly lower, pressured by a profit-warning and soft December sales from discount retailer Wal-Mart Stores Inc. (NYSE:WMT) and by losses in Europe and Asia. The slide in Asia wiped out initial 2009 gains, with the overall market off more than 3% as bank, energy, chip and pc maker shares were in retreat mode. Crude oil stabilized after Wednesday’s 12% hit, but other commodities were down, which could weigh on companies involved in mining and other raw goods businesses. The Dow was expected to open down 100 points, while the Russell 2000 (NYSE:IWM) was seen down 0.8%, near 493.00.
The weekly unemployment claims report came in at 467,000, which was quite a bit better than the forecast for 540,000. However, continuing claims rose to 4.6 million, the highest since November 1982.
In overseas trading, European markets were down even in the face of another rate cut from the Bank of England, which slashed benchmark rates by 50 basis points to 1.5%, the lowest in history for the BOE. Bank stocks were lower in Asia and on tenuous footing this morning following negative analyst comments on Citigroup Inc. (NYSE:C) and JP Morgan Chase and Co. (NYSE:JPM).
Wal-Mart’s same-store sales for December came in at plus 1.7%, which missed the analyst projection for a rise of 2.8%. Wal-Mart officials said the holiday season was “more challenging than expected” and lowered its Q4 profit forecast. WMT shares were off about 7% in pre-market trading.
Copper prices were down 4.5% in Asian trading, which raises concerns about the global economy and could weigh on commodity names in early trading today. After getting thrashed Wednesday, crude oil prices stabilized ahead of the stock market opening today, but weren’t exactly mounting a bounce, either.
The chart picture for small caps has tilted into a mild short-term bearish stance, but that is playing out within a larger sideways consolidation mode. The Russell appears set for a test of 491 support right off the bat today; a breach of that point opens the door to a deeper pullback, with 484 and 473 the next downside points to watch. If the market can right the ship today, then resistance will be at 504.50 and 514.50.
