Opening View: DJIA Futures Fall after Spain Placed on Ratings Review

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After tapping a fresh two-year high, the Dow Jones Industrial Average (DJIA) settled on a gain of 54 points in the wake of the Fed's update on U.S. monetary policy. The central bank reiterated its stance on continued low interest rates and the $600 billion bond repurchase program. "The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment," the Fed explained. Suffering from a post-Fed hangover, and news that Moody's Investor Services placed Spain on review for a downgrade, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 21 points and 4 points below fair value, respectively.

Technically, the DJIA closed firmly above the 11,450 level, and even made a run at 11,500. Look for the latter region to provide resistance today, while the 11,400 level may be called upon for support, should this morning's reports on consumer prices, manufacturing, and housing come in worse than expected. As for the SPX, the broad-market index has found resistance in the 1,246 area, while support could arrive at 1,240, or 1,235 if early selling pressure gains momentum.

In equity news, Yahoo! Inc. ( YHOO ) said after the close last night that it is cutting 4% of its roughly 14,000 employees, confirming an earlier Wall Street Journal report on the matter. The move is intended to position the company "for revenue growth and margin expansion and to support our strategy to deliver differentiated products to the marketplace." Yahoo said in a statement that it is "grateful for the important contributions made by the employees affected by this reduction. We are offering severance packages and outplacement services to these employees."

On the merger and acquisition front, Swiss drug concern Novartis AG ( NVS ) announced that will take full ownership of Alcon Inc. ( ACL ). NVS is paying $168 per share, or $12.9 billion, for the remaining portion of ACL shares that it does not already own. "The full merger is the logical conclusion of our initial strategic investment in Alcon. With this step Novartis takes full ownership, becoming the global leader in eye care, a rapidly expanding, innovative platform based on the growing needs of an aging population," said Novartis Chairman Daniel Vasella.

Finally, Joy Global Inc. ( JOYG ) posted a fourth-quarter net profit of $146.3 million, or $1.39 per share, as sales rose 8.9% to $1.05 billion. Analysts were expecting a profit of $1.15 per share on sales of $921.6 million. Looking ahead, JOYG said it sees fiscal 2011 revenue of between $3.9 billion and $4.1 billion, with earnings of between $5.00 and $5.30 per share. Analysts had expected 2011 earnings of $4.85 per share on sales of $3.85 billion.

Earnings Preview

There are no more major earnings reports slated for release today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The economic calendar is packed with data today, as the November consumer price index, the December Empire State manufacturing index, November industrial production, the National Association of Home Builders' housing market index, and the usual weekly report on U.S. crude inventories are slated to arrive. Thursday is also busy, with weekly jobless claims, November housing starts, and the Philly Fed's December manufacturing index. The flood finally abates on Friday, with only the Conference Board's leading indicators for November slated for release

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,397,782 call contracts traded on Tuesday, compared to 719,199 put contracts. The resultant single-session put/call ratio arrived at 0.51 while the 21-day moving average dropped to 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

Overseas Trading

Overseas trading is abysmal this morning, with only one of the 10 foreign indexes that we track in positive territory. The cumulative average return on the collective stands at a loss of 0.73%. Asian markets closed broadly lower, with Hong Kong shares leading the way after Moody's Investor Services placed Spain on review for a possible downgrade. Meanwhile, Japanese stocks were pressured lower, despite the yen's decline versus the dollar, after the Bank of Japan's tankan survey showed that manufacturing sector sentiment deteriorated. As you might suspect, Spain is heading up the retreat in Europe, with euro-zone banks suffering the brunt of this morning's selling.

Overseas markets

Currencies and Commodities

With Spain on review, the euro is feeling the heat this morning. In fact, the weak European currency has helped push the U.S. Dollar Index roughly 0.45% higher in premarket trading. As you might expect, the rally in the dollar has applied pressure to commodities. Specifically, crude futures were last seen lower by 97 cents at $87.87, while gold futures had dropped $14.30 to trade at $1,390 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

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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: ACL , CBOE , JOYG , NVS , YHOO

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