Mild rise on Libor dip, overseas gains; watching voter polls
Small-cap stocks pushed higher on the opening, but gains were short of expectations built on pre-market futures activity. Support was tied to further declines in lending rates and advances in overseas equities, but the focus today was clearly on the elections underway in the United States. At 10:01 a.m. ET, the Russell 2000 (NYSE:IWM) was up 0.82, or 0.15% at 539.32.
The factory orders report came out at minus 2.5%, which was below the forecast for a decline of 1.5%. The market noticeably trimmed away gains after the report.
Even with the market in rally mode early today, the spotlight will likely be on the exit poll reports as American voters close out the presidential election campaign. Barack Obama is widely reported as holding a comfortable lead into today’s vote, but market watchers are also closely watching the House and Senate seats that are up for a vote to see if the Democrats will mount a big power shift. In addition, traders are debating the potential impact of an Obama stimulus package.
On the inter-bank lending front, three-month Libor rates tumbled to a five-month low and are now below the levels in place before the stock market collapse in September. In addition, three-month Euribor rates hit a seven-month low. Libor rates are now down more than 2% from the peak seen in the credit crisis when banks were so mistrustful that they weren’t even lending to each other.
Bank stocks were strong performers in Europe thanks to the lower lending rates, and U.S. banks were also in rally mode this morning. Citigroup Inc. (NYSE:C) was up 3.1% and Bank of America Corp. (NYSE:BAC) was up 1.3%, while the PHLX KBW Banking Index was up 1.7%.
Around the globe, European shares were up about 2% into the U.S. stock market open. Meanwhile, shares in Asia were mixed by country, but up solidly overall, lifting the World Index up for a sixth consecutive day. Japan returned from a holiday with a big 6.2% rally. Elsewhere, India was up 2.8%, South Korea up 1.9% and Hong Kong up 0.2%. Australia slipped 0.1%, even though the central bank there lowered rates by a larger than expected 75 basis points.
With a little more than 70% of the S&P 500 reporting results so far, profits have been down about 10%, which is slightly below expectations. Among the bevy of big companies reporting so far today, Archer Daniels Midland Co. (NYSE:ADM) and MasterCard Inc. (NYSE:MA) topped the forecast and were higher on the opening, with ADM up 15.7% and MA up 11.2%. Also, Viacom Inc. (NYSE:VIA.b) reported sloppy results, but they perhaps weren’t as bad as feared and the stock was up about 1.7%.
Individual small caps on the move this morning included Bruker Corp. (Nasdaq:BRKR), which was up 12%. Also, Safe Bulkers Inc. (NYSE:SB), continued to be a hot stock as the marine transporter jumped 31% after being one of the biggest small-cap movers on Monday. Osiris Therapeutics Inc. (Nasdaq:OSIR) was up 20% after releasing earnings and on news that the firm would co-develop and market two adult stem cell products. On the downside, Kenexa Corp. (Nasdaq:KNXA) was down 28% as the employment search firm reporting earnings and the CEO said that the “business environment deteriorated” toward the end of the quarter with a more difficult economic climate.
The Russell still faces a resistance zone from 546-551 and must tackle that area to trigger another leg up for the move. In addition to previous chart resistance there, that area marks a logical symmetrical upside target for the pattern bounce off the lows. Therefore, this is a logical spot for the market to stall, but if the market can extend the rally and convert 546 into support, then it opens the door for a move up to 580. If small caps start to wobble today, then support is at 534.50, 525 and 520.
The factory orders report came out at minus 2.5%, which was below the forecast for a decline of 1.5%. The market noticeably trimmed away gains after the report.
Even with the market in rally mode early today, the spotlight will likely be on the exit poll reports as American voters close out the presidential election campaign. Barack Obama is widely reported as holding a comfortable lead into today’s vote, but market watchers are also closely watching the House and Senate seats that are up for a vote to see if the Democrats will mount a big power shift. In addition, traders are debating the potential impact of an Obama stimulus package.
On the inter-bank lending front, three-month Libor rates tumbled to a five-month low and are now below the levels in place before the stock market collapse in September. In addition, three-month Euribor rates hit a seven-month low. Libor rates are now down more than 2% from the peak seen in the credit crisis when banks were so mistrustful that they weren’t even lending to each other.
Bank stocks were strong performers in Europe thanks to the lower lending rates, and U.S. banks were also in rally mode this morning. Citigroup Inc. (NYSE:C) was up 3.1% and Bank of America Corp. (NYSE:BAC) was up 1.3%, while the PHLX KBW Banking Index was up 1.7%.
Around the globe, European shares were up about 2% into the U.S. stock market open. Meanwhile, shares in Asia were mixed by country, but up solidly overall, lifting the World Index up for a sixth consecutive day. Japan returned from a holiday with a big 6.2% rally. Elsewhere, India was up 2.8%, South Korea up 1.9% and Hong Kong up 0.2%. Australia slipped 0.1%, even though the central bank there lowered rates by a larger than expected 75 basis points.
With a little more than 70% of the S&P 500 reporting results so far, profits have been down about 10%, which is slightly below expectations. Among the bevy of big companies reporting so far today, Archer Daniels Midland Co. (NYSE:ADM) and MasterCard Inc. (NYSE:MA) topped the forecast and were higher on the opening, with ADM up 15.7% and MA up 11.2%. Also, Viacom Inc. (NYSE:VIA.b) reported sloppy results, but they perhaps weren’t as bad as feared and the stock was up about 1.7%.
Individual small caps on the move this morning included Bruker Corp. (Nasdaq:BRKR), which was up 12%. Also, Safe Bulkers Inc. (NYSE:SB), continued to be a hot stock as the marine transporter jumped 31% after being one of the biggest small-cap movers on Monday. Osiris Therapeutics Inc. (Nasdaq:OSIR) was up 20% after releasing earnings and on news that the firm would co-develop and market two adult stem cell products. On the downside, Kenexa Corp. (Nasdaq:KNXA) was down 28% as the employment search firm reporting earnings and the CEO said that the “business environment deteriorated” toward the end of the quarter with a more difficult economic climate.
The Russell still faces a resistance zone from 546-551 and must tackle that area to trigger another leg up for the move. In addition to previous chart resistance there, that area marks a logical symmetrical upside target for the pattern bounce off the lows. Therefore, this is a logical spot for the market to stall, but if the market can extend the rally and convert 546 into support, then it opens the door for a move up to 580. If small caps start to wobble today, then support is at 534.50, 525 and 520.
About the Author
Kevin Pendley covers the Russell 2000 index for SmallCapInvestor.com and writes a weekly technical analysis column.
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