Russell opens higher, slips back into red
Small-cap stocks opened higher, but were unable to sustain the early bid and slipped back slightly into the red as slumping financial stocks and higher crude oil overcame bullish fodders on the merger and acquisition front from a large deal in the agriculture arena. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was down 1.06, or 0.15%, at 724.67.
Bunge Ltd. (NYSE:BG), a giant fertilizer and oilseed processing company, announced plans to purchase Corn Products International (NYSE:CPO) in a deal worth $4.4 billion. BG shares were up in overnight trading, benefiting from news that the company increased its earnings forecast, but turned lower shortly after the regular market open this morning. CPO prices soared some 24% on the news.
Crude oil prices were on the rise heading toward the U.S. stock market opening, climbing despite a pledge from Saudi Arabia to raise production. Tension in the Middle East has been stirred lately by revelations that Israel executed a practice strike on Iran’s nuclear facilities.
Despite the rise in crude oil prices, the dollar was actually on a roll this morning, climbing about 0.7% against the euro following soft economic data out of the Eurozone overnight. The greenback was also up about 0.5% versus the yen.
Financial stocks have been pummeled in recent weeks by investors amid ongoing worries about the credit crunch. Although some stocks in the financial zone might benefit from bargain hunters this week, there were additional analyst downgrades on banks and against home lenders overnight, which could keep that area on the defensive. Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) were off early today after Lehman Bros. analysts increased their loss forecast on the pair.
Broad market sectors on the rise this morning included education services shares, refiners, oil and gas drillers, gas utilities and steel companies. On the downside, thrifts, mortgage financial firms and automobile manufacturers were attracting sellers.
Small caps of note included Barrier Therapeutics (Nasdaq:BTRX), which gapped higher on the opening amid unusually brisk volume on news that the firm was being purchased by Stiefel Laboratories in a deal worth $4.15 a share. Barrier stock was up 128% on the news. Also on the upside, ShengdaTech Inc. (Nasdaq:SDTH) was up 5%, climbing to the highest point since early March.
Small caps attracting sellers this morning included Peerless Manufacturing (Nasdaq:PMFG), which slumped 4%, gapping lower without fresh news. Also, Main Street Capital (Nasdaq:MAIN), gapped to the downside, tumbling about 6% to 52-week lows.
Looking at the chart structure, it will be critical this week for the Russell 2000 to hold above support in a zone from 720.50 to 717.50. If the market starts to trade consistently below 720.50 it would suggest a rollover into a deeper corrective move, with a downside target toward 690. On the upside, resistance comes in today at 731, 735 and 741.
