Opening View: DJIA Down as China and Ireland Overshadow Domestic Data

By
A A A

The Dow Jones Industrial Average (DJIA) advanced fractionally on Monday, closing back above the 11,200 level. However, the Dow will likely give up this round-number region early this morning, as fears about tightening Chinese monetary policy and a seemingly inevitable bailout of Ireland are squeezing Wall Street bulls out of the market. Heading into the open, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 63 points and 6.7 points below fair value, respectively. Domestic data looks solid, however, with positive earnings from Wal-Mart Stores Inc. ( WMT ) and Home Depot Inc. ( HD ) ahead of a fresh round of economic reports. For the DJIA, look for support near 11,150-11,100, with resistance near 11,300, while the SPX could find a floor near 1,190-1,195.

In equity news, General Motors Co. ( GM ) increased the price tag on its upcoming initial public offering (IPO) to a range of $32 per share to $33 per share. GM also said it's increasing the size of its Series B mandatory convertible junior preferred stock offering to $4 billion from $3 billion. At the midpoint of the IPO, GM will raise $13.6 billion, making it the second-richest IPO in U.S. history, behind Visa Inc.'s $18 billion offering in 2008.

Also, Apple Inc.'s ( AAPL ) iTunes music store will soon be offering Beatles songs, according to The Wall Street Journal . The deal was the culmination of long time talks between Apple, the Beatles, and their record label, EMI Group, the Journal reported. The report said that it was unclear whether other online music stores would be able to sell Beatles' songs.

In earnings news, Wal-Mart Stores Inc. ( WMT ) reported third-quarter earnings of $3.44 billion, or 95 cents per share, as sales rose 2.6% to $101.2 billion. Looking ahead, WMT forecast a fourth-quarter profit of $1.29 to $1.33 per share, and raised its full-year outlook to $4.08 to $4.12 per share. Analysts were expecting third-quarter earnings of 90 cents per share, fourth-quarter earnings of $1.28 per share, and a profit of $4.02 per share for the full year.

Finally, The Home Depot Inc., ( HD ) reported that its third-quarter net income climbed 21% on a year-over-year basis to $834 million, or 51 cents per share, as sales added 1.4% to $16.6 billion. Wall Street was expecting earnings of 48 cents per share on $16.63 billion in sales. For fiscal 2011, Home Depot now expects to earn $1.94 per share, above the current consensus estimate for $1.90 per share.

Earnings Preview

On the earnings front, Abercrombie & Fitch Inc. ( ANF ), ArvinMeritor Inc. (ARM), Dick's Sporting Goods Inc. (DKS), Saks Incorporated (SKS), The TJX Companies Inc. (TJX), and SINA Corporation (SINA) will release their quarterly reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Today, the October producer price index (PPI) and core PPI will be accompanied by the twin reports on industrial production and capacity utilization for October. Wednesday brings the usual weekly report on U.S. petroleum supplies, as well as the October consumer price index (CPI), core CPI reading, October's housing starts, and building permits. We end the week early on Thursday, with weekly initial jobless claims, October's leading economic indicators, and November's Philadelphia Fed manufacturing index.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,324,358 call contracts traded on Monday, compared to 747,432 put contracts. The resultant single-session put/call ratio arrived at 0.56, while the 21-day moving average held at 0.59.

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

Overseas Trading

Overseas trading is in a rout this morning, as none of the 10 foreign indexes that we track are in positive territory. In fact, the cumulative average return on the collective stands at a hefty loss of 1.48%. In Asian trading, Shanghai led the retreat with a nearly 4% plunge. Property developers dropped due to tightening measures out of Beijing, while miners and energy firms were hit on concerns about price curbs. Miners were also under pressure in Europe, with Chinese demand concerns being raised. What's more, sovereign debt issues were once again at the forefront, as it becomes increasingly clear that Ireland may be forced to accept a bailout by the European Union.

Overseas markets

Currencies and Commodities

The U.S. dollar continues to gain strength amid the current round of global turmoil. The greenback has rallied versus the euro, as the European currency weakens against increasing likelihood of a forced Irish bailout. At last check, the U.S. Dollar Index was up 0.28% at 78.74 in premarket trading. Meanwhile, continued talk of tightening Chinese monetary policy is pressuring both gold and crude prices this morning. Specifically, crude futures are down $1.24 at $84.05 per barrel, while gold has plunged $10.70 an ounce to $1,357.80 an ounce in London.

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.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.


This article appears in: Investing , Options

Referenced Stocks: AAPL , ANF , GM , HD , WMT

Schaeffer's Investment Research

Schaeffer's Investment Research
  • See all for Schaeffer's Investment Research
  • View Print Version

More from Schaeffer's Investment Research:

Related Videos

Stocks

Referenced

Most Active by Volume

44,823,339
  • $75.19 ▲ 0.28%
43,744,171
  • $3.44 ▼ 0.29%
42,340,022
  • $97.671 ▲ 0.66%
34,178,145
  • $17.62 ▼ 1.23%
34,028,998
  • $15.59 ▼ 0.19%
32,055,708
  • $21.23 ▼ 2.41%
31,539,235
  • $3.76 ▲ 0.80%
30,434,619
    $34.25 unch
As of 7/25/2014, 04:03 PM