Opening View: DJIA Set to Follow Europe Lower Amid Revived Concerns About Greek Debt

By
A A A

The major market indexes are set to snap their five-session winning streak, thanks to revived concerns about the fiscal health of Europe. A relatively unproductive weekend summit of European Union ( EU ) finance ministers and U.S. Treasury Secretary Timothy Geithner did little to bolster sentiment, as did a regional election defeat for German Chancellor Angela Merkel. In addition, reports that Greek Prime Minister George Papandreou took part in an emergency meeting to address his country's budget shortfall have investors on edge, especially ahead of a scheduled conference call between Finance Minister Evangelos Venizelos and representatives from several international finance agencies. Against this uncertain backdrop, the Dow Jones Industrial Average (DJIA) is bracing for a triple-digit drop out of the gate, while the S&P 500 Index (SPX) is set to open roughly 16 points in the red.

Dow, S&P and Nasdaq futures

In earnings news, Lennar (LEN - 13.80) said fiscal third-quarter earnings fell 31% to $20.7 million, or 11 cents per share, while revenue dropped 0.6% to $820.2 million. Analysts, on average, were expecting the home builder to post a profit of 10 cents per share on sales of $820.6 million. "We have seen demand for home purchases slowly return to the marketplace, driven by low home prices and all-time low interest rates," said CEO Stuart Miller. Ahead of the bell, the shares of LEN are set to open about 3.3% higher.

In equities news, Tyco International (TYC - 43.70) unveiled plans to split into three publicly traded companies. The firm said its shareholders would own a 100% stake in each of the three entities, which consist of the ADT North America residential security business, flow control products and services, and the commercial security and fire business. Tyco said it expects the transaction to be completed in about a year, and is anticipating one-time transaction costs of about $700 million. In pre-market trading, the shares of TYC have skyrocketed more than 9%.

Finally, Netflix (NFLX - 155.19) said it is separating its streaming movie business and its DVD delivery business, which will be known as "Qwikster." "It's hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best," wrote CEO Reed Hastings via NFLX's corporate blog. Furthermore, Hastings admitted that he "messed up" in the way he handled the firm's recent -- and highly controversial -- price hikes, saying that "it is clear from the feedback over the past two months that many members felt we lacked respect and humility." However, he said, "that was certainly not our intent, and I offer my sincere apology." Nevertheless, the shares of NFLX are pointed 1.3% lower in pre-market action.

Earnings Preview

Today's earnings docket will also feature a report from Accuray ( ARAY ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The economic calendar kicks off today with the NAHB housing market index for September. On Tuesday, housing starts and building permits for August are set to hit the Street. All eyes will be on the Federal Open Market Committee (FOMC) this Wednesday, when the group reveals its latest decision on monetary policy. Also on the day's calendar are existing home sales for August and the regularly scheduled report on petroleum supplies. Initial jobless claims are on the docket for Thursday, along with the Conference Board's index of leading economic indicators for August. There are no major economic reports scheduled for Friday.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,241,722 call contracts traded on Friday, compared to 837,458 put contracts. The resultant single-session put/call ratio arrived at 0.67, while the 21-day moving average was 0.74.

NYSE and Nasdaq summary

Volatility indices

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

Overseas Trading

Asian markets ended broadly lower today, with familiar concerns about European debt setting the tone. The Wall Street Journal reported that Greek Prime Minister Papandreou took part in emergency meetings Sunday to address his country's budget crisis, after the International Monetary Fund ( IMF ), European Central Bank (ECB), and European Commission ( EC ) demanded "a credible plan to meet [Greece's] deficit reduction commitments" before doling out any aid. By the close, Hong Kong's Hang Seng lost 2.8%, China's Shanghai Composite shed 1.8%, and South Korea's Kospi gave up 1%. Markets in Japan are closed for holiday.

European stocks are also wallowing in red ink, with speculation swirling about a potential Greek default ahead of a planned conference call between Finance Minister Venizelos and representatives from the IMF, ECB, and EC. Political turmoil is also fueling the bears, after German Chancellor Merkel's conservative party lost a regional vote to Social Democrats. Against this uneasy backdrop, banks are among the top decliners, with Societe Generale taking a dive in Paris and Barclays stumbling lower in the U.K. At midday, the German DAX is down 2.5%, the French CAC 40 has surrendered 2.4%, while London's FTSE 100 has lost 1.7%.

Overseas markets

Currencies and Commodities

The greenback has continued its recent ascent this morning, with the U.S. dollar index up about 0.6% at last look. Elsewhere, crude oil futures have extended Friday's slide, with the front-month contract down 81 cents, or 0.9%, at $87.37 per barrel. Gold futures, on the other hand, are trading modestly higher. At last check, the front-month contract has tacked on $7.70, or 0.4%, to linger near $1,822.40 an ounce.

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.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.


This article appears in: Investing , Options

Referenced Stocks: ARAY , CBOE , EC , EU , IMF

Schaeffer's Investment Research

Schaeffer's Investment Research
  • See all for Schaeffer's Investment Research
  • View Print Version

More from Schaeffer's Investment Research:

Related Videos

Stocks

Referenced

Most Active by Volume

58,724,485
  • $101.9861 ▲ 2.23%
43,054,517
  • $16.49 ▲ 1.41%
40,148,386
  • $13.06 ▼ 6.71%
32,879,888
  • $40.6763 ▼ 6.04%
24,434,148
  • $9.32 ▲ 1.75%
24,070,731
  • $96.1499 ▲ 1.86%
21,535,005
  • $30.581 ▲ 3.00%
18,549,959
  • $3.46 ▼ 11.28%
As of 10/21/2014, 12:52 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com