Opening View: DJIA Heads for Triple-Digit Deficit on European Debt Concerns

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U.S. stocks are taking their cues from overseas this morning, with futures headed lower amid news of a volcanic ash cloud above Iceland, as well as ramped-up concerns about the collective health of the European economy. Investors are still digesting Fitch's late-week downgrade of Greek debt to sub-junk status, as well as Standard & Poor's downwardly revised outlook of Italy's debt. Elsewhere, the latest manufacturing data out of China is fueling concerns that ongoing monetary tightening measures by Beijing are beginning to take their toll. As such, the greenback has gained ground against its foreign rivals, pushing dollar-denominated crude oil even further from the century mark. Against this backdrop -- and despite a relatively solid round of corporate earnings reports -- the Dow Jones Industrial Average (DJIA ) is flirting with a triple-digit deficit right out of the gate.

Dow, S&P and Nasdaq futures

On the earnings front, Perry Ellis International (PERY - 29.50) said first-quarter earnings jumped a year-over-year 37% to $15.4 million, or 99 cents per share. Excluding items, the clothing maker said it earned $1.08 per share, exceeding expectations for a per-share profit of 99 cents per share. Revenue for the quarter jumped 31% to $288.3 million, surpassing the Street's forecast for sales of $277 million. Looking ahead, PERY upped its full-year earnings guidance by 10 cents to $2.40 to $2.50 per share, and reiterated its revenue outlook. At last check, PERY is set to open about 0.3% higher.

Meanwhile, Campbell Soup Co. (CPB - 35.24) reported fiscal third-quarter net income of $187 million, or 57 cents per share -- up from the $168 million, or 49 cents per share, earned in the year-ago quarter, and in line with analysts' estimates. Sales remained relatively flat at $1.81 billion, edging just past the Street's expectations for sales of $1.8 billion. The soup maker also said it expects fiscal-year earnings to come in at the high end of its guidance, which ranges from a year-over-year decrease of 1% to an increase of 1%. In pre-market trading, CPB is up almost 0.8%.

Elsewhere, Krispy Kreme Doughnuts (KKD - 6.40) said first-quarter earnings more than doubled to $9.17 million, or 13 cents per share, while revenue soared 14% to $104.6 million. Analysts, on average, were calling for a first-quarter profit of 9 cents per share on sales of $97 million. Meanwhile, sales at company stores increased 11%, while company-owned same-store sales jumped 5.8%, marking the tenth straight quarter-over-quarter increase. Ahead of the bell, KKD is flirting with a 7.5% lead.

Finally, thanks to a "non-cash charge" related to Japanese tax credits, Sony Corp. (SNE - 14.11) said it now expects to record a fiscal-year net loss of 260 billion yen (or $3.2 billion), compared to its previous guidance for a profit of 70 billion yen. The video-game maker is expected to step into the earnings confessional on Thursday, May 26, according to Thomson Reuters. At last check, SNE is poised to open about 2.5% lower.

Earnings Preview

Today's earnings docket will feature reports from China Sunergy ( CSUN ), GT Solar (SOLR), Perfect World (PWRD), and Verigy Ltd. (VRGY), just to name a few. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

There are no notable economic reports scheduled for release today. Tomorrow will bring us the Commerce Department's report on new home sales for April, as well as the Richmond Fed's manufacturing index for May. The pace picks up on Wednesday, with the day's docket featuring weekly petroleum inventories, durable goods orders for April, and the Federal Housing Finance Agency's home price index for March. On Thursday, the Commerce Department will issue its first-quarter gross domestic product ( GDP ) revision, while the Labor Department will release the latest data on weekly jobless claims. Meanwhile, the Kansas City Fed will unveil its manufacturing index for May. The economic schedule wraps up on Friday, with reports due out on personal incomes and spending, pending home sales for April, and the final Reuters/University of Michigan consumer sentiment index for May.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,210,563 call contracts traded on expiration Friday, compared to 917,371 put contracts. The resultant single-session put/call ratio docked at 0.76, while the 21-day moving average remained at 0.64.

NYSE and Nasdaq summary

Volatility indices

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Overseas Trading

Asian stocks ended broadly lower, pressured by lackluster economic data out of China. The HSBC flash manufacturing purchasing managers index (PMI) dropped to a 10-month low of 51.1 in May, suggesting that ongoing monetary tightening measures by Beijing are beginning to take their toll. Meanwhile, in Japan, industrial issues Hitachi Construction and Kawasaki Heavy swallowed steep losses after negative notes from analysts at Nomura. By the close, China's Shanghai Composite fell 2.9%, South Korea's Kospi tumbled 2.6%, the Hong Kong Hang Seng lost 2.1%, and Japan's Nikkei gave up 1.5%.

European markets are also sitting on significant losses at midday, with traders pricing in their anxiety over disappointing Chinese data and a new volcanic ash cloud hovering over Iceland. The country's most active volcano, Grimsvotn, erupted on Sunday, sending airlines in the region reeling today as investors fear a repeat of the travel disruptions caused by the Eyjafjallajokull ash cloud in 2010. At last check, the German DAX has shed 1.7%, France's CAC 40 has given up 1.8%, and London's FTSE 100 is off almost 1.6%.

Overseas markets

Currencies and Commodities

The greenback is trading higher this morning, thanks to fresh debt concerns in both Italy and Spain. In pre-market trading, the U.S. dollar index up about 1.1%. Elsewhere, black gold has erased Friday's gains, with the newly front-month contract down $2.50, or 2.5%, at $97.60 per barrel. Meanwhile, gold futures have continued their end-of-week rebound, with the front-month contract fractionally higher at $1,509.20 an ounce. Silver, on the other hand, has surrendered nearly 1.3% to trade near $34.65 an ounce.

Currencies and commodities

Unusual Put and Call Activity:

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This article appears in: Investing , Options

Referenced Stocks: CBOE , CSUN , GDP

Schaeffer's Investment Research

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