The Dow Jones Industrial Average (DJIA ) fell over 400 points on
Thursday, as economists at Morgan Stanley cut their growth
forecasts for the struggling global economy. The situation looks
even worse today, as J.P. Morgan has put another nail in the bulls'
coffin. This morning, J.P. Morgan cut estimates for U.S. economic
growth, while also warning that recession risks are "clearly
elevated." Specifically, the firm slashed its outlook for
fourth-quarter growth to 1% from 2.5%, while lowering its
first-quarter 2012 growth forecast to 0.5% from 1.5%. "Declining
energy prices should help to cushion some of the weakness in the
economy, and the still-low levels of cyclically-sensitive spending
could reduce the chances of getting a negative GDP quarter.
Nonetheless, the risks of a recession are clearly elevated," the
firm said. Meanwhile, a disappointing earnings report from
Hewlett-Packard (HPQ - 29.51) has only fanned the bearish flames,
putting all three major indexes in position to open substantially
lower this Friday morning.
Jumping right in... HPQ announced that its fiscal third-quarter
profit rose 8.6% to $1.93 billion, or 93 cents per share, while
revenue edged up 1.5% to $31.19 billion. Excluding items, HPQ
earned $1.10 per share. The results fell roughly in line with
analysts' expectations, which called for a profit of $1.09 per
share on $31.17 billion in revenue. For the full year, the tech
giant slashed its earnings forecast to a range between $4.82 and
$4.86 per share, down from its prior view for a profit of at least
$5 per share. Fiscal 2011 revenue is expected to weigh in between
$127.2 billion and $127.6 billion, compared to HPQ's previous
guidance of $129 billion to $130 billion. HPQ also unveiled plans
to acquire U.K.-based Autonomy Corp. for approximately $42.11 per
share, and confirmed reports that it's "evaluating strategic
alternatives" for its PC business. Ahead of the open, HPQ is down
Retailer Ann Inc. (ANN - 19.27) confessed to a second-quarter
profit 47 cents per share on revenue of $558.2 million. These
figures easily topped analysts' predictions, which called for a
profit of 45 cents per share on revenue of $550.22 million. Looking
ahead, ANN forecast third-quarter sales of $565 million, with
fiscal-year sales coming in around $2.23 billion. Analysts had
forecast third-quarter sales of $560.5 million, with fiscal 2011
sales arriving at $2.21 billion. Kay Krill, ANN's CEO, said the
strong results reflected the success of its LOFT and Ann Taylor
brands. "Looking ahead to the third quarter, we are pleased by
client response to our new pre-Fall product assortments, and we
fully expect to deliver positive comparable sales performance at
both brands in all channels," the CEO said.
Salesforce.com (CRM - 114.06) swung to a second-quarter loss of
$4.3 million, or 3 cents per share, from its year-ago profit of
$14.7 million, or 11 cents per share. Excluding items, CRM earned
30 cents per share, while revenue improved 38% to $546 million.
Analysts were looking for a profit of 30 cents per share on $528.8
million in revenue. For the full year, the tech firm raised its
revenue forecast to a range between $2.22 billion and $2.23
billion, up from its May guidance of $2.15 billion to $2.17
billion. CRM has been hit this morning with price-target cuts from
UBS, Susquehanna, J.P. Morgan, and Jefferies, but the stock is up
4.9% in pre-market trading.
Elsewhere, BP plc (BP - 39.32) is down some 2% this morning on
suspicions of a possible spill in the Gulf of Mexico. On Thursday,
BP said that it had been asked by the U.S. Coast Guard to
investigate a reported sheen seen in the area. "Based on the
initial investigation, it does not appear that the sheen was from a
BP source," BP said in a statement. Last year, BP was one of the
parties involved in the Deepwater Horizon disaster, which quickly
became the largest oil spill in U.S. history.
Today's earnings docket will feature reports from China Sunergy
) and Yingli Green Energy (
). Keep your browser at
for more news as it breaks.
There are no major economic reports on for today.
Equity option activity on the Chicago Board Options Exchange (
) saw 1,167,915 call contracts traded on Thursday, compared to
1,137,881 put contracts. The resultant single-session put/call
ratio arrived at 0.97, while the 21-day moving average was
The summer 2011 issue of
magazine is now available here.
Asian markets ended broadly lower today, as recession fears
rippled around the globe. Deutsche Bank cut its growth outlook for
China, with the firm asserting that weakness in the U.S. and Europe
now poses a greater threat to the economy than monetary tightening.
Meanwhile, a 6.8-magnitude earthquake -- as well as a related
tsunami advisory -- kept traders on edge in Tokyo. However,
Seoul-listed equities paced the decline, with trading briefly
halted in the face of heavy selling. By the close, South Korea's
Kospi lost 6.2%, enduring its largest single-day percentage drop in
nearly three years. Hong Kong's Hang Seng gave up 3.1%, Japan's
Nikkei fell 2.5%, and China's Shanghai Composite gave up about
European stocks are swimming in red ink at midday, led lower by
the banking sector. Activity in the European Central Bank's (ECB)
overnight lending program has prompted fresh liquidity concerns,
with Italy's Intesa SanPaolo and UniCredit among the top decliners.
Elsewhere, BP shares backpedaled in London as a result of the
aforementioned oil sheen suspicions. At last check, the German DAX
is down 3.2%, the French CAC 40 is down 2.1%, and London's FTSE 100
is off 1.4%.
Currencies and Commodities
Despite all of the "downgrade" and "recession" talk on the
Street, the U.S. dollar index is flat this morning. Meanwhile, the
"R" word has taken a toll on oil, with crude futures down 2.3
points, or 2.8%. Amid this backdrop, gold has continued its
record-breaking ascent, as traders flock to the precious metal's
"safe-haven" arms. Ahead of the open, gold futures are up nearly 56
points, or 3%, to trade at $1,877.90 an ounce.
Unusual Put and Call Activity:
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