TradeMaster Daily Stock Alerts Blog

Small-cap stocks are expected to open higher, underpinned by another positive earnings surprise on the banking front. Gains could be limited, however, by rising energy values. The Russell 2000 (NYSE:IWM) was up about 0.5% in after-hours trading, which would suggest a cash open near 696.00.

Crude oil futures were in rally mode ahead of the stock market opening, climbing nearly $2.50 dollars a barrel back above $131. Despite the negative impact on stock market psychology here in the U.S., oil and other commodity-based shares were a supportive factor in European stock trading, with copper and gold also higher overnight.

On the earnings front, several big name companies will be under the results radar today, but the early key appears to be Bank of America (BAC), which was up some 10% in overnight trading as investors embraced quarterly figures. In other large-cap news, Genentech Inc. (DNA) rallied more than 10% overnight on news that Swiss firm Roche Holdings made an offer to buy all outstanding shares for more than $43 billion.

Over the weekend, Treasury Secretary Henry Paulson said that 99% of U.S. banks were on solid footing, but that the economy could be in a slow growth period for some time. He was also confident that Congress would approve a bailout plan for GSEs, and both Fannie Mae (FNM) and Freddie Mac (FRE) were higher ahead of the open.

Overseas equities markets were solidly higher overnight, with Hong Kong up 3.0%, China up 3.4%, Taiwan up 3.9%, Australia up 3.5%, Singapore up 2.5%, South Korea up 3.7% and India up 1.5%.

Looking at the chart picture, last week’s dramatic reversal hinted at a potential bottom in small-caps, but that scenario needs further upside confirmation this week. Initial resistance this morning in the Russell 2000 comes in at 697, then at 707.50. On the downside, key short-term support is at 684.

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