Opening View: DJIA Futures Lower; Stocks Retreat from Two-Year Highs

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The Dow Jones Industrial Average (DJIA) was once again rejected by resistance at the 11,450 level on Tuesday, as the blue chip barometer refused to break out to a fresh two-year high. The S&P 500 Index (SPX), however, did tag a new two-year peak of 1,235.05 yesterday. However, Tuesday's late-session malaise appears to have carried over into this morning, with futures on the DJIA and the SPX trading roughly 8 points and 1.25 points below fair value, respectively. Even deal making from salesforce.com Inc. ( CRM ) and Fortune Brands Inc. ( FO ), and an earnings update from Home Depot Inc. ( HD ), have failed to inspire bulls to resume their buying spree this morning.

Technically, the DJIA has pulled back to support at the 11,350 level, with this region potentially providing a floor for the Dow today. A break below this support level could send the DJIA down to support at the 11,300 level. Resistance, meanwhile, remains firm in the 11,450 region. As for the SPX, support lies at the 1,220 level, with resistance near 1,230.

In equity news, Home Depot Inc. ( HD ) said that it expects adjusted 2010 earnings of $1.97 per share, on sales growth of about 2% to 2.5%. For 2011, HD forecast earnings of $2.19 per share to $2.23 per share, excluding items. Wall Street is currently looking for 2010 earnings of $1.95 per share, with 2011 earnings expected to come in at $2.22 per share. Home Depot said that it plans to buy back $2.5 billion in stock in 2011.

Elsewhere, salesforce.com Inc. ( CRM ) announced that it will buy social networking firm Heroku. Salesforce expects the deal to cut adjusted earnings by 2 cents per share in the fiscal 2011 fourth quarter, and by 12 cents to 13 cents per share in fiscal 2012.

Finally, Fortune Brands Inc. ( FO ) announced plans to split into three businesses. The company is spinning off its home-and-security unit, with products including Moen faucets and Master locks, in a tax-free move for stock holders. The golf division will also be spun off, while the company will continue to operate its liquor business as an independent publicly traded company. "[Each] business is very well positioned to create significant value for shareholders on its own," Fortune said.

Earnings Preview

On the earnings front, SAIC Inc. ( SAI ) and Smith & Wesson Holding Corp. ( SWHC ) are scheduled to release their quarterly reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The Street will be greeted with the weekly report on U.S. petroleum supplies today, while weekly jobless claims and October's wholesale inventories will arrive tomorrow. We round out the week tomorrow with November's import/export prices, December's University of Michigan consumer sentiment index, and November's Treasury budget.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,712,440 call contracts traded on Tuesday, compared to 805,420 put contracts. The resultant single-session put/call ratio arrived at 0.47 while the 21-day moving average held at 0.57.

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 looks weak this morning, as only three of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 0.20%. Regional indexes were broadly lower in Asia, though Japanese exporters led the Nikkei to a nearly 1% gain due to the yen's decline versus the U.S. dollar. Meanwhile, European markets are trading in a tight range this morning, as stocks digest their recent run to multi-year highs. What's more, news that Germany's exports dropped 1.1% in October from the preceding month is hampering investor sentiment.

Overseas markets

Currencies and Commodities

The U.S. dollar is bouncing back a bit this morning, with the U.S. Dollar Index popping back above the round-number 80 level. At last check, the index was up 0.38% at 80.16. Crude futures are taking the dollar's bounce to heart, falling 65 cents to $88.04 per barrel in electronic trading. Finally, gold futures are extending yesterday's late-session retreat, falling $13.70 to $1,395.30 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.



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This article appears in: Investing , Options

Referenced Stocks: CRM , FO , HD , SAI , SWHC

Schaeffer's Investment Research

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