Opening View: DJIA Heads Lower on Greek Downgrade, Debt-Ceiling Stalemate


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It's shaping up to be a rough session for U.S. stocks, after weekend talks between Republicans and Democrats failed to produce a plan to avoid a potential debt default. To make matters worse, Moody's issued a fresh downgrade of Greek debt this morning, slashing the country's rating by three notches to Ca -- just one step above default status. Against this backdrop, stock futures are pointed due south this morning. In fact, White House Chief of Staff William Daley may have summed it up best in a Face the Nation appearance on Sunday, when he warned, "We may have a few stressful days coming up." However, gold futures are benefiting from the ongoing debt gridlock, with the front-month contract on pace to explore new record highs in today's session. At last look, the Dow Jones Industrial Average (DJIA) is lingering about 94 points south of fair value, while the broader S&P 500 Index (SPX) is poised to open with a double-digit drop.

Dow, S&P and Nasdaq futures

Lorillard (LO - 112.29) said its second-quarter profit rose 11% to $291 million, or $2.05 per share, from its year-ago earnings of $263 million, or $1.73 per share. Revenue for the quarter increased 12% to $1.16 billion, excluding excise taxes. The results were mixed, as analysts, on average, were expecting LO to report a profit of $2.02 per share on $1.21 billion in revenue. Lorillard's quarterly performance was impacted by higher marketing and promotional costs linked with the debut of its Newport non-menthol cigarettes. Meanwhile, the company's flagship Newport brand grabbed a bigger market share during the quarter, up 1.1 percentage points to 12%. LO is set to soar 5.7% at the open.

Kimberly-Clark (KMB - 67.90) earned an adjusted second-quarter profit of $1.18 per share on revenue of $5.3 billion, topping Wall Street's forecast for earnings of $1.14 per share on $5.13 billion in revenue. However, the company's guidance for the remainder of the year has put traders on edge. "Although the commodity cost environment has worsened over the last three months, we are continuing to target adjusted earnings per share in a range of $4.80 to $5.05 for 2011," said Chairman and CEO Thomas J. Falk in a statement. "Nonetheless, without some moderation in input costs, it's more likely that 2011 adjusted earnings per share will be in the lower half of our guidance range." KMB is down 0.8% ahead of the bell.

Cal-Maine Foods (CALM - 35.51) earned a fiscal fourth-quarter profit of $7.3 million, or 30 cents per share, down 65% from $21.0 million, or 88 cents per share, in the year-ago period. Revenue edged up 9% to $242.4 million. The results were stronger than expected, with the average analyst estimate calling for a profit of 29 cents per share on $224.7 million in revenue. President and CEO Dolph Baker chalked up the healthy results to "higher retail demand associated with a late Easter holiday and a slightly smaller national flock." CALM shares are inactive in pre-market trading.

Earnings Preview

Today's earnings docket will feature reports from Baidu ( BIDU ), Broadcom ( BRCM ), Netflix ( NFLX ), RadioShack ( RSH ), Texas Instruments ( TXN ), Anadarko Petroleum (APC), and BE Aerospace (BEAV). Keep your browser at for more news as it breaks.

Economic Calendar

No major economic reports are scheduled for today. The economic calendar kicks off Tuesday with new home sales for June, the S&P/Case Shiller 20-city home price index for May, and the Conference Board's consumer confidence index for July. Wednesday features the Federal Reserve's Beige Book, along with June's durable goods orders and the regularly scheduled weekly report on petroleum inventories. On Thursday, we'll hear the usual update on weekly jobless claims, as well as pending home sales for May. The week's marquee economic report -- the advance estimate of second-quarter gross domestic product (GDP) -- hits the Street on Friday. Also on the day's docket are the Chicago PMI and the final Reuters/University of Michigan consumer sentiment index for July.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,053,606 call contracts traded on Friday, compared to 650,400 put contracts. The resultant single-session put/call ratio docked at 0.62, while the 21-day moving average remained at 0.63.

NYSE and Nasdaq summary

Volatility indices

The summer 2011 issue of SENTIMENT magazine is now available here.

Overseas Trading

Stocks in Asia slipped today, pressured by familiar debt concerns out of the U.S. and Europe. A Greek debt downgrade sparked some early jitters, as did ongoing gridlock on Capitol Hill. Rising risk aversion propped up the Japanese yen, thereby pressuring exporters. Meanwhile, shares of China South Locomotive and Rolling Stock plummeted after a deadly weekend train crash, even as the tragedy provided support for airline issues. By the close, China's Shanghai Composite fell 3%, South Korea's Kospi gave up 1%, Japan's Nikkei declined 0.8%, and Hong Kong's Hang Seng edged 0.7% lower.

European markets are mostly lower at midday, thanks to Moody's downgrade of Greek debt. In a note, the ratings agency cited a "virtually 100%" chance of default for the cash-strapped country. The lack of progress on the U.S. debt-ceiling debate is also emboldening the bears, with just a matter of days until the Aug. 2 deadline rolls around. At last check, the French CAC 40 is down 0.1%, the German DAX is fractionally lower, and London's FTSE 100 has bucked the trend with a 0.6% gain.

Overseas markets

Currencies and Commodities

Despite a softer U.S. dollar, crude oil futures are poised to snap their four-session winning streak today, with the front-month contract last seen about 96 cents, or almost 1%, lower. Meanwhile, gold futures are on track for their second straight session in the black, as escalating concerns about global debt have whetted traders' appetite for "safe haven" investments. At last check, the front-month gold contract has added $16.20, or 1.01%, to flirt with $1,617.70 an ounce.

Currencies and commodities

Unusual Put and Call Activity:

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This article appears in: Investing , Options
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