Russell to open in the red
Small-cap shares are expected to open in the red Monday, weighed down by weekend news that Microsoft Corporation (Nasdaq:MSFT) has withdrawn an offer to takeover Yahoo! Inc. (Nasdaq:YHOO), which could dull some investor enthusiasm about the immediate future of merger and acquisition deals just days after the Mars/Wrigley (NYSE:WWY) deal stoked merger hype. In the immediate fallout of the news, Yahoo was down 15%, while Microsoft was up 2%.
The Russell 2000 (NYSE:IWM) was trading down about 0.4% in after-hours action, which would translate to a cash opening just below 723. Overseas stock markets were mixed to lower, with the European DJ Stoxx 50 down 0.4%, and Hong Kong’s Hang Seng down 0.2%. However, U.K. and Japan markets were closed for a holiday, so volume was lighter than usual.
The ISM Manufacturing Survey, which is arguably the largest economic report of the week, comes out this morning at 10:00 a.m. ET, and will likely help establish a trading direction for equities.
The dollar was down overnight against the euro and versus the yen, which also could weigh bullish psychology into this week’s action. Crude oil jumped again in overseas trading, climbing to $117 dollars a barrel, lifted by battles in northern Iraq and concerns over a cutback in Nigerian output. The advance in crude was accomplished on light volume, which takes some of the starch out of the move.
Technically, the Russell 2000 left a minor topping pattern on daily charts Friday by making new highs, then closing lower, which suggests that investors rejected the new highs as true value. Look for support today on a pullback at 720.50, then at 715 and 708. Meanwhile, resistance is at 731, 735 and 743. Chart watchers will also keep an eye on 1,400 in S&P 500 futures this week, as that point marks a major “figure” line for the market.
