TradeMaster Daily Stock Alerts Blog

Small-cap stocks are expected to open sharply higher again this morning, bolstered by news that the U.S. government will spend some $250 billion buying equity in various major banks. The Russell 2000 (NYSE:IWM) was up nearly 3% in after-hours trading, which would translate to a cash open near 587.00.

Stock markets around the world remained in rally mode overnight, with Japan generating a massive 14% surge. European shares were up some 5%, while Hong Kong was up 3.1%, Taiwan up 5.4%, Australia up 3.7%, Singapore up 2.5%, South Korea up 6.1% and India up 1.5%. China shares were actually down 2.5%.

Banks will be in the spotlight early today. In after-hours action, Bank of America Corp. (NYSE:BAC) was up nearly 8%; Wells Fargo & Company (NYSE:WFC) up 5%; JP Morgan Chase & Co. (NYSE:JPM); Bank of New York Mellon Corporation (NYSE:BK) up 7% and Goldman Sachs Group Inc. (NYSE:GS) up 9%, just to name a few of the big banks that should stand to benefit from this latest government freebie.

In addition, in an address on the financial crisis this morning, President Bush said the government will also guarantee “most” new loans for a short period of time, another measure aimed at thawing the distrust level among banks lending to each other, which should help pull down Libor rates.

Clearly, the credit crisis will occupy most of the investor psyche today, but there were strong earnings results from Johnson and Johnson (NYSE:JNJ) that were above the forecast, with JNJ stock climbing some 4% ahead of the opening. Also on the earnings front Pepsico Inc. (NYSE:PEP) missed the projection, announced they would cut 3,000 jobs and PEP stock slipped about 1%. Tech bellwether Intel Corp. (Nasdaq:INTC) is slated to release today as well.

The projected opening value for the Russell means the market would fly right through the next logical testing zone at 570-577. The price area near 591 represents a 50% Fibonacci retracement of the 2002-2007 bull market run and could offer a test for the bounce. However, the best level is near 615, which would take a 7% rally from Monday’s close to attack.

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