Steep opening slide set for Russell

Kevin Pendley | Jun 26, 2008 8:59am EDT | Comment

Rating: Unrated [rate it]

Small-cap stocks are poised for a dramatic slide on the opening in the wake of analyst downgrades for big-name stocks, slumping financial and tech shares, a batch of disappointing earnings figures and a rise in crude oil prices. The Russell 2000 (NYSE:IWM) was down about 1% in after-hours action, which suggests an opening near the 710 level.

Influential researchers at Goldman Sachs downgraded General Motors Corp. (NYSE:GM) overnight, and the stock tumbled 5% in after-hours trading. Goldman also put Citigroup (NYSE:C) on its sell list and the nation’s top bank slumped more than 4%. Goldman also slashed its rating on the brokerage industry, so those stocks could be under pressure this morning as well.

Financial stocks were taking a hit overseas, with European bank Fortis sinking some 10% on news that it will cancel its dividend and raise capital. European stocks were also off more than 1% heading into the U.S. open, while Asia shares were mixed.

On the tech front, big-name large caps like Research in Motion (Nasdaq:RIMM) and Oracle (Nasdaq:ORCL) were down 7% and 3%, respectively, in overnight trading, with RIMM’s profit outlook falling short of expectations and ORCL issuing a cautious outlook despite posting decent results.

Another large-cap big name slumping overnight was Nike (NYSE:NKE), which was off nearly 5% in after-hours action after reporting earnings.

Adding to the equity market woes this morning was another jump in crude oil prices, which were back up above $135 dollars a barrel. In addition, the U.S. dollar was taking a beating against the euro.

GDP and weekly claims data were released this morning, but the GDP is truly dated (first quarter final figures), the headline figure hit the forecast on the nose and had very little impact on the market. Meanwhile, the weekly claims figures were slightly worse than expected at 384,000 versus 380,000, but were close enough to the forecast to quickly move into the background while the market focuses on troubles in financial and tech stocks heading toward the opening.