Modest opening dip seen with soft techs
Small-cap stocks are expected to open slightly lower, with support from gains in Europe and Asia countered by a weak tone on tech stocks. Luxury goods makers were up in Europe and ocean shippers were riding the wave higher in Asia, but tech stocks were a worry overnight after warnings for U.S. firms and news of massive job cuts for Japan’s Sony. Stock index futures were down 0.1% in pre-market trading, suggesting a Russell 2000 (NYSE:IWM) open near 480.50.
Chip makers Texas Instruments Inc. (NYSE:TXN) and National Semiconductor Corp. (NYSE:NSM) both slashed revenue forecasts overnight, and were down some 5% in pre-market trading, which could drain enthusiasm out of the tech arena, especially in light of the Sony news.
Commodities were a driving force during Monday’s big rally, fueled by the infrastructure plans forwarded by President-elect Obama over the weekend. However, commodities were relatively tame in Europe and Asia overnight. Crude oil prices moved on either side of steady heading toward the U.S. stock market open, but copper prices tumbled 6% in London, which is a troubling sign since copper is considered a key barometer of economic activity.
Investors will look to see if the rescue package for automakers can be finalized today. The general perception is that an initial loan of some $15 billion is in the works, which should be enough to avert a “worst-case” scenario in which General Motors Corp. (NYSE:GM) or Ford Motor Co. (NYSE:F) declare bankruptcy and trigger a downward spiral of collapse among connected businesses.
The chart picture for small caps improved dramatically in recent days and is trying to confirm the bullish reversal off bear market lows from the Nov. 20 bottom. World stocks are up some 16% since that move low, while the Russell 2000 is up 29% from that bottom (but still down 37% on the year). Monday’s push through 473 was an important event, especially if pullbacks today find support above that point. It should be noted that the market has seen lots of good news on the stimulus front and rallied through bearish news like the jobs report, and it wouldn’t be a surprise to see the market take a little “breather” today. If the rally continues, then the key spot to watch is at 491. If the Russell can charge through that point, it would mark a watershed event as it would snap a string of lower lows and lower highs through the bear market run.
