Russell seen higher on housing starts report
Small-cap shares are expected to open higher, lifted by overseas gains in Europe and a stronger-than-forecast housing starts report that caused S&P 500 futures to rise about two handles. If the Russell 2000 (NYSE:IWM) matches the percentage climb in large-cap index products, then small caps should open near 745.
April housing starts were reported at an annual rate of 1.03 million units, up from 954,000 in March, and well above the forecast for 940,000. Permits also topped the analyst prediction.
Equity market overseas should be a supportive element in play for U.S. stocks this morning. European shares climbed to four-month highs overnight, rising about 1% on improved earnings outlooks and merger activity. Asia stock index products were mixed, with Japan down 0.2% and China down 0.3%
Crude oil futures jumped higher overnight, which could bolster some energy shares. However, rising crude oil prices remain a big concern for the overall market health because consumer pocketbooks are already stressed by record high pump prices, surging food costs and a loss in home equity.
Large-cap movers of note overnight include Genentech (NYSE:DNA), which was up 2.2% on promising cancer study results. Also, Kraft Foods (NYSE:KFT) was up 1.6% on news that Warren Buffett increased his stake in the firm. Lockheed Martin (NYSE:LMT) was up 0.6% after winning a big defense contract.
From a charting perspective, the Russell notched the highest daily close Thursday since Jan. 3 and is now pushing into a resistance zone in the 743 to 750 area. The recent rally extension has been accomplished on light volume, which raises a caution flag, but the path of least resistance is toward higher prices, which should be respected. Resistance today comes in at 750, while support is down at 735 and 731.
