Modest rise with Asia gains; GMAC bank approval
U.S. stocks are expected to open modestly higher, supported by gains in Asian markets overnight, a bounce in crude oil prices and approval for GM’s financial division to become a bank holding company. However, gains should be limited by worries over sluggish holiday spending as the economy limps into year-end and the recession deepens. The Dow is expected to open 60 points higher, while the Russell 2000 (NYSE:IWM) is called about 0.7% higher, near 473.80.
In overseas trading, Japan shares were up 1.6%, despite the largest drop in factory output in 55 years. Taiwan shares were up 0.2%, but markets in China, Singapore and South Korea were slightly lower. Overall, the Asian index was up about 0.5% in thin holiday trading. It should be noted that many markets in Europe, plus exchanges in Australia and Hong Kong were closed for the Christmas holiday.
GMAC LLC, which operates the finance arm for General Motors Corp. (NYSE:GM), was approved to become a bank holding company by the Federal Reserve, which would allow GM access to discount lending programs. Shares in GM were up about 7% in pre-market trading on the news.
Crude oil futures rose about $0.85 a barrel heading into the U.S. stock market open, which could provide a lift to energy stocks. Meanwhile, the U.S. dollar was down against the euro, which could be a supportive element to commodities in general.
On the shopping front, data from MasterCard Advisors estimates that holiday spending from Nov. 1 to Dec. 24 is down 2% to 4%, which would be worse than even the most dire forecasts. There is a hope among retailers that shoppers will be out in force today and Saturday to snap up post-Christmas bargains, perhaps purchase something extra while returning unwanted gifts or simply release some pent-up shopping desire after winter weather hampered sales last weekend before the Christmas holiday.
The chart picture for small caps remains trapped in a sideways consolidation mode. Wednesday’s pre-Christmas session saw the tightest range seen since the collapse began back in mid-September, and another listless session today after the holiday wouldn’t surprise. From a short-term support/resistance standpoint, the spots to watch on the upside are at 479, 484 and 491. Meanwhile, downside points are at 461 and 452.50.
