Opening View: DJIA Bounces Back as European Concerns Fade

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The Dow Jones Industrial Average (DJIA) gave up 107 points on Tuesday, slipping below former support at the 10,350 level as renewed concerns about European debt levels scuttled any hope of extending the prior week's rally. This morning, however, those fears have cooled following a successful Portuguese debt auction. With the Fed's Beige Book set to hit the Street later today, optimism is creeping back into the market, as futures on the DJIA and the S&P 500 Index (SPX) are trading 43 points and 3 points above fair value, respectively. The Dow could reclaim support at the 10,350 level in early trading, but resistance still looms overhead in the 10,450 area, which is home to the blue-chip barometer's 200-day moving average. As for the SPX, support lies in the 1,090 area, but yesterday's decline has placed the broad-market index back below resistance in the 1,100 region.

Looking to spread the blame around, BP plc ( BP ) said in a report released this morning that "a sequence of failures involving a number of different parties" led to the explosion and the massive Gulf of Mexico oil spill. According to the report, decisions made by "multiple companies and work teams" contributed to the accident. "It is evident that a series of complex events, rather than a single mistake or failure, led to the tragedy," said outgoing CEO Tony Hayward. "Multiple parties, including BP, Halliburton, and Transocean were involved."

Separately, Fitch Ratings lifted its long-term issuer default rating on BP by three levels to A from BBB. Fitch said the upgrade reflects an end to the threat of further leaks from the Macondo well in the Gulf of Mexico, as well as the "improved visibility of potential liability scenarios" that the company could face.

In earnings news, Ciena Corp. ( CIEN ) said that its third-quarter net loss widened to $109.9 million, or $1.18 per share. On an adjusted basis, the company posted a loss of 9 cents per share. Revenue fell to $164.8 million. Analysts were looking for a loss of 32 cents per share. Looking ahead, Ciena expects fourth-quarter revenue to rise by 5% from a year ago.

Finally, Smithfield Foods Inc. ( SFD ) swung to a fiscal first-quarter profit of $76.3 million, or 46 cents per share, from a loss of $107.7 million, or 75 cents per share, a year earlier. Sales rose 7% to $2.9 billion. Analysts were expecting earnings of 46 cents per share on sales of $2.99 billion. The company reiterated its "positive outlook" for the year.

Earnings Preview

On the earnings front, The Talbots Inc. ( TLB ), The Men's Wearhouse Inc. ( MW ), Shanda Games Limited ( GAME ), and Shuffle Master Inc. ( SHFL ) will release their quarterly earnings reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The Fed's Beige Book for September will be released later today, along with the usual weekly report on U.S. petroleum supplies. Tomorrow, we'll get the weekly report on initial jobless claims, along with the trade balance report from the Commerce Department. There are no major economic reports scheduled or Friday.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 791,779 call contracts traded on Tuesday, compared to 477,543 put contracts. The resultant single-session put/call ratio arrived at 0.60, 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 mixed this morning, as only six of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 0.17%. In Asia, the yen tagged a 15-year high versus the U.S. dollar, sending Japanese shares sharply lower in Tokyo. Japan's Nikkei closed with a loss of more than 2%, as banking stocks, which were already overburdened by renewed European concerns, were pressured by the yen's unchecked rally. Speaking of Europe, banking stocks remain weak this morning, but the region is mostly higher in the wake of a successful Portuguese debt auction.

Overseas markets

Currencies and Commodities

Commodities are taking center stage this morning, with crude retreating in the face of continued weakness in Asia, while gold prices push steadily toward all-time high territory. While the lead contract is currently up a mere $1.40 at $1,260.70 an ounce in London, gold futures tagged a fresh high of $1,262.30 an ounce - a two-month high for the December contract, and higher than yesterday's record settlement high of $1,259.30 an ounce in New York. Meanwhile, weaker equity markets in Asia and high U.S. petroleum stockpiles continues to apply pressure to crude futures. Heading into the open, the most active contract is down 13 cents at $73.96 per barrel. Finally, the U.S. Dollar Index has slipped 0.14% to 82.71, as the greenback rallies against the euro, but continues to struggle versus the Japanese yen.

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.



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This article appears in: Investing , Options


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