Opening View: DJIA Down On Its Luck After JPMorgan Earnings, Bank of America Report

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U.S. stocks are headed moderately lower ahead of the bell, with a couple of blue-chip banking bigwigs dragging on the Dow. Most notably, JPMorgan Chase ( JPM ) is bracing for a drop out of the gate, after the firm confessed to a "modestly disappointing" fourth quarter. Meanwhile, Bank of America ( BAC ) is also making waves in the face of a Wall Street Journal report, which revealed the company's potential scale-back in the U.S. However, another encouraging bond auction out of Italy, as well as lingering optimism ahead of the latest consumer sentiment statistics, seems to be keeping the pre-market bears in check. Ahead of the bell, the Dow Jones Industrial Average (DJIA) is headed 25 points lower, while the broader S&P 500 Index (SPX) is set to open an historically positive day about 4 points south of fair value.

Dow, S&P and Nasdaq futures

In earnings news, JPMorgan Chase (JPM - 36.85) this morning reported a fourth-quarter profit of $3.7 billion, or 90 cents per share -- down 23% from a year earlier, primarily thanks to a 52% profit decline for its investment banking arm. Revenue, meanwhile, dropped 17% to $22.2 billion. Analysts, on average, were calling for a per-share profit of 90 cents on sales of $23.06 billion. "The firm's returns on tangible common equity for the fourth quarter of 2011 and the full year 2011 were 11% and 15%, respectively. We believe these returns were reasonable given the environment, although the return for the fourth quarter was modestly disappointing," said CEO Jamie Dimon. At last look, JPM is bracing for a 2.1% drop out of the gate.

Meanwhile, citing a heftier drop in same-store sales and weakened margins, New York & Co. (NWY - 3.01) downwardly revised its fourth-quarter fiscal guidance. NWY is now forecasting a loss of $11 million to $13 million - the fourth loss in a row for the women's retailer. In addition, NWY expects same-store sales to fall in the mid- to high-single digits, on a percentage basis, and for gross margin to contract by approximately 6.5% to 7.5% from a year earlier. The company previously called for a drop in same-store sales in the low- to mid-single digits, and for margins to decrease by 2% to 3%. As CEO Gregory Scott lamented, "Due to the highly promotional [holiday] environment, we found it necessary to increase our promotional efforts in December to drive sales - this came at the expense of margins."

In equities news, Bank of America (BAC - 6.79) will consider scaling back its U.S. operations if its financial problems worsen, according to a report in The Wall Street Journal . Citing sources familiar with the matter, the firm's executives put the option of a retreat on a list of potential emergency scenarios submitted to the Federal Reserve last year. In pre-market trading, BAC is down 2.7%.

Finally, Novartis AG (NVS - 56.73) unveiled plans to cut 1,960 jobs in the U.S. this year, thanks to the patent expiration of hypertension drug Diovan. The restructuring is expected to generate annual savings of about $450 million by 2013, and will cost the company a charge of $160 million in the first quarter. Furthermore, the firm said ebbing sales of Aliskeren will result in a fourth-quarter charge of $900 million. Ahead of the bell, NVS is pointed 1.3% lower.

Earnings Preview

There are no other notable earnings reports on today's docket. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The week wraps up with the mid-month Thomson Reuters/University of Michigan consumer sentiment index, plus the Labor Department's report on the trade deficit and import/export prices.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,314,706 call contracts traded on Thursday, compared to 752,333 put contracts. The resultant single-session put/call ratio arrived at 0.57, while the 21-day moving average was 0.68.

NYSE and Nasdaq summary

Volatility indices

Overseas Trading

Stocks in Asia ended mostly higher today, as traders celebrated encouraging bond auctions in Spain and Italy. Furthermore, a softer greenback bolstered commodity-related equities into the black, with Pacific Metals soaring 4.5% in Tokyo. However, Shanghai-listed stocks extended yesterday's retreat, thanks to data showing a relatively steep drop in the country's foreign-exchange reserves in the fourth quarter. By the close, Hong Kong's Hang Seng added 0.6%, Japan's Nikkei jumped 1.4%, and the Shanghai Composite bucked the trend with a 1.3% drop.

European stocks are mostly higher at midday, thanks to a second-straight successful auction of Italian debt, which sent yields lower. As such, banking stocks are pacing the advance across Europe, with Royal Bank of Scotland up 6% in the U.K., and BNP Paribas tacking on 4.8% in France. At last check, the German DAX has added 0.6%, the French CAC 40 is up 1.1%, and London's FTSE is 0.2% higher.

Overseas markets

Currencies and Commodities

The greenback is on the mend this morning, with the U.S. dollar index up about 0.3%. Meanwhile, crude futures have extended Thursday's embargo-related slide south of the century mark, with the front-month contract down 0.3% to linger near $99.04 per barrel. Finally, gold futures are pulling back from one-month peaks , with the malleable metal last seen 0.5% lower at $1,639.30 per barrel.

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

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This article appears in: Investing , Options

Referenced Stocks: BAC , CBOE , JPM

Schaeffer's Investment Research

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