The Dow Jones Industrial Average (DJIA) logged its biggest
percentage decline since Nov. 16, 2010 on Friday, plunging 1.39% as
growing turmoil in Egypt fed fears on Wall Street. That said,
investors appear to have digested the worst of the situation, as
futures on the DJIA and the S&P 500 Index (SPX) are trading
roughly 7 points and 4 points above fair value, respectively,
pointing toward a positive start to the regular session. Merger and
acquisition activity is helping to lift sentiment, while positive
corporate earnings and optimism ahead of Friday's nonfarm payrolls
data are contributing, as well.
Technically, the DJIA plunged below its 10-day moving average on
Friday, but held firm at support in the 11,800 region - which is
home to the Dow's 20-day moving average. Look for the DJIA to hold
in this area, while resistance could emerge near 11,900 and the
Dow's 10-day trendline. The SPX, which closed below both its 10-day
and 20-day moving averages, has support at the 1,275 level, while
resistance is emerging near the 1,285 area. Finally, traders should
keep a close eye on the CBOE Market Volatility Index (VIX), as the
so-called "fear barometer" spiked roughly 24% on Friday, logging
its biggest single-session percentage rally since May 20, 2010,
when the VIX spiked 29.64%. The VIX is now trading at its 2011
peak, just above the round-number 20 level.
Merger and acquisition news is dominating the equities market
this morning. Specifically, ProLogis (
) and AMB Property Corp. (
) announced a merger agreement in a stock-for-stock deal that is
expected to close in the second quarter of 2011. The combined
company would have a total market capitalization of $24 billion.
The combined company will be named ProLogis and trade under the
ticker symbol PLD.
Elsewhere, Sunoco Inc. (
) said that it is pushing forward with plans to spin off its
SunCoke unit, after reaching a settlement with ArcelorMittal (
) on coke pricing litigation. Sunoco said the settlement will
result in a charge of about $60 million for its 2012 earnings
before interest, taxes, depreciation, and amortization. The company
plans to disclose more information on its SunCoke unit separation
on Feb. 3.
Finally, Alcoa Inc. (
) said that it will purchase TransDigm Group Inc.'s fastener unit
for $240 million. The TransDigm unit is comprised of three
manufacturing facilities and about 400 staff, and will be rolled
into Alcoa Fastening Systems. Alcoa said the deal, to be closed
during the first quarter, "is expected to be earnings and cash flow
accretive in the first year."
On the earnings front, Exxon Mobil Corp. (XOM), Gannett Co. Inc.
(GCI), Illinois Tool Works Inc. (ITW), Sohu.com Inc. (SOHU),
Anadarko Petroleum Corp. (APC), Baidu.com Inc. (BIDU), Eastman
Chemical Co. (EMN), and McKesson Corp. (MCK) are slated to release
their quarterly earnings reports today. Keep your browser at
for more news as it breaks.
The economic calendar starts the week off today with a look at
December's personal income and spending figures and the Chicago
purchasing managers' index for January. Tomorrow offers up
December's construction spending, January's Institute for Supply
Management (ISM) manufacturing index, and January's auto sales
figures. On Wednesday, the weekly report on U.S. petroleum supplies
will be joined by the Challenger Gray & Christmas report on
planned corporate layoffs, and ADP's private sector employment for
January. Weekly initial jobless claims arrives on Thursday,
followed by December's factory orders and the ISM services index
for January. We round out the week with a bang, as the Labor
Department will release the January nonfarm payrolls report and the
Equity option activity on the CBOE saw 1,542,301 call contracts
traded on Friday, compared to 1,033,994 put contracts. The
resultant single-session put/call ratio arrived at 0.67, while the
21-day moving average held at 0.53.
**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
Trading the News: A Contrarian View.
Check out this special report from Bernie Schaeffer
Overseas trading has a bearish bias this morning, as only four
of the 10 foreign indexes that we track are in positive territory.
The cumulative average return on the collective stands at a loss of
0.29%. Ongoing unrest in Egypt has spread across the globe this
morning, with Asian stocks declining sharply across the board.
Commodities-related stocks were the lone exception, gaining ground
as crude oil rebounded in overnight trading. European trading has
followed Asia's lead, with financial firms, travel companies, and
car makers leading the way lower due to travel fears and concerns
regarding rising oil prices.
Currencies and Commodities
Support for the U.S. dollar has evaporated quickly in the wake
of Egypt's turmoil. The greenback enjoyed a solid day on Friday, as
investors fled to the dollar as a safe-haven investment. However,
the dollar is retreating this morning, with the U.S. Dollar Index
down 0.30% at 77.90 in premarket trading. Commodities, meanwhile,
are mostly lower despite the decline in the dollar. Gold futures
have plunged roughly $14.10 to $1,327.60 an ounce in London, while
crude futures have rebounded from the worst of their losses, and
were last seen lower by 3 cents at $89.31 per barrel.
Unusual Put and Call Activity:
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