Small caps to open higher on crude dip

Small-cap stocks are expected to open higher, underpinned by a dip in crude oil prices overnight, a bounce off the lows in European stock trading and a consolidation breather after Monday’s big loss. The Russell 2000 (NYSE:IWM) was up about 0.5% in after-hours trading, which suggests an opening near 699.50.

European markets tumbled during overnight trading, spiraling lower after Merrill Lynch (NYSE:MER) reported another big debt write-down, which rekindled fears that the credit crunch still has plenty of room to unravel further. After the close Monday, MER said it would absorb a $5.7 billion write-down in the third quarter, and would raise $8.5 billion by selling new stock. Also, in the financial arena, Citigroup (NYSE:C) shares took a dive overnight as analysts lowered the 2008 outlook for the nation’s top bank. Interestingly, outside of Citigroup, several large name financial firms were in the green heading toward the open, and even MER pulled back toward flat levels.

Crude oil prices were off about $0.70 a barrel during European trading near the $124 level, which should provide a little bit of a cushion for stock market bulls into this morning’s consumer confidence release, which comes out at 10:00 a.m. ET. The U.S. dollar was also firm, up about 0.2% against both the euro and the yen.

Elsewhere on the large-cap earnings front, Amgen (Nasdaq:AMGN) was in rally mode overnight after topping the estimate, just a day after the drug-maker shot higher on news of a successful osteoporosis trial.

Looking at the chart picture, short-term resistance on a bounce today comes in at 701, 707.50 and 715. If the market resumes Monday’s downward spiral, . . .

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