Opening View: Despite Alcoa's Earnings Miss, DJIA Heads Higher on Hopes for Slovak Revote

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U.S. stocks are set to kick off the session on a high note today, despite blue-chip bigwig Alcoa's ( AA ) lackluster start to third-quarter earnings season. Furthermore, in spite of Slovakia's rejection of a bolstered euro-zone bailout fund , investors are optimistic that the country will overturn the vote ahead of a summit of European Union ( EU ) leaders next week. As Wall Street takes the glass-half-full approach, the Dow Jones Industrial Average (DJIA) is headed for a 62-point pop out of the gate, while the broader S&P 500 Index (SPX) is poised to extend its October run in the black.

Dow, S&P and Nasdaq futures

In earnings news, Alcoa (AA - 10.30) said its third-quarter profit more than doubled to $172 million, or 15 cents per share, from last year's earnings of $61 million, or 6 cents per share. Revenue improved 21% to $6.42 billion. The results were mixed, as Wall Street was anticipating a profit of 22 cents per share on $6.22 billion in revenue. "With the exception of Europe, we saw growth in our end markets, though at a slower rate than in the first half, as confidence in the global recovery faded," explained Chairman and CEO Klaus Kleinfeld. In pre-market trading, the shares of AA are pointed 3.4% lower.

Elsewhere, Healthcare Services Group (HCSG - 17.52) reported a third-quarter profit of $10 million, or 15 cents per share, up 9% from its year-ago earnings of $9.2 million, or 14 cents per share. Meanwhile, revenue increased 12% to $218.9 million. Analysts, on average, were expecting HCSG to bank a profit of 15 cents per share on $216 million in revenue.

Finally, PepsiCo (PEP - 60.95) reported a third-quarter profit of $2 billion, or $1.25 per share, compared to $1.92 billion, or $1.19 per share, a year earlier. Excluding items, the beverage behemoth said it earned $1.31 per share. Revenue, meanwhile, jumped 13% to $17.58 billion. The results topped expectations, as analysts, on average, were calling for an adjusted profit of $1.30 per share on sales of $17.18 billion. Meanwhile, PEP also reiterated its 2011 outlook, which calls for high single-digit earnings-per-share growth. At last check, PEP is poised to start the session with a 1.2% gain.

Earnings Preview

Today's earnings docket will feature reports from Adtran Inc. ( ADTN ), Infosys ( INFY ), ASML Holding ( ASML ), and Universal Forest Products (UFPI). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The Federal Open Market Committee's (FOMC) latest meeting minutes, along with the MBA mortgage index, are slated for release today. Meanwhile, Thursday heats up with the August trade balance, the holiday-delayed crude inventories report, and the weekly report on initial jobless claims. Friday winds down with September retail sales data, the Reuters/UMich consumer sentiment index, business inventories, and import/export prices.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 747,982 call contracts traded on Tuesday, compared to 582,457 put contracts. The resultant single-session put/call ratio arrived at 0.78, while the 21-day moving average was 0.71.

NYSE and Nasdaq summary

Volatility indices

Overseas Trading

Asian markets ended mostly higher today, with Shanghai-listed equities blazing the path into the black. Banking stocks continued to lead the advance, lifted by news that the government's sovereign wealth fund is plowing cash into major financial firms. Traders in South Korea shrugged off downbeat jobs data to take part in the day's rally, but Japanese equities succumbed to selling pressure. Weakness in major manufacturing issues played a role, as the likes of Honda and Toyota face production halts amid heavy flooding at their respective Thailand factories. By the close, Japan's Nikkei shed 0.4%, South Korea's Kospi rose 0.8%, Hong Kong's Hang Seng gained 1%, and China's Shanghai Composite surged 3%.

European benchmarks are on positive ground at midday, recovering from early losses after Slovakia voted down a measure to expand the European Financial Stability Facility (EFSF). With a second vote on the matter slated for later in the week, traders aren't ready to panic just yet. Instead, investors are looking forward to some insight from European Commission President Jose Manuel Barroso, who's due to present a bank recapitalization plan before the European Parliament later in the session. In other news, a report on euro-zone industrial production came in stronger than expected, while chip maker ASML rallied on the heels of its third-quarter earnings report. At midday, the French CAC 40 is up 1.3%, the German DAX has added 1.2%, and London's FTSE 100 has tacked on 0.3%.

Overseas markets

Currencies and Commodities

The greenback is trading lower this morning, with the U.S. dollar index down 0.8% at last look. Elsewhere, crude futures are poised to extend their winning streak to six straight sessions, despite the International Energy Agency's (IEA) downwardly revised demand forecast for 2011 and 2012. At last check, the front-month contract is up 48 cents, or 0.6%, at $86.49 per barrel. Finally, gold futures have bounced back from yesterday's wave of profit-taking, with the malleable metal last seen $23.90, or 1.4%, higher at $1,684.90 an ounce.

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: AA , ADTN , ASML , EU , INFY

Schaeffer's Investment Research

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