A 75-Point Drop in Futures Pulls the Dow Below 13K

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Wall Street is set to start the week on a sour note, with futures on all three major market indexes swimming in red ink. The 13,000 mark could be in play, with the Dow Jones Industrial Average (DJI) staring down a hefty 75-point deficit. The broad-market barometer hasn't breached this level on a daily closing basis since April 23.

  • Senior Technical Strategist Ryan Detrick points out a variety of indicators to eye in this historically bearish season.
  • Senior Options Strategist Tony Venosa highlights two key technical levels to watch on the S&P 500 Index ( SPX ) .
Among equities in focus, Cognizant Technology Solutions (CTSH ) is bracing for a post-earnings plunge; analysts were all for Avis Budget Group, Inc. (CAR ) ahead of earnings; and, Tyson Foods (TSN ) shorts jumped ship in the weeks leading up to this morning's announcement.

And now, on to the numbers...

Dow, S&P and Nasdaq futures

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,241,729 call contracts traded on Friday, compared to 890,300 put contracts. The resultant single-session put/call ratio arrived at 0.72, while the 21-day moving average was 0.64.

NYSE and Nasdaq summary

Volatility indices

From the Trading Floor

"The SPX broke down through minor support at the 1,393-1,394 area after a worse-than-expected employment report was announced Friday morning. A couple of important levels to keep an eye on for possible SPX support are its ascending 80-day moving average , which is currently located at 1,365, as well as the April double bottom in the 1,360 vicinity," explained Senior Options Strategist Tony Venosa. "In addition, the markets will have to digest weekend news concerning the election results in France and Greece this morning."

Currencies and Commodities

  • The U.S. dollar index is up this morning, with the greenback last seen 0.2% higher at $79.68.
  • Crude oil continues to retreat further from the century mark , with crude for June delivery down 0.7% at $97.77 per barrel.
  • Gold futures are down, as well, with the malleable metal 0.2% lower at $1,641.90 an ounce.

Currencies and commodities

In earnings news, Cognizant Technology Solutions Corporation (CTSH - 69.66) said its first-quarter profit improved 17% on a year-over-year basis to $243.7 million, or 79 cents per share. Excluding items, earnings landed at 86 cents per share. Revenue was also on the rise, jumping 25% to $1.71 billion. By comparison, analysts forecast adjusted earnings of 79 cents per share on in-line revenue. Citing weak demand trends, CTSH lowered its full-year earnings guidance to $3.62 per share, down from its earlier view of $3.69 per share. Near-term puts were the options of choice ahead of earnings, with CTSH's Schaeffer's put/call open interest ratio (SOIR) docked at 1.20. CTSH is looking at a 9.7% drop right out of the gate.

Avis Budget Group, Inc. (CAR - 15.90) swung to a first-quarter loss of $23 million, or 22 cents per share, as acquisition-related charges weighed on the company's bottom line. On an adjusted basis, CAR booked a per-share profit of 12 cents, while revenue swelled 31% to $1.62 billion. The results came in better than expected, with analysts calling for a loss of 1 cent per share on $1.59 billion in sales. No less than 75% of analysts maintain a "strong buy" recommendation toward the stock, with not a single "sell" to be found.

Finally, Tyson Foods (TSN - 18.04) banked a fiscal second-quarter profit of $166 million, or 44 cents per share, while revenue increased 3% to $8.27 billion. Analysts were expecting the meat processor to earn 39 cents per share on $8.49 billion in revenue. Short sellers reduced their bearish exposure by more than 20% during the last two reporting periods, and short interest now accounts for a low 3.4% of the stock's float. TSN is up 2.4% in pre-market trading.

Earnings and Economic Data

The week kicks off with the Federal Reserve's consumer credit report . Quarterly earnings are due out from Clean Energy Fuels ( CLNE ) , Dendreon ( DNDN ), Electronic Arts ( EA ) , Rackspace Hosting (RAX) , Vivus (VVUS), DISH Network (DISH) , Halozyme Therapeutics (HALO), and PetMed Express (PETS) .

Overseas Trading

Stocks in Asia ended broadly lower today, as traders were rattled by the outcomes of key euro-zone elections over the weekend. In both France and Greece, voters removed incumbent politicians who had supported unpopular austerity measures -- throwing new doubts on the fiscal future of the debt-burdened region. Additionally, investors had a chance to respond to weak U.S. jobs data, which sparked Friday's sell-off on Wall Street. By the close, Japan's Nikkei lost 2.8%, Hong Kong's Hang Seng gave up 2.6%, South Korea's Kospi fell 1.6%, and China's Shanghai Composite closed fractionally lower.

Greece is the most pressing concern in Europe at midday, as the defeat of French President Nicolas Sarkozy had been telegraphed by preliminary election results. The two political parties that helped Greece secure a euro-zone bailout saw their voter support weaken considerably, suggesting that the country may be veering closer toward a disorderly bankruptcy. At last check, the German DAX is down 0.6%, and the French CAC 40 has advanced 0.1%. Markets in the U.K. are closed for holiday.

Overseas markets

Unusual Put and Call Activity:

For an explanation of how to use this information, check out our Education Center topics on Option Volume and Open Interest Configurations .

Unusual options activity - puts

Unusual options activity - calls

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This article appears in: Investing , Options

Referenced Stocks: CBOE , CLNE , DNDN , EA , SPX

Schaeffer's Investment Research

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