Stronger opening seen
U.S. stocks are expected to open higher Tuesday, underpinned by gains in Europe, where retail and mining stocks were strong performers. A host of economic data later this morning could spark volatility, as could the afternoon release of FOMC minutes. Crude oil prices climbed to a five-week high overnight, which could bolster energy stocks, one of the top performing sectors during Monday’s session. The Dow is called 80 points higher, while the Russell 2000 (NYSE:IWM) is seen opening about 0.7% higher near 508.50.
Crude oil prices climbed back above $50 dollars a barrel in European trading as tension in the Middle East and a dispute over gas between Russia and Ukraine continue to spark a risk bid into energy prices, which were already beaten down drastically from last summer’s peak. The rally in energy prices continues to fly in the face of a strong dollar, which soared another 2% against the euro during European trading. The strong greenback took the edge off gold prices Monday and the yellow metal was lower again overnight; despite the slide in gold, industrial metals remain firm, providing a lift to mining stocks overseas.
Although Asian equity markets were basically flat overnight, chipmakers were solid performers, which could carry over into U.S. trading this morning. Still, much of the individual company news has been dreary to start the new year – which in itself probably isn’t a surprise. On the small-cap front, solar wafer manufacturer LDK Solar Co. Ltd. (NYSE:LDK) issued a sales warning Monday afternoon and took a double-digit hit in extended trading.
Economic data and the reading of the FOMC tea leaves promises to be in full gear today, with a host of economic reports on tap for 10:00 a.m. ET this morning, before the release of FOMC minutes this afternoon.
Small-cap stocks had an inside session pullback Monday that had very little impact on the short-term chart structure. Sustained action above 491 will provide a higher base to grind higher in coming days, but how the market trades this week amid plenty of event risk and increased volume will be an important test. For today’s action, if the market can pop through a little double top on hourly charts just above 508 this morning, then look for resistance at 514.50, then approaching 525. On the downside, there is minor support at 496.50, but the key support point is down near 491.
