Opening slide as profit worries offset overseas rate cuts
Small-cap stocks are expected to push lower on the opening, with support from a raft of rate cuts around the world overnight countered by concerns over profit outlooks and worries over monthly retailer sales tallies. Stock index futures were down about 1.5% in pre-market trading, which suggests the Russell 2000 (NYSE:IWM) will open near 447.50.
European stocks were higher after European Central Bank officials slashed 75 basis points off their benchmark lending rate, which was more aggressive than expected. However, European shares slipped into the negative after El du Pont de Nemours and Co. (NYSE:DD) revised their profit outlook downward this morning. The DuPont news added to a dreary tally of fresh profit/outlook concerns from several companies, including Merck & Co. Inc. (NYSE:MRK), Cirrus Logic Inc. (Nasdaq:CRUS), Intersil Corp. (Nasdaq:ISIL) and Jo-Ann Stores Inc. (NYSE:JAS).
Back to the rate cut news, the Bank of England, Sweden’s Riksbank, New Zealand authorities and even Indonesia cut lending rates overnight as central bank officials around the world strive to battle the economic downturn.
The weekly claims report this morning came in at 509,000, which is historically a big number, but which was actually below the forecast of 540,000. The four-week moving average on claims rose to 524,500 which was above 518,250 from last week and is at the highest point in 26 years, as are continuing claims.
The chart picture for small caps has some mild short-term upside momentum, but it is still in the shadow of the historic collapse from Monday. The Russell needs to break out of this week’s range to truly trigger a noteworthy move (473.14 upside; 416.13 downside). Initial resistance today is at 464, then at 473.14. If the market starts to wobble, support is at 442, 433 and 424.50.
