Opening View: Debt Vote Cancelled, Stocks Spiral Lower

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The highly anticipated vote from the U.S. House of Representatives regarding a solution to the pressing debt default dilemma... was cancelled. After several hours of deliberation (and several pizzas, according to MarketWatch ) the House decided late Thursday night to cancel the vote over Speaker John Boehner's deficit-reduction plan. As of now, it's unclear what this means for the future of the U.S. economy. What will come first: a vote to essentially increase the debt ceiling and avoid default, or the Aug. 2 deadline?

As you can probably guess, this news hasn't had a positive effect on stocks, with futures on all three major indexes pointing lower this morning. More specifically, the Dow Jones Industrial Average (DJIA ) is hovering 52 points south of fair value, while futures on the S&P 500 Index (SPX ) are trading 5 points lower. While there are several key economic and earnings reports on the docket for today, with such a dark cloud cast over the Street this morning, it seems unlikely that any of this news will have much of a positive effect on the market; however, any negative news could help fuel the bearish cause.

Dow, S&P and Nasdaq futures

Weyerhaeuser Company (WY - 20.05) reported second-quarter earnings bright and early this morning, boasting a profit of $10 million, or 2 cents per diluted share, on net sales of $1.8 billion. Excluding items, the company reported net earnings of $32 million, or 6 cents per diluted share. "We are confident that our ongoing efforts to sharpen our focus and reduce costs are positioning us to achieve our goal of generating superior sustainable returns for our shareholders," said President and Chief Executive Dan Fulton. Shareholders seem pleased with this news, with the stock up nearly 2% ahead of the open.

Chesapeake Energy (CHK - 33.43) reported a second-quarter profit of $510 million, or 68 cents per share, doubling its year-ago earnings of $255 million, or 37 cents per share. Excluding items, earnings arrived at 76 cents per share, while revenue surged 65% to $3.32 billion. The results surpassed expectations, with the consensus estimate calling for a profit of 72 cents per share on $2.77 billion in revenue. Output rose 9.3% during the quarter, said the natural gas giant.

Java king Starbucks (SBUX - 39.98) banked a fiscal third-quarter profit of $279.1 million, or 36 cents per share, up 34% on a year-over-year basis. Net revenue ramped up 12% to $2.93 billion, as same-store sales increased 8% in the U.S. and 5% overseas. Wall Street was expecting a slimmer profit of 34 cents per share on $2.84 billion in revenue. Looking ahead, SBUX upped its full-year earnings forecast to a range between $1.50 and $1.51 per share, up from its prior guidance of $1.46 to $1.48 per share. Additionally, the coffee chain said it's looking to add 600 net new stores in fiscal 2011, with another net addition of 800 stores in fiscal 2012.

STEC, Inc. (STEC - 16.70) unveiled second-quarter earnings of $9.7 million, or 18 cents per share, while revenue improved 34% to $82.5 million. Excluding items, STEC earned 23 cents per share. The results fell just short of consensus expectations, which called for earnings of 24 cents per share on $83.3 million in revenue. However, it was the firm's third-quarter forecast that really hit the Street with a thud. STEC anticipates an adjusted profit of 8 cents to 10 cents per share, with revenue ranging between $70 million and $72 million. Analysts, on the other hand, were predicting a profit of 31 cents per share on $96 million in revenue. Chairman and CEO Manouch Moshayedi attributed the downbeat guidance to "several market challenges." The Street has not responded well to this news, with the stock down nearly 36% ahead of the open.

Earnings Preview

Today's earnings docket will feature reports from Amgen ( AMGN ), Meritage Homes ( MTH ), Newmont Mining ( NEM ), American Axle ( AXL ), and Arch Coal ( ACI ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The week's marquee economic report -- the advance estimate of second-quarter gross domestic product (GDP) -- hits the Street today. Also on the day's docket are the Chicago PMI and the final Reuters/University of Michigan consumer sentiment index for July.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 941,868 call contracts traded on Thursday, compared to 654,886 put contracts. The resultant single-session put/call ratio docked at 0.70, while the 21-day moving average remained at 0.63.

NYSE and Nasdaq summary

Volatility indices

The summer 2011 issue of SENTIMENT magazine is now available here.

Overseas Trading

Asian markets retreated today, thanks to another stumbling block on Capitol Hill. The House of Representatives' cancelled vote exacerbated concerns about a resolution to the U.S. debt crisis, and sent Hong Kong financial stocks like HSBC Holdings down more than 1%. Elsewhere, Sony Corp. surrendered 3.3% after slashing its fiscal-year forecast, while Nintendo plummeted 13% after trimming its own fiscal-year profit outlook. By the close, Japan's Nikkei fell 0.7%, Hong Kong's Hang Seng index dipped 0.6%, and South Korea's Kospi backpedaled 1.05%.

European markets are also lower at midday, with banking stocks pacing the retreat in the wake of growing fears of a U.S. default. Furthermore, Moody's Investors Service issued a downgrade warning for cash-strapped Spain, which added to the broad-market selling pressure. In Paris, Credit Agricole was down more than 2.5% after warning of an earnings hit stemming from losses at its Greek business, while BNP Paribas was down more than 1.5% in sympathy with its sector peer. At last check, France's CAC 40 is trading 1.3% lower, Germany's DAX has surrendered 0.9%, and London's FTSE 100 is down 1%.

Overseas markets

Currencies and Commodities

Oil has had a rough week, as ongoing concerns over the U.S. debt situation and a string of discouraging economic data have taken their toll on black gold. As a result, crude futures are trading lower this Friday morning, down 0.7 point, or 0.7%, ahead of the open. On the other hand, the uncertain economic backdrop has done nothing but boost the demand for gold, with the precious metal tacking on 1.9 points, or 0.1%, to hover around $1,618.10 an ounce. Finally, despite everything working against it, the dollar has gained a bit of ground against its rivals this morning, adding 0.2 point, or 0.3%.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

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This article appears in: Investing , Options

Referenced Stocks: ACI , AMGN , AXL , MTH , NEM

Schaeffer's Investment Research

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