Opening View: DJIA Futures Dip on Chinese Inflation Concerns

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The Dow Jones Industrial Average (DJIA) logged its seventh consecutive positive finish on Tuesday, as the blue chip barometer broke out to another multi-year high above the 12,200 level. However, concerns about the potential need for China to further tighten its monetary policy are creating drag this morning. In fact, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 10 points and 3.8 points below fair value, respectively. Later this morning, Wall Street will turn its attention toward Capitol Hill, where Federal Reserve Chairman Ben Bernanke will testify on the Fed's economic outlook and monetary policy before the House Budget Committee at 10 a.m. Eastern time.

Technically, traders will want to keep an eye out for potential support in the 12,200 region for the DJIA, with the 12,150 region potentially offering up additional leverage if selling pressure takes hold. Resistance, meanwhile, could emerge in the 12,250-12,300 region. Turning to the SPX, the 1,315 area could emerge as a floor for the index, while stronger support lies in the 1,305 region, which is home to the index's 10-day moving average. Resistance remains in the 1,320-1,325 area.

In earnings news, The Coca-Cola Company ( KO ) reported that its fourth-quarter net income rose to $2.37 billion, or $1.02 per share, as revenue advanced to $8.67 billion from $8.27 billion last year. The company said that North American volume rose for the first time in more than two years. "We firmly believe that North America will be a growth market of great opportunity for the next 10 years and beyond," said CEO Muhtar Kent. Excluding items, KO earned $1.06 per share in the period, besting Wall Street's expectations for a profit of $1.03 per share.

After the close last night, The Walt Disney Co. ( DIS ) announced that its first-quarter profit spiked 54% from the same period last year, helped in part by solid international video sales of "Toy Story 3." For the quarter, DIS said that it earned $1.33 billion, or 68 cents per share, with revenue rising to $10.7 billion. The average consensus estimate, per Thomson Reuters , was for a profit of 56 cents per share on sales of $10.5 billion.


Finally, Take-Two Interactive Software Inc. ( TTWO ) said that its third-quarter earnings rose 7% to $40.6 million, or 45 cents per share, due to stronger-than-expected video game sales. On a non-GAAP basis, TTWO's profit came in at $49.5 million, or 52 cents per share, even as revenue slipped 7% to $334.3 million. Wall Street had forecast third-quarter earnings of 34 cents per share on revenue of $310 million, according to Thomson Reuters .

Earnings Preview

On the earnings front, Alpha Natural Resources Inc. ( ANR ), IntercontinentalExchange Inc. ( ICE ), Northrop Grumman Corp. (NOC), Polo Ralph Lauren Corp. (RL), Activision Blizzard Inc. (ATVI), Advance Auto Parts Inc. (AAP), Akamai Technologies Inc. (AKAM), The Allstate Corp. (ALL), Cisco Systems Inc. (CSCO), MetLife Inc. (MET), Prudential Financial Inc. (PRU), and Whole Foods Market Inc. (WFMI) are slated to release their quarterly earnings reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The usual weekly report on crude inventories is the sole report on the docket today, while tomorrow sports only the weekly report on initial jobless claims. Finally, we round out the week on Friday with the December trade deficit and the University of Michigan's initial consumer sentiment index for February.

Market Statistics

Equity option activity on the CBOE saw 1,338,079 call contracts traded on Tuesday, compared to 723,200 put contracts. The resultant single-session put/call ratio arrived at 0.54, while the 21-day moving average held at 0.54.

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

Trading the News: A Contrarian View. Check out this special report from Bernie Schaeffer here.

Overseas Trading

Overseas trading is looking kind of grim this morning, as only two of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 0.51%. In Asia, regional markets headed sharply lower on speculation that Beijing may need to take additional steps to rein in inflation, even after raising interest rates yesterday. Toyota Motor Corp. (TM) was a standout in Tokyo, however, with the shares surging 5.2% after the company lifted its earnings forecast. European markets are taking their cues from Asia in the early going, with stocks retreating in the wake of a fresh rush of corporate earnings.

Overseas markets

Currencies and Commodities

Crude futures rebounded from their lowest levels in more than a week in overnight trading, as traders shrugged off the potential demand implications of China's rate hike. Heading into the open, the March crude contract has added 35 cents to trade at $87.29 per barrel. A falling U.S. dollar is helping provide lift for commodities this morning, with the U.S. Dollar Index off roughly 0.02% at 77.99 at last check. The greenback has struggled against the euro and the yen following China's monetary tightening. Finally, gold futures are stagnating this morning, as the weaker dollar and China's inflationary problems play tug-of-war with the precious metal. In London, gold has fallen 30 cents to $1,363.80 an ounce.

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.

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This article appears in: Investing , Options

Referenced Stocks: ANR , DIS , ICE , KO , TTWO

Schaeffer's Investment Research

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As of 12/17/2014, 04:15 PM


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