Small caps projected to open higher

Kevin Pendley | Jun 05, 2008 8:49am EDT | Comment

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Small-cap stocks were projected to open higher, lifted by solid chain store sales numbers so far today, a rise in the dollar and a better-than-advertised weekly unemployment claims report. The Russell 2000 (NYSE:IWM) rose about 0.4% in after-hours trading, which would translate to an opening near 746.70.

Weekly claims were released at 8:30 a.m. ET, and came in at 357,000, well below the forecast of 375,000. With the ADP payroll report showing a rise in jobs Wednesday, and the weekly claims better than expected today, it will heighten hopes for a jobs report Friday that is better than the median forecast.

Monthly chain store sales numbers were strong for discounters Costco (Nasdaq:COST) and Wal-Mart (NYSE:WMT), and both stocks were up over 1% in after-hours trading. May same-store sales numbers were up 9% for Costco and up 3.9% for Wal-Mart.

The dollar was firm overnight, climbing to the highest point since late February against the yen, and rising about 0.3% versus the euro.

On the inflation front, crude oil prices remained well off the record highs set last week, hovering near four-week lows. Meanwhile, gold slipped to a three-week low. The recent pullback in energy has been a supportive element for battered airline stocks, and United Airlines (Nasdaq:UAUA) and Northwest Corp. (NYSE:NWA) were sharply higher overnight following an analyst upgrade for the air carriers.

From a charting standpoint, key resistance is still in play in the Russell 2000 at 750, which represents a 50% retracement of the entire bear market slide. If the market can mount a decisive breach of that resistance zone, then the next upside resistance areas are at 754 and 760. On the downside, support is at 741, 735 and 731 for today.