Opening View: DJIA Edges Higher on Merger Monday

By
A A A

The Dow Jones industrial Average (DJIA) is poised to extend Friday's nearly 200-point rally, as Wall Street gains strength from this morning's flood of merger and acquisition activity. Futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 6.7 points and 1 point above fair value, respectively, up from session lows. The Dow vaulted above potential support at the 10,800 level on Friday, closing just north of 10,850. This region should provide a backstop for the DJIA heading into the week. Meanwhile, resistance lies overhead in the 10,950-11,000 area. As for the SPX, the broad-market index faces a key technical hurdle right out of the gate this morning at the 1,150 level. Should the SPX overcome this area this morning, look for 1,150 to provide support. Otherwise, the index could remain trapped between 1,150 and 1,140 for most of the week.

In merger and acquisition news, Southwest Airlines Co. ( LUV ) has agreed to buy AirTran Airways ( AAI ) for about $1.4 billion. The deal values AAI at $7.69 per share - a 69% premium to the stock's close on Friday. Both companies' boards have already voted in favor of the purchase. Shares of AirTran jumped 64% premarket, and Southwest shares slipped less than 1%.

Also in M&A action, Unilever plc ( UL ) has agreed to acquire Alberto Culver Co. ( ACV ) for $3.7 billion in cash. The deal values ACV at $37.50 per share in cash - a 19% premium to Alberto Culver's close at $31.48 on Friday.

Finally, Wal-Mart Stores Inc. ( WMT ) got in on the buying spree by making nonbinding proposal to acquire Johannesburg, South Africa-based Massmart Holdings Ltd. for 148 rand ($21.13) per share, or roughly $4.26 billion. Massmart shares last traded at 134.75 rand per share, meaning that WMT's deal represents a 9.8% premium. Wal-Mart said that acquiring Massmart would be "a compelling growth opportunity."

Earnings Preview

On the earnings front, Cal-Maine Foods Inc. ( CALM ), Jabil Circuit Inc ( JBL ), and Paychex Inc. ( PAYX ) are slated to release their quarterly earnings reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

There are no major economic reports scheduled for release today. Tomorrow offers up the Case-Shiller home price index for July and the Conference Board's Consumer Confidence Index for September. On Wednesday we'll get the usual weekly report on U.S. petroleum supplies, while the weekly report on initial jobless claims, the latest look at second-quarter gross domestic product, and the Chicago purchasing managers' index come in on Thursday. Friday will be chock full of economic data. The Commerce Department alone will report on August construction spending, personal income and spending, and September auto sales, while the University of Michigan will give us a final look at consumer sentiment in September and the Institute for Supply Management will release its September manufacturing index.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,225,730 call contracts traded on Friday, compared to 703,287 put contracts. The resultant single-session put/call ratio arrived at 0.57, while the 21-day moving average held at 0.60.

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

Click here for the new summer issue of SENTIMENT magazine

Overseas Trading

Overseas trading has a bullish bias this morning, as seven of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 0.44%. In Asia, regional indexes were broadly higher, with Japanese shares rallying behind exporters due to weakness in the yen. Across the pond in Europe, stocks traded mixed amid a wave of merger and acquisition deals, including Unilever plc's ( UL ) $3.7 billion deal for Alberto Culver Co. ( ACV ).

Overseas markets

Currencies and Commodities

Trading in currencies and commodities is pretty uneventful this morning. The U.S. Dollar Index is trading flat heading into the open, with the index off 0.02% at 79.38. Meanwhile, crude futures have added 15 cents to trade at $76.64 per barrel in electronic trading. Finally, gold remains perched just shy of the $1,300 level, with the December contract rising $1.30 to $1,299.40 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


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

27,140,634
  • $15.1545 ▼ 0.63%
18,053,322
    $37 unch
15,532,573
  • $95.90 ▲ 0.31%
13,553,415
  • $94.84 ▼ 0.19%
13,420,699
  • $3.985 ▲ 1.92%
13,134,437
  • $3.405 ▲ 0.74%
13,112,359
  • $25.3128 ▲ 0.65%
12,979,567
  • $72.60 ▼ 0.07%
As of 8/1/2014, 10:53 AM