Small caps seen slightly lower; await more data

Kevin Pendley | Aug 29, 2008 8:50am EDT | Comment

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Small-cap stocks are expected to open slightly lower, pressured by pre-weekend profit-taking from short-term traders who caught this week’s updraft. In addition, the first batch of a data trifecta this morning came in soft, stalling some of the economic “good news” that has been in play so far this week. The Russell 2000 (NYSE:IWM) was seen opening near 746.50.

The personal income report came in at minus 0.7%, which was below the forecast of 0.0%. The immediate market response was a mild dip in stock index futures in after-hours trading, but the move was fairly muted. Still on tap on the data front this morning are the Chicago Purchasing Manager’s Survey at 9:45 a.m. ET and the Michigan sentiment survey, which typically leaks out a little before 10:00 a.m. ET.

Crude oil prices were higher overnight, climbing about $1.60 a barrel back above $117 as traders remain concerned about the path of Gustav heading into the extended holiday weekend.

The U.S. dollar was soft, which was seen as a positive element for commodities and a mildly negative component for stocks this morning. The dollar was down 0.6% against the euro and about 0.1% versus the yen.

Stock markets around the world were mostly higher overnight, with India up 3.7%, China up 2.7%, Japan up 2.4%, Malaysia up 2.8%, Singapore up 1.8%, Indonesia up 1%, Hong Kong up 1.9% and the Philippines up 1.2%. Despite the strong final day of trading for August, most Asian stock markets had a difficult month, with Hong Kong hitting a one-year low last week and China slumping 13% even while hosting the Olympic games. For the year, southeast Asian indices were down 20% or more pretty much across the board through August.

Stocks in the news overnight were highlighted by Dell Inc. (Nasdaq:DELL), as the firm tumbled some 10% after notching a deep decline in earnings and saying that companies around the world are reducing technology spending. The pullback in Dell spilled over to other big-name tech firms such as International Business Machines (NYSE:IBM) and Apple Inc. (Nasdaq:AAPL). Chip-maker Marvell Technology Group Ltd. (Nasdaq:MRVL) beat the earnings forecast overnight, but projected a cautious outlook, which had an immediate chilling impact on the stock in after-hours trading.

The chart picture shows small-caps back in the upper portion of the recent range after a remarkably relentless rally Thursday. The market closed above the opening on every single hourly candle, which is extremely rare. However, the market is now in the shadow of a resistance zone that runs from 748 to 756 and that zone might be tough to crack without some type of startling fresh news. Look for support today on pullbacks near 742 and 734.