Russell 2000 futures sagging

The Russell 2000 (NYSE: IWM) futures are down and the small-cap index will open lower on news of a jump in producer prices.

Producer prices increased 1% in January, the U.S. Labor Department reported this morning. That’s more than twice the forecasted increase of 0.4% and comes following a 0.3% decline in December.

The numbers, which measure the selling prices received by domestic producers for their output, raise fears of inflation.

Small-cap stocks posted an impressive rally to start the week on Monday, paying off short-term traders who bought into Friday’s bullish "hammer" pattern on daily charts. The Russell 2000 eventually closed Monday at 710.46, up 15.03 or 2.16%. Look for support Tuesday at 704, 697 and then down at 688. Meanwhile, resistance is pegged at 717, 722.50 and 731.

If the market can extend Monday’s rise through this morning's PPI report and the 10:00 a.m. ET consumer confidence report, then a run toward the key double top at 731 could be underway. However, any failure back below 700 would suggest that Monday’s rally was a short-term move that lacked legs.

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