Soft earnings, weak ADP data to weigh on Russell
Small-cap stocks are expected to open lower, pulled down by sloppy earnings news in the United States and Europe and a weak reading on the ADP jobs report, which could refocus market attention on the economy following a historic runaway victory by Barack Obama in the presidential vote. Stock index futures were down about 1.5% in after-hours trading, which suggests the Russell 2000 (NYSE:IWM) will open near 537.50.
The ADP Employment Survey came in at minus 157,000, which was worse than the forecast for a decline of 100,000. Although the ADP report has not been tracking well with the big Labor Department report that will come out Friday morning, it still throws up a caution flag.
Some of the pullback might also have been tied to concerns that Democrats picked up several new seats in the Senate and Congress during the U.S. elections, giving one party a commanding majority, whereas the market seems to favor more balance of power. In addition, there was some sense that the market has been grinding higher on nothing but air amid awful economic data in recent days, which is a tenuous position heading toward Friday’s big monthly employment report.
On the earnings front, Time Warner Inc. (NYSE:TWX) slipped about 2% during European trading despite beating the profit forecast as the world’s largest entertainment firm lowered the outlook. Also, Ambac Financial Group Inc. (NYSE:ABK) tumbled some 23% in pre-market trading as quarterly losses were much bigger than expected.
The chart picture shows some stalling signals on short-term studies as the market has filled upside targets on a symmetrical bounce and ran into logical resistance in the 546 to 551 zone. Above 551, resistance comes in at 559 and 564.50, but with the market pointing lower on the open, support could be more in play today. The downside points to watch are at 534.50, then down at 525 and 514.50.
