Russell to open higher
Small-cap stocks are expected to push higher Tuesday, extending the run from Monday’s GSE takeover. There was an improved tone on the tech front early today, which was an encouraging sign since tech stocks have been lagging lately on concerns about global growth and a reduction in spending on technology. Also, crude oil futures tumbled to five-month lows, which will help the consumer spending outlook. S&P 500 futures were up about 0.3% in after-hours trading, which would suggest an opening for small-caps in the 735.00 range.
Agency and mortgage backed security debt rallied significantly in the wake of the GSE news, which pulls down mortgage interest rates, one important component of the GSE plan that will help — but not necessarily save — the troubled housing sector.
As for tech stocks, bellwether Hewlett-Packard Co. (NYSE:HPQ) was up 2% in overnight trading and Nasdaq futures were 0.6% higher after struggling well behind the other index products in recent days.
Crude oil prices turned lower ahead of the opening, sinking some $2 a barrel toward $104.30, slipping to five-month lows in the process. Sellers were still prominent in oil even though Hurricane Ike was pressing into the Gulf of Mexico. OPEC leaders were meeting in Vienna today, but were expected to hold output targets in place. The OPEC meeting is slated to begin around 9:00 a.m. ET.
Looking at the chart picture, we see that the market was able to hold above the opening gap Monday despite a steep pullback off the morning highs. When an opening gap is not filled, it often signals a “breakaway” market move — especially if the market can sustain the directional momentum the next two sessions. Look for resistance today at 739, 742 and 748. If the market starts to wobble, support comes in at 726, then at 720.50. A slide back below 726 would be a troubling show of weakness given all the recent buyer euphoria.
Looking ahead this morning, pending home sales data will come out at 10:00 a.m. ET. Also, Federal Reserve Chairman Ben Bernanke is slated to speak on education before the White House Initiative on Historic Black Colleges and Universities at 9:00 a.m. ET. There have not been any signs he will address the economy or the GSE takeover, but anytime Bernanke is in front of a podium, it could be of interest to the market.
