Opening View: DJIA Futures Point to Continued Rebound

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The Dow Jones Industrial Average (DJIA) is poised to extend yesterday's 68-point rebound this morning, with Wall Street's economic optimism underpinned by solid corporate earnings. Construction spending and manufacturing data are due out today, as traders prepare for a wave of jobs data that begins tomorrow. Meanwhile, the earnings deluge continues today, with Pfizer Inc. ( PFE ) and United Parcel Service Inc. ( UPS ) among those firms likely to garner considerable attention. Heading into the open, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 28 points and 6.88 points above fair value, respectively.

Technically, the DJIA has rallied back to challenge potential resistance at the 11,900 level (home to the Dow's 10-day moving average), though this hurdle could fall in early trading this morning. Support for the DJIA resides at 11,800, while resistance remains at 12,000. The SPX, meanwhile, reclaimed its 20-day moving average yesterday, and could push back above its 10-day trendline later this morning. Look for the broad-market index to hold support at 1,280, with resistance in the 1,290-1,295 area. Finally, investor pessimism is rising again among options traders, as the 21-day moving average of the CBOE equity-only, single-session put/call ratio has risen to a nearly seven-week high of 0.54.

In earnings news, Cummins Engine Inc. ( CMI ) reported that its fourth-quarter earnings rose 34% to $362 million, or $1.84 per share, as sales climbed 22% to $4.14 billion. Analysts were looking for earnings of $1.69 per share on sales of $3.9 billion. "Given our strong balance sheet, the expected recovery of our North American markets and the global growth opportunities in front of us, we are forecasting further significant growth in 2011 and beyond," said Chairman and Chief Executive Tim Solso.

Elsewhere, BP plc ( BP ) said that its fourth-quarter net profit rose 30% to $5.57 billion and that it plans to resume paying a quarterly dividend. Revenue rose 14% to $83.99 billion. The company said its fourth-quarter results included a $1 billion pretax charge related to the Gulf of Mexico oil spill. The company also said that it plans to sell its Texas City and Carson refineries in the U.S.

Finally, Baidu Inc. ( BIDU ) announced that its fourth-quarter net income rose sharply to 1.16 billion yuan ($175.6 million), or 3.32 yuan per American depositary share. Revenue rose 94% to 2.45 billion yuan ($370.9 million). Excluding items, Baidu said earnings for the period were 3.40 yuan, or 52 cents per depositary share. Analysts had expected Baidu to post earnings of 47 cents per depositary share.

Earnings Preview

On the earnings front, Pfizer Inc. ( PFE ), United Parcel Service Inc. ( UPS ), Boston Scientific Corp. (BSX), Broadcom Corp. (BRCM), Electronic Arts Inc. (ERTS), and MEMC Electronic Materials Inc. (WFR) are slated to release their quarterly earnings reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The economic calendar offers up December's construction spending, January's Institute for Supply Management (ISM) manufacturing index, and January's auto sales figures today. Tomorrow, 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 arrive 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 unemployment rate.

Market Statistics

Equity option activity on the CBOE saw 1,245,689 call contracts traded on Monday, compared to 761,346 put contracts. The resultant single-session put/call ratio arrived at 0.61, while the 21-day moving average rose to 0.54 - its highest reading since Dec. 15, 2010.

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 bouncing back this morning, as eight of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 0.24%. Asian markets headed mostly higher, though trading in China was choppy ahead of this week's Lunar New Year holiday. Mixed manufacturing data out of Beijing also complicated matters, as China's official purchasing managers' index fell to 52.9 in January. European stocks are also trading higher, as Egyptian concerns took a back seat to gains in the metals and mining sector.

Overseas markets

Currencies and Commodities

The U.S. Dollar Index is headed lower once again this morning, as investors turn toward the equities market for higher returns on riskier investments. Heading into the open, the index is down 0.49% at 77.36. Crude futures are also heading lower this morning, as Egyptian concerns subside. Currently, the most active crude contract is down 70 cents at $91.49 per barrel. Finally, gold futures are edging higher, rising $3.80 to $1,338.30 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: BIDU , BP , CMI , PFE , UPS

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