Opening View: Caterpillar Lifts DJIA, Though Microsoft Earnings Limit Pre-Market Momentum


Stocks extended their trip into new-high territory on Thursday, despite a dose of less-than-impressive data on the home front. Ahead of the bell today, the major market indexes are trading mixed, as the Street deliberates over the latest batch of corporate earnings reports. On one hand, the Dow Jones Industrial Average (DJIA ) is flirting with a modest pre-market gain, with industrial bigwig Caterpillar ( CAT ) pacing the advancers after blowing past analysts' profit projections. However, an unimpressive showing from Microsoft Corp. (MSFT) has limited the blue-chip barometer's momentum, and -- along with an even more dismal report from Research In Motion (RIMM) -- has pushed the tech-rich Nasdaq Composite (COMP ) into the red.

Dow, S&P and Nasdaq futures

In equities news, Microsoft Corp. (MSFT - 26.71) reported a fiscal third-quarter profit of $5.2 billion, or 56 cents per share, excluding a one-time tax benefit -- up 31% from the year-ago quarter, and matching the Street's forecast. Revenue, meanwhile, rose 13% to $16.43 billion, compared to analysts' expectations for sales of $16.19 billion. Digging deeper into the data, Microsoft said sales of its Windows 7 operating system fell 4% in the quarter, while PC sales declined 1%. Nevertheless, the blue chip said demand for business PCs is up 9%, and that "consumers are purchasing Office 2010, Xbox and Kinect at tremendous rates." In pre-market trading, MSFT is poised to open about 0.8% lower.

Meanwhile, Caterpillar (CAT - 112.64) this morning reported a record first-quarter profit of $1.23 billion, or $1.84 per share, up fivefold from the period a year earlier. Revenue for the quarter jumped 57% to $12.95 billion. Analysts, on average, were anticipating first-quarter earnings of $1.31 per share on sales of $11.69 billion. The blue chip also upped its full-year earnings forecast to a range of $6.25 to $6.75 per share on revenue of $52 billion to $54 billion, compared to its prior guidance for earnings "near $6" per share on revenue "above $50 billion." At last check, CAT is set to open more than 3.1% higher.

Finally, Research In Motion Limited (RIMM - 56.59) slashed its first-quarter profit forecast to a range between $1.30 and $1.37 per share, compared to its late March outlook for earnings of $1.47 to $1.55 per share. The company also expects to fall short of its first-quarter revenue guidance of $5.2 billion to $5.6 billion. RIMM attributed the freshly cut forecast to weaker shipments of its BlackBerry smartphones and a shift toward devices with lower average selling prices. However, RIMM backed its full-year profit forecast of $7.50 per share, which it expects to attain through "prudent cost management" and new product launches due later in the fiscal year. Ahead of the bell, RIMM is lingering about 12% below breakeven.

Earnings Preview

Today's earnings docket will feature reports from Chevron Corp. ( CVX ), Merck & Co. (MRK), Goodyear Tire & Rubber (GT), D.R. Horton ( DHI ), and Cliffs Natural Resources ( CLF ), just to name a few. Keep your browser at for more news as it breaks.

Economic Calendar

The week ends with a bang today, with reports on personal income and spending, the Chicago purchasing managers index (PMI), and the Reuters/University of Michigan consumer sentiment index on the calendar.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,277,787 call contracts traded on Thursday, compared to 706,087 put contracts. The resultant single-session put/call ratio docked at 0.55, while the 21-day moving average remained at 0.59.

NYSE and Nasdaq summary

Volatility indices

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Overseas Trading

Markets in Asia finished mixed today, with stocks in Seoul slipping into the red after disappointing earnings from Samsung Electronics and data showing a slowdown in industrial production growth. However, Chinese equities powered higher, bouncing back from a five-session losing streak as bargain hunters scooped up battered stocks ahead of a long holiday weekend. By the close, South Korea's Kospi shed 0.7%, Hong Kong's Hang Seng lost 0.4%, and China's Shanghai Composite added 0.9%. Japanese markets are closed for holiday.

European markets are wobbling around breakeven at midday, with traders weighing a mixed bag of earnings from the auto sector. German company Daimler weighed on sentiment with lackluster first-quarter results, but Volvo and Volkswagen continued to gain ground in the wake of their respective quarterly reports. At last check, the German DAX is up 0.4%, while France's CAC 40 is off 0.1%. Markets in the U.K. are closed in observance of the royal wedding festivities.

Overseas markets

Currencies and Commodities

The greenback is ticking lower again this morning, with the U.S. dollar index down almost 0.3%. Elsewhere, crude futures have given back some of Thursday's modest gains. At last check, the June-dated contract has surrendered 0.2% to flirt with $112.65 per barrel. Meanwhile, gold futures have continued their trek into record-high territory. In pre-market action, the front-month contract has tacked on 0.3% to trade at $1,536.30 an ounce.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

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Every morning, our research staff analyzes the prior day and the overnight markets, and monitors the morning wires to give you an accurate preview of the day to come. If you enjoyed today's edition of Opening View, sign up here for free daily delivery, straight to your inbox, before the opening bell.

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This article appears in: Investing , Options

Referenced Stocks: CAT , CBOE , CLF , CVX , DHI

Schaeffer's Investment Research

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