Opening View: Bull Rally Threatens to Send VIX to Multi-Week Lows

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The Dow Jones Industrial Average (DJIA) is sitting on a weekly gain of more than 2% after the blue-chip barometer soared more than 200 points on Thursday. The DJIA is cautiously higher this morning, with futures trading about 22 points above fair value, as investors digest another round of corporate earnings while awaiting bank stress tests out of Europe. The Dow is still staring up at stiff technical resistance in the 10,350-10,400 area, which could limit today's advance. Support, meanwhile, should manifest near 10,200, or 10,000 should Europe's banking tests spook investors. Turning to the S&P 500 Index (SPX), the SPX is trading above support near 1,085, but the index must still contend with the 1,100 level if it is to stage any serious rally ahead of the weekend. Finally, the CBOE Market Volatility Index (VIX) is being squeezed into support near the 23-24 region. The VIX has not closed a session below the 23 level since May 3, though a strong rally on Wall Street could finally send the "fear" index to multi-week lows.

In earnings news, Ford Motor Co. ( F ) reported second-quarter net income of $2.6 billion, or 61 cents per share. Adjusted net income was 68 cents per share. Revenue rose to $31.3 billion, from $26.8 billion. Wall Street analysts expected earnings of 40 cents per share, on revenue of $29.5 billion. Ford expects third-quarter production to rise by 126,000 units from year-ago levels, "reflecting continued strong demand for Ford products, maintenance of competitive stock levels, and the non-recurrence of prior-year stock reductions."

Elsewhere, Microsoft Corp. ( MSFT ) said that its fiscal fourth-quarter net income rose to $4.5 billion, or 51 cents per share, as revenue rose to $16.04 billion. Analysts were expecting earnings of 46 cents per share, and $15.2 billion in revenue.


Finally, Amazon.com Inc.'s ( AMZN ) second-quarter earnings jumped 45% to $207 million, or 45 cents per share, as grew 41% to $6.57 billion. Analysts were looking for earnings of 53 cents per share on revenue of $6.5 billion. For the third quarter, Amazon predicts revenue to come in the range of $6.9 billion to $7.6 billion. Analysts had been looking for $7.16 billion for the third quarter.

Earnings Preview

On the earnings front Honeywell International Inc. ( HON ), Johnson Controls Inc. ( JCI ), Schlumberger Limited ( SLB ), Verizon Communications Inc. ( VZ ), and Kimberly-Clark Corp. ( KMB ) are scheduled to release their quarterly earnings report today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

We end the week today as we began it, with no economic reports on the docket.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,435,420 call contracts traded on Thursday, compared to 769,983 put contracts. The resultant single-session put/call ratio arrived at 0.54, while the 21-day moving average held at 0.64.

Volatility indices

NYSE and Nasdaq summary

**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**

Dow, S&P and Nasdaq futures

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Overseas Trading

Overseas trading looks strong heading into the weekend, as eight of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 0.60%. Gains in U.S. markets provided lift for Asian markets, with Chinese shares soaring to their sixth consecutive winning session and Japanese stocks nearly erasing losses from earlier in the week. Across the pond in Europe, regional indexes were mixed due to activity in the financial sector ahead results from banking stress tests in the region.

Overseas markets

Currencies and Commodities

The U.S. Dollar Index continues to backslide from gains posted earlier in the week. Despite the decline of the past few sessions, the index is hovering just above support near the 82 level. Heading into the open, the U.S. Dollar Index is off 0.33% at 82.32. Crude futures are also trading lower in electronic trading, with the lead contract off 28 cents at $79.02 per barrel. Finally, gold futures are benefiting from the dollar's weakness, with the malleable metal up $2.50 at $1,198.10 an ounce in London.

Currencies and commodities

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


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