Opening rise pegged on earnings, economic data
Small-cap stocks were on target for a solidly higher open, buoyed by decent earnings results from key large-cap names, gains in overseas equities markets and better-than-expected economic data this morning. The Russell 2000 (NYSE:IWM) was up about 0.7% in after-hours trading, which suggests an opening near 691.
On the data front, weekly claims came in at 366,000, which was better than the forecast for a number closer to 380,000. Also, the four-week moving average dipped as did the continuing claims numbers. Meanwhile, housing starts in June staged a stunning 9.1% rise instead of a forecast drop, climbing to 1.06 million units, well ahead of the forecast for a 960,000-unit pace. However, the number was “goosed” by a change in New York City building codes, and would have actually been lower without that data quirk. The immediate response to the economic numbers was an extension of overnight gains in stock index futures products.
Large caps setting a positive tone early on included Coca-Cola Co. (NYSE:KO), United Technologies (NYSE:UTX) and JP Morgan (NYSE:JPM), all of which posted better-than-expected earnings, continuing a theme set forward Wednesday when solid results from Wells Fargo & Co. (NYSE:WFC) set a big rally in motion.
The chart picture has improved tremendously this week, starting with a sound rejection of fresh move lows Tuesday, the formation of a doji reversal candle, and the required validation of that pattern during Wednesday’s rally. If the Russell can sustain upward momentum through the rest of the week, then it will forge a bottoming pattern on weekly studies, which is important for the longer-term perspective. From a short-term standpoint, look for resistance at 696, 701 and 707.50. If the market starts to wobble, support should be seen at 684 and 675.
