Russell to open higher on M&A deal, oversold ideas
Small-cap stocks are expected to start out the week in the green, underpinned by merger and acquisition news on the agriculture front, and by ideas the market was oversold after Friday’s slide. The Russell 2000 (NYSE:IWM) was up about 0.4% in after-hours trading, which suggests an open near 728.50.
Bunge Ltd. (NYSE:BG) announced a deal to buy Corn Products International (NYSE:CPO) for $4.4 billion, and the news sparked a 2.4% rally in Bunge overnight and a hefty 27% jump in CPO shares.
Despite the good news on the M&A front, there were additional analyst downgrades in the banking and financial sector overnight, which could keep a lid on any recovery move in that downtrodden area. Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) could be on the defensive following news that Lehman Bros. analysts raised their loss forecast on the lenders.
In overseas stock market trading, Asia shares were primarily lower, catching up with the declines in U.S. equities from Friday. Japan was down 1.3%, Hong Kong off 0.2%, Taiwan down 1.8%, Australia down 1.4%, South Korea down 0.6% and India down 2.4%. However, China shares were up 2.7% and Singapore was up 0.3%.
Looking at the chart picture, the dominant structure is still top-heavy, but Friday’s nice bounce off important support at 720.50 set the market up for a retest of short-term resistance at 731, 735 and perhaps even 741 early this week. If things start to regress, it will be critical for 720.50 down to 717.50 to hold the sellers at bay, otherwise it would suggest a breakdown into a new lower range toward 690.
.jpg)
