Opening View: DJIA Bulls Retreat Ahead of Second-Quarter GDP

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The Dow Jones Industrial Average (DJIA) attempted to bounce back from a triple-digit loss yesterday, but the pressure proved to be too much. The blue-chip barometer is pointed lower once again this morning, with futures trading about 45 points below fair value as traders grow anxious ahead of data on the health of the U.S. economy in the second quarter. The Dow remains pinned between support near 10,400 and resistance in the 10,600 region, though a negative reaction to this morning's flood of economic data could send the venerable average down for a test of support near 10,350. Elsewhere, the S&P 500 Index (SPX) is headed for an opening drop of about 6 points. Support for the broad-market index remains near 1,095, while resistance is holding firm in the 1,115 region, which is also home to the SPX's 200-day moving average. Should 1,095 fail as support, look for the SPX's decline to slow near 1,080. Finally, survey data from the American Associate of Individual Investors points toward the largest bullish percentage (40%) since mid-June, while the bearish percentage (33.33%) rests near a one-month low. This swing toward optimism could be a sign of short-term weakness for Wall Street.

In earnings news, Merck & Co. Inc. ( MRK ) reported second-quarter earnings of 86 cents per share, excluding items and one-time charges, as revenue jumped 92% to $11.35 billion. Wall Street was looking for a profit of 83 cents per share and revenue of $11.45 billion. Merck said it expects adjusted 2010 earnings of $3.29 per share to $3.39 per share, which falls short of the current consensus estimate for a fiscal 2010 profit of $3.37 per share.

Elsewhere, Coventry Health Care Inc. ( CVH ) reported second-quarter earnings of $1.10, excluding one-time items and a $278 million litigation charge. Revenue for the quarter fell 18% to $2.87 billion. Analysts were expecting earnings of 55 cents per share on revenue of $2.83 billion. For 2010, Coventry sees earnings of $1.72 to $1.87 per share.

Finally, ITT Corp. ( ITT ) posted adjusted second-quarter earnings of $1.14 per share, on revenue of $2.74 billion. Wall Street was looking for earnings of $1.07 per share. ITT said it expects third-quarter adjusted earnings to fall 6% from last year, in the range of 94 to 98 cents per share, while revenue is seen rising 1% to $2.7 billion. For the full year, the company sees adjusted earnings in a range of $4.08 to $4.18 per share.

Earnings Preview

On the earnings front, Arch Coal Inc. ( ACI ) and Chevron Corp. ( CVX ) are scheduled to release their quarterly earnings report today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

We round out the week today with the latest numbers on second-quarter gross domestic product, along with the Chicago Purchasing Managers' Index for July, and a final look at July consumer confidence as measured by Reuters and the University of Michigan.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,129,105 call contracts traded on Thursday, compared to 758,053 put contracts. The resultant single-session put/call ratio arrived at 0.67, while the 21-day moving average held at 0.61.

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 looks terrible this morning, with none of the 10 foreign indexes that we track in positive territory. What's more, the cumulative average return on the collective stands at a loss of 0.73%. In Asia, Japanese stocks lead the retreat, with exporters taking a large hit due to a strengthening yen and weak employment numbers. Meanwhile, European shares are headed lower, despite news that the unemployment rate across the euro-zone held flat at 10% in June.

Overseas markets

Currencies and Commodities

The U.S. Dollar Index appears to be rebounding from a multi-week low in pre-market trading. The index bounced off short-term support near 81.50 in Asian trading, and is attempting to repair some of this week's damage. Heading into the open, the index is up 0.24% at 81.84. Gold futures, meanwhile, are marginally higher, adding about $2.50 an ounce to trade at $1,173.70. The malleable metal is currently off about 1.6% for the week. Finally, crude futures have dropped 52 cents to trade at $77.84 per barrel in pre-market activity. Crude prices continue to meet with resistance near the $80-per-barrel mark.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

Unusual options activity - calls

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This article appears in: Investing , Options

Referenced Stocks: ACI , CBOE , CVH , CVX , ITT , MRK

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