Opening View: DJIA Headed Higher on Hopes for a Healthy Euro Zone

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The cautious optimism that led to stocks' positive finish yesterday has carried over into today, with hopes for a solution to the European debt drama once again lifting sentiment. Specifically, investors are hopeful ahead of a scheduled conference call between German Chancellor Angela Merkel, French President Nicolas Sarkozy, and Greek Prime Minister George Papandreou. In fact, it seems Wall Street is donning its rose-colored glasses, with futures reversing early losses stemming from Moody's downgrade of a couple of French banks. What's more, not even a looming batch of data has weighed on the bulls, with reports on both retail sales and producer prices slated for release ahead of the bell. Against this optimistic backdrop, the Dow Jones Industrial Average (DJIA) is set for a 55-point climb out of the gate, while the broader S&P 500 Index (SPX) is lingering about 7 points north of breakeven.

Dow, S&P and Nasdaq futures

In equities news, Dell Inc. (DELL - 14.38) late yesterday said its board approved a plan to buy back up to $5 billion in stock, or about 19% of the tech firm's current market value. The new plan comes on the heels of the company's previous stock-repurchase program, which had $2.16 billion left on the initial $10 billion authorized four years earlier. "With this additional commitment from the board, we have the flexibility to continue making opportunistic share repurchases as a key element of our disciplined capital allocation strategy," said CFO Brian Gladden. Ahead of the bell, the shares of DELL are up 2.3%.

In earnings news, Majesco Entertainment (COOL - 2.66) reported an adjusted third-quarter profit of 3 cents per share on revenue of $19.5 million, surpassing analysts' expectations for a loss of 2 cents per share on revenue of $17.5 million. "Despite what is normally a seasonally weak time for our business, Majesco experienced another strong quarter," said CEO Jesse Sutton. "Driven by strength in Europe this past quarter, Zumba Fitness has now sold over 3 million units worldwide." The company predicted its fiscal 2011 earnings to range between 35 cents and 38 cents per share, on an adjusted basis, with revenue ranging between $120 million and $130 million. Consensus estimates were calling for COOL's fiscal-year earnings to hit 37 cents per share on revenue of $125.7 million.

Finally, Schiff Nutrition International, Inc. (WNI - 9.60) reported a fiscal first-quarter profit of $4.7 million, or 16 cents per share -- up 27% from its year-ago earnings of $3.7 million, or 13 cents per share, and comfortably surpassing the Street's forecast for a per-share profit of 13 cents. Meanwhile, revenue rose a year-over-year 13% to $58.2 million, beating analysts' consensus estimate for sales of $51.4 million. For the fiscal year, WNI backed its forecast for net sales percentage growth in the high single digits to low double digits.

Earnings Preview

Today's earnings docket will also feature reports from Apogee Enterprises ( APOG ), Ascena Retail Group ( ASNA ), CLARCOR ( CLC ), and Pall Corp. ( PLL ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

A batch of housing data from the Mortgage Bankers Association ( MBA ), the producer price index (PPI) for August, last month's retail sales figures, business inventories for July, and the usual crude inventories report are on the docket today. Thursday features the weekly jobless figures from the Labor Department, the Empire State manufacturing index, the Philly Fed business index, the consumer price index (CPI), and industrial production and capacity utilization for August. Friday wraps up with the preliminary Reuters/University of Michigan consumer sentiment index for September.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 797,237 call contracts traded on Tuesday, compared to 578,038 put contracts. The resultant single-session put/call ratio arrived at 0.73, while the 21-day moving average was 0.75.

NYSE and Nasdaq summary

Volatility indices

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Overseas Trading

Asian markets ended mixed today, as traders weighed conflicting signals over the fate of Europe. German Chancellor Merkel on Tuesday batted down speculation about a potential Greek default, but beleaguered French banks Credit Agricole and Societe Generale were hit with a Moody's downgrade today. Not surprisingly, the ratings agency cited "sizeable exposures to the Greek economy" as the impetus behind the negative notes. However, Chinese Premier Wen Jiabao gave credence to reports that Beijing might be willing to lend aid to cash-strapped euro-zone countries. "We have repeated our willingness to extend a helping hand and increase our investment," noted Wen at the World Economic Forum. Against this uncertain backdrop, South Korea's Kospi lost 3.5%, Japan's Nikkei gave up 1.1%, Hong Kong's Hang Seng added 0.08%, and China's Shanghai Composite rose 0.6%.

Meanwhile, traders in Europe are taking a glass-half-full approach, with the major regional indexes broadly higher at midday. The aforementioned Moody's downgrade seems to have been priced in already, with Societe Generale and Credit Agricole enjoying modest gains at last check. Plus, investors are hopeful ahead of the aforementioned conference call between Merkel, Sarkozy, and Papandreou. Even more encouraging, European Commission President Jose Manuel Barroso suggested that progress is being made on the concept of a joint euro-zone bond. At last check, the German DAX is up 3.1%, the French CAC 40 is 1.9% higher, and London's FTSE 100 has gained 1.8%.

Overseas markets

Currencies and Commodities

The greenback is trading fractionally lower this morning, with the U.S. dollar index down about 0.1% at last look. Elsewhere, crude oil futures have pulled back from six-week peak territory, with the front-month contract down 35 cents, or 0.4%, at $89.93 per barrel. Gold futures, on the other hand, have extended yesterday's upward momentum, tacking on $7.90, or 0.4%, to flirt with $1,838 an ounce.

Currencies and commodities

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This article appears in: Investing , Options

Referenced Stocks: APOG , ASNA , CLC , MBA , PLL

Schaeffer's Investment Research

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