Solid opening rally set for small caps after China stimulus
Small-cap stocks are expected to open solidly higher, boosted by gains in equity markets around the world on news that China will roll out a $586 billion economic stimulus plan. Stock index futures were up about 2% in overnight trading, which suggests the Russell 2000 (NYSE:IWM) will open near 515.75.
Around the world overnight, China shares were up 7.4%, Japan’s Nikkei climbed 5.8%, Hong Kong was up 3.5%, India rallied 5.7%, Australia was up 1.3% and European shares were up about 2% heading toward the U.S. open.
Commodity markets – and commodity-themed stocks – were on a roll overnight, with BHP Billiton, the world’s largest mining company, jumping some 13%. Crude oil prices were up more than $4 a barrel, while copper prices climbed 8% in Asian trading.
Individual stocks in the news included American International Group (NYSE:AIG), which was up some 20% in pre-market trading on news that the government plans to add another $27 billion to the aid package for the embattled insurance giant and buy some $40 billion in preferred stock.
Also, President-elect Obama said that help for domestic automobile manufacturers was a “priority,” which sparked a rise in General Motors Corp. (NYSE:GM) and Ford Motor Co. (NYSE:F).
If the market can leapfrog resistance at 514.50 on the opening and then hold above that point, then it would clear the way for a run toward 525 and a better test up at 534.50. If the market slips quickly back below 514.50, then mild support is around 507, then near the “figure” at 500.
