Higher opening seen on M&A news, overseas gains

Kevin Pendley | Apr 28, 2008 8:57am EDT | Comment

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Small-cap shares are expected to open modestly higher Monday after tame overnight gains. The Russell 2000 (NYSE:IWM) rose about 0.3% in after-hours trading, which would equate to a cash opening near 723.50.

Stocks are expected to find an early bid in line with gains in overseas stock index products. Japan’s Nikkei was up 0.2%, Hong Kong’s Hang Seng was up 0.59%, the Aussie market was up 0.2% and the European DJ Stoxx 50 was up about 0.85%. European shares were lifted by talk that some analysts were saying that the worst of the credit issue was in the past for big European banks.

A psychological lift this morning could be tied to news of a $22-billion takeover of Wrigley (NYSE:WWY) by Mars Inc. and Warren Buffet’s Berkshire Hathaway (NYSE:BRK). Buffet said on CNBC this morning that he was a “financing partner” in the deal, accounting for about $6.5 billion of the acquisition. Seeing merger and acquisition activity in the current market environment could ease some of the ongoing concerns about the credit crunch. Wrigley shares were up a whopping 28% in after-hours trading.

Also, Kirk Kerkorian’s Tracinda Corp. said it would make a cash offer for 20 million shares of Ford Motor Co. (NYSE:F) at $8.50 a share, which is a full dollar above Friday’s closing price for the automaker.

There are no economic reports of note today, which means the market should be free to focus trading decisions on earnings news, chart movement and other factors.

From a chart standpoint, the market is hovering just below the recent move highs shy of 724, and that zone stands as an important resistance test this morning. Decisive action above 724 would clear the way for a run toward 731, which marked a double top on daily and weekly charts back in early February. On the downside, support is pegged at 720, 715 and 707.50 for today’s action.

Within the small-cap spectrum, the following companies are slated to release quarterly earnings this morning at 10:00 a.m. ET: Duncan Energy Partnters (NYSE:DEP); Cott Corp. (NYSE:COT), and The Bancorp Bank (Nasdaq:TBBK).