TradeMaster Daily Stock Alerts Blog

Small-cap stocks are expected to open lower, pressured by inflation jitters stirred by import price data and by ongoing concerns in the financial arena. It’s worth noting that stocks were already in the negative column overnight before this morning’s retail sales and import price reports were released, and they remained in the red when the data failed to generate any kind of upside surprises. The Russell 2000 (NYSE:IWM) was expected to open about 0.5% lower, which would suggest an open near 740.30.

The retail sales report headline figure came in at minus 0.1%, which was in line with the market consensus. The sales figure excluding autos was at plus 0.4%, which was slightly below the forecast for a rise of 0.5%. However, last month’s figure was revised upward to plus 0.3%, after being reported at plus 0.1%. The immediate response in stock market futures was muted, while the dollar was basically flat vs. the euro and remained lower against the yen.

The retail sales report was released in tandem with the import price data, which was very strong, and which sparked a slide in Treasury futures. July import prices was up 1.7%, compared with the forecast for a rise of 1.0%, June prices were revised upward and the year-over-year rise in import prices was up a stunning 21.6% to the highest level in 26 years, fueled by soaring petroleum prices. Treasury prices typically recoil from a rise on inflation, which devalues fixed income investments.

Outside of the data, traders are expected to keep a close watch on the financial arena, as worries about debt write-downs took a toll on bank stocks Tuesday. Also, farm machinery maker Deere & Co. (NYSE:DE) reported soft sales and profits for the quarter and stock in the firm could be under pressure this morning. Elsewhere on the radar, Citigroup analysts initiated coverage on Toll Brothers Inc. (NYSE:TOL) and Pulte Homes (NYSE:PHM) with a “buy” rating, which could attract some investor interest, especially amid the ongoing housing slump.

In overseas trading, Asian stocks were lower, with Japan down 2.1% following a slide in GDP. Hong Kong was off 1.6%, Australia down 2.0%, South Korea off 0.9% and India down 0.7%. China and Taiwan shares were basically flat.

Crude oil prices were higher overnight, rising about 50 cents a barrel to the mid-$113 range, as the market waits for weekly inventory data later this morning. The crude oil stocks report is expected to show a drawdown of about 200,000 barrels.

Tuesday’s pullback in the Russell alleviated short-term overbought conditions, without serving up any serious topping or reversal patterns. In fact, the inside session on light volume is more consistent with corrective action on an uptrend than with a top. Looking ahead to today’s action, support comes in at 742, 734 and 726. A breach of the latter would be a big deal and would usher in talk about a potential top for the bounce. On the upside, resistance is at 750, 758 and 763.

For important information and a disclaimer, click here.