Opening View: DJIA Aims for Triple-Digit Rebound Amid Cautious Optimism in Europe

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The major market indexes are looking to chip away at their weekly deficits today, with U.S. stocks pointed higher ahead of the bell. In Europe, reports that the European Central Bank (ECB) is buying the government debt of "periphery countries" have helped to cool the yields of euro-zone bonds . Meanwhile, traders appear cautiously optimistic ahead of both a meeting between German Chancellor Angela Merkel and U.K. Prime Minister David Cameron, and the new Greek government's delivery of its 2012 austerity budget to parliament. On the home front, Wall Street is awaiting the Conference Board's index of leading indicators, and in the meantime is celebrating the latest batch of earnings reports from notables like Aruba Networks ( ARUN ) and Marvell Technology ( MRVL ). Against this backdrop, the Dow Jones Industrial Average (DJIA) is aiming for a triple-digit rebound -- though the expiration of November-dated options could make for an extra volatile session.

Dow, S&P and Nasdaq futures

In earnings news, Aruba Networks, Inc. (ARUN - 21.79) reported a fiscal first-quarter loss of $467,000, or breakeven on a per-share basis, compared to a year-ago profit of $2.1 million, or 2 cents per share. ARUN is attributing the loss to a higher-than-projected 28.9% tax rate. Excluding items, earnings arrived at 14 cents per share, matching expectations. Net sales were on the rise, jumping 44% to $119.4 million. The top-line results exceeded the Street's forecast, with analysts, on average, predicting revenue of $117.4 million. Meanwhile, ARUN also announced plans to acquire privately held Avenda Systems for an undisclosed amount. The deal is expected to close sometime in the fiscal second quarter. In pre-market action, ARUN is headed for a 9.2% surge.


Meanwhile, Marvell Technology Group (MRVL - 13.76) reported a third-quarter profit of $195.1 million, or 32 cents per share - down 24% from its year-ago profit of $255.7 million, or 38 cents per share. Excluding items, MRVL said per-share earnings fell to 40 cents from 45 cents. Revenue, meanwhile, dipped 0.9% to $950.4 million. The results exceeded expectations, as analysts were calling for an adjusted profit of 39 cents per share on sales of $938.9 million. However, MRVL warned that severe flooding in Thailand could weigh on demand for hard-drive controllers in the current quarter, though the firm expects the industry to rebound by the middle of next year. At last check, MRVL is pointed 6% higher.

Finally, The Gap (GPS - 19.25) reported a third-quarter profit of $193 million, or 38 cents per share, down from $303 million, or 48 cents per share, in the year-ago period. The company also reported that same-store sales dropped by 5%, compared to a 1% increase in the same quarter last year. Meanwhile, revenue fell by 2% to $3.59 billion. Analysts, on average, were expecting a profit of 36 cents per share on revenue of $3.61 billion. Looking ahead, the company reiterated its fiscal 2011 earnings forecast of $1.40 to $1.50 per share, representing a slightly more cautious view than analysts' expectations for a profit of $1.50 per share. Ahead of the bell, GPS is up 0.2%.

Earnings Preview

Today's earnings docket will also feature reports from Ann Inc. ( ANN ), Cost Plus ( CPWM ), Cyberonics ( CYBX ), and H.J. Heinz (HNZ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

We wrap up the week with the Conference Board's index of leading indicators.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,033,639 call contracts traded on Thursday, compared to 861,677 put contracts. The resultant single-session put/call ratio arrived at 0.83, while the 21-day moving average was 0.70.

NYSE and Nasdaq summary

Volatility indices

Overseas Trading

Stocks in Asia ended the week on a negative note, as traders eyed soaring borrowing costs for several key European economies. Spanish bond yields tagged new euro-era highs ahead of a closely watched election this Sunday, where the Popular Party is expected to vanquish the ruling Socialists. Uncertainty over the euro zone's fiscal future weighed heavily on banking issues and exporters -- particularly in Tokyo, where the yen continues to rise on safe-haven buying. Meanwhile, data showing a monthly decline in Chinese home prices also brought out the bears. By the close, South Korea's Kospi fell 2%, China's Shanghai Composite lost 1.9%, Hong Kong's Hang Seng gave up 1.7%, and Japan's Nikkei shed 1.2%.

Meanwhile, the major European benchmarks are hovering around the breakeven line at midday, recovering from earlier losses amid signs of potential progress on the sovereign debt crisis. ECB President Mario Draghi is pushing political leaders to implement the proposed expansion of the European Financial Stability Facility (EFSF), and a new Dow Jones report indicates that the ECB may be near a plan to loan money to the International Monetary Fund (IMF) to underwrite government bailouts -- despite a lack of accord from Frankfurt. At midday, the German DAX and the French CAC 40 are both up 0.4%, and London's FTSE 100 is off 0.4%.

Overseas markets

Currencies and Commodities

The greenback is on the decline this morning, with the U.S. dollar down 0.7%. On the other hand, crude futures have rebounded from yesterday's plunge, though the front-month contract still remains south of the century mark. At last check, December-dated oil has recovered 0.8% to linger near $99.67 per barrel. Finally, gold futures have bounced back from two-week lows, with the precious metal last seen 0.7% higher at $1,731.40 an ounce.

Currencies and commodities

Unusual Put and Call Activity:

Due to technical issues, the Unusual Put and Call Activity charts are unavailable today. We apologize for any inconvenience.

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This article appears in: Investing , Options

Referenced Stocks: ANN , ARUN , CPWM , CYBX , MRVL

Schaeffer's Investment Research

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