Russell to open higher on M&A activity
Small-cap stocks are expected to open higher, lifted by merger and acquisition news on the large-cap front, and by a rosier outlook from discount retailing giant Wal-Mart (NYSE:WMT). The Russell 2000 (NYSE:IWM) was expected to open about 0.5% higher, which would translate to an open near 667.
Wal-Mart’s June same-store sales jumped 5.8%, which surpassed analyst expectations for a rise of 3.8%. The retailer followed up the strong sales news by raising their second-quarter outlook, which sparked a rally in overnight trading in WMT.
On the M&A front, news that Dow Chemical (NYSE:DOW) said it would purchase Rohm and Haas (NYSE:ROH) for $18.8 billion. This type of acquisition activity suggests that there are bargains to be found and bolsters investor psychology about the outlook.
Stock index futures briefly extended overnight gains ahead of the opening when weekly jobless claims came in at 346,000, which was far better than the forecast for a dip to 395,000 from last week’s stunning 404,000 number. Despite the bullish surprise on the headline number, it was still the eleventh consecutive week in which continuous claims were above 3 million, which is a troubling figure for the overall labor market. Within a few minutes of the claims release, futures were back below pre-report levels.
Crude oil futures were basically flat overnight, hovering near the $136 dollars a barrel zone, as political tension in the Middle East was countered by softer demand and money flow out of the commodities arena. Iran was testing missiles again overnight, which keeps jitters over the Iran/Israel saber-rattling in the mix as a supportive element for energy.
The technical analysis picture retains a bearish bias, and Wednesday’s steep afternoon slide suggests the market faces solid resistance in the 684 zone. For short-term trading, look for resistance today approaching 675. On the downside, support is pegged at 661, then just above 650.
