Opening View: Deal-Making Fails to Lift DJIA Ahead of Fed

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The Dow Jones Industrial Average (DJIA) plunged 141 points on Monday, as traders continue to fret over the loss of momentum in the economic recovery. With several key reports on tap today, including the minutes from the most recent Federal Open Market Committee meeting, Monday's late-session sell-off has plenty of fuel heading into the open. In fact, futures on the DJIA and S&P 500 Index (SPX) are trading about 65 points and 7.8 points below fair value, respectively. With the Dow perched just above 10,000 heading into the open, it is likely that we will see this psychological level breached in early trading. What's more, the SPX appears poised to open near its lowest levels since July 7. Support for the DJIA could materialize near 9,950, while 1,035 is the next potential floor for the SPX should 1,040 fall. Finally, the CBOE Market Volatility Index (VIX) could be poised for a breakout above the 28-29 region - an area that has held the index in check since July 6.

Merger and acquisition news continues to roll in this morning, as Deere & Co. ( DE ) announced the sale of its John Deere Renewables unit to Exelon Corp. ( EXC ) in a deal valued at $900 million. Exelon said that the deal will help it expand into the wind generation business through the addition of 735 megawatts of wind energy, including 230 megawatts which are currently under development. Deere plans to take an after-tax charge of approximately $25 million in its fourth-quarter results as part of the sale.

Elsewhere, Cigna Corp. ( CI ) has acquired privately held Vanbreda International in a move to expand its global presence. Terms of deal were not disclosed. Vanbreda specializes in insurance and employee benefits for non-government organizations as well as corporate clients. "There is little overlap between our current businesses and capabilities bringing mutual opportunity to both," said William Atwell, president of CIGNA International.

Finally, in earnings news, Dollar General Corp. ( DG ) reported second-quarter earnings of $141 million, or 41 cents per share, as sales rose to $3.2 billion from $2.9 billion a year ago. Analysts were looking for a profit of 39 cents per share on sales of $3.2 billion. Looking ahead, Dollar General lifted its 2010 adjusted earnings forecast to $1.68-$1.74 per share from $1.62-$1.69 per share.

Earnings Preview

On the earnings front, DSW Inc. ( DSW ) will release its quarterly earnings report today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The Case-Shiller home price index, the minutes from the most recent Federal Open Market Committee meeting, the Chicago Purchasing Managers' Index, and the Conference Board's Consumer Confidence Index for August will be released today, while the ADP report on private sector job growth in August will kick off three days of employment data tomorrow. Also on tap for Wednesday are the Institute for Supply Management's ( ISM ) manufacturing index for August, the July construction spending report for July, and August's auto sales. We'll get the weekly report on new jobless claims on Thursday, along with July reports on factory orders and pending home sales. The hammer drops on Friday with the Labor Department's numbers on nonfarm payrolls and the unemployment rate in August. The ISM will also release its services index for August.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 692,508 call contracts traded on Monday, compared to 403,434 put contracts. The resultant single-session put/call ratio arrived at 0.58, while the 21-day moving average held at 0.63.

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 is in poor shape this morning, as none of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 1.20%. Asian markets finished broadly lower, though Japan's Nikkei outstripped the rest of the region with a plunge of 3.55%. In fact, Japanese shares closed at a fresh 16-month low, with investors bailing on exporters due to the continued rise in the yen, as the nation's currency continued to rise despite the Bank of Japan's efforts to further ease its monetary policy. In Europe, stocks were last seen broadly lower, as a weak session on Wall Street and heavy losses in Tokyo are weighing heavily on investor sentiment. Economic concerns remain at the forefront, as the euro zone's unemployment rate remained at 10% in July, despite German reporting its 14th consecutive month of declining joblessness.

Overseas markets

Currencies and Commodities

For maybe the first time in two weeks, the Japanese yen is not the center of attention among commodities traders, as the euro has turned higher in the wake of reports that Germany's jobless numbers fell for the 14th straight month. That's not to say that the yen didn't continue its rally versus the dollar, as the Japanese currency shrugged off more comments from the country's top finance minister. Surprisingly, the U.S. Dollar Index is only off about 0.10% in the midst of this flurry of activity, with the index holding above support in the 83 region. In commodities, crude futures are being pummeled once again, dropping $1.01 to $73.69 per barrel. Finally, gold futures are down $3.40 at $1,235.80 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

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.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: CBOE , CI , DE , DG , DSW , EXC , ISM

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