Opening View: DJIA, SPX Cautiously Higher as Wall Street Eyes Euro Zone, Earnings

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U.S. stocks have seemingly shrugged off yesterday's Apple- and Beige Book-induced losses , though lingering concerns about the euro zone have limited the bulls' momentum. Specifically, last night's surprise meeting between French President Nicolas Sarkozy, German Chancellor Angela Merkel, and other international officials has bolstered fears about regional unity over the euro-zone rescue fund, though a document obtained by Reuters has eased a few jitters ahead of Sunday's highly anticipated summit in Brussels. On the home front, meanwhile, big-cap earnings reports continue to roll in, with Wall Street digesting the latest quarterly figures from American Express ( AXP ) and eBay ( EBAY ), just to name a few. Ahead of the bell -- and a slew of economic reports -- the Dow Jones Industrial Average (DJIA) is trading about 39 points above fair value, while the broader S&P 500 Index (SPX) is flirting with a 5.6-point lead.

Dow, S&P and Nasdaq futures

In earnings news, American Express (AXP - 46.13) collected a third-quarter profit of $1.24 billion, or $1.03 per share, up 13% from last year's earnings of $1.09 billion, or 90 cents per share. Revenue for the period rose 9% to $7.6 billion, while consolidated expenses increased 10%, on an adjusted basis, to $5.6 billion. Analysts were expecting the financial services firm to earn 96 cents per share on $7.58 billion in revenue. "Against the backdrop of an uncertain economic environment, we are focused on maintaining a strong risk profile and carefully managing expenses," noted Chairman and CEO Kenneth I. Chenault. Ahead of the bell, AXP is hovering just north of breakeven.


Elsewhere, eBay (EBAY - 33.18) last night said its third-quarter earnings rose 13% to $490.5 million, or 37 cents per share, from $431.9 million, or 33 cents per share, a year earlier. Excluding items, the online auctioneer said earnings rose to 48 cents from 40 cents per share. Sales, meanwhile, increased 32% to $2.97 billion. The results were slightly better than expected, with analysts calling for a per-share profit of 48 cents on revenue of $2.91 billion. What's more, the company said it now expects full-year earnings of $1.98 to $2.01 per share on revenue of $11.5 billion to $11.6 billion. Previously, EBAY projected a per-share profit of $1.97 to $2 on sales of $11.3 billion to $11.6 billion. However, the forecast fell on the low end of Wall Street's estimates, with analysts calling for a full-year profit of $2 per share on revenue of $11.53 billion. In pre-market trading, EBAY has shed 4.8%.

Also, E*Trade Financial (ETFC - 9.40) reported a third-quarter profit of $71 million, or 24 cents per share, substantially higher than last year's earnings of $8 million, or 3 cents per share. In addition, revenue rose to $507 million from $489 million on a year-over-year basis. The results were mixed, as analysts had predicted earnings of 18 cents per share on revenue of $520 million. ETFC's loan-loss provision fell 35% to $98 million during the quarter, and the online broker's bottom-line results were boosted by a tax benefit worth 21 cents per share. However, the company did not provide an update on the status of the strategic review being performed by Goldman Sachs. At last check, ETFC is flirting with breakeven.

Finally, Cirrus Logic (CRUS - 17.01) said its fiscal second-quarter profit fell 64% to $11.2 million, or 17 cents per share, from last year's profit of $30.9 million, or 42 cents per share. Revenue, meanwhile, rose 1% to $101.6 million. CRUS' results came in well below analysts' expectations for a profit of 33 cents per share on $103 million in revenue. "While we are seeing softness in some areas of our business due to issues in the global economy, we still expect significant year-over-year revenue growth in Q3, and we are well positioned to capitalize on some extraordinary growth opportunities," stated CEO Jason Rhode. For the third quarter, the semiconductor company predicted sales of $102 million to $108 million, while analysts are looking for $108 million in sales. Ahead of the bell, CRUS is set to open with a 12.7% drop.

Earnings Preview

Today's earnings docket will also feature reports from Acme Packet ( APKT ), Alexion Pharmaceuticals ( ALXN ), Altera ( ALTR ), AT&T (T), AutoNation (AN), Blackstone Group (BX), Boston Scientific (BSX), Capital One Financial (COF), Chipotle Mexican Grill (CMG), Cypress Semiconductor (CY), Diamond Offshore Drilling (DO), Eli Lilly (LLY), Fifth Third Bancorp (FITB), Huntington Bancshares (HBAN), KeyCorp (KEY), McGraw-Hill Companies (MHP), New York Times Co. (NYT), Philip Morris (PM), Rambus (RMBS), SanDisk (SNDK), Synaptics (SYNA), and Southwest Airlines (LUV). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The usual report on weekly jobless claims is due out today, as well as existing home sales for September, the October Philadelphia Fed index, and the Conference Board's index of leading economic indicators. There are no major economic reports scheduled for Friday.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,101,987 call contracts traded on Wednesday, compared to 789,216 put contracts. The resultant single-session put/call ratio arrived at 0.72, while the 21-day moving average was 0.71.

NYSE and Nasdaq summary

Volatility indices

Overseas Trading

Asian stocks ended lower today, thanks to fresh concerns about the euro zone. Reports indicate a growing rift between the International Monetary Fund (IMF) and the European Union (EU) regarding the next payment of aid to Greece, raising doubts that meaningful progress could be made on the debt crisis at this weekend's summit of EU leaders. Traders also responded to a downbeat U.S. Beige Book, with resource stocks slipping amid lower commodity prices. By the close, South Korea's Kospi slid 2.7%, China's Shanghai Composite shed 1.9%, Hong Kong's Hang Seng gave up 1.8%, and Japan's Nikkei dipped 1%.

European indexes are also in the red at midday, as traders price in some uncertainty ahead of the EU summit. In addition to the rumored IMF/EU conflict, French President Sarkozy on Wednesday missed the birth of his daughter, with the leader hopping a flight to Berlin to debate with German Chancellor Merkel about the best way to bolster the European Financial Stability Facility (EFSF). However, regional benchmarks have trimmed their losses after Reuters reported that the EFSF will now be empowered to buy bonds in secondary markets. At last check, the German DAX and London's FTSE 100 have each declined 0.4%, while the French CAC 40 has shed 0.5%.

Overseas markets

Currencies and Commodities

The greenback has given up some of its Beige Book-induced gains this morning, with the U.S. dollar index down 0.3% at last look. On the other hand, crude futures have pared some of yesterday's losses, with the front-month contract up 0.2% ahead of the bell. Gold futures, however, have extended yesterday's retreat , with the precious metal last seen $21.70, or 1.3%, lower at $1,625.30 an ounce.

Currencies and commodities

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This article appears in: Investing , Options

Referenced Stocks: ALTR , ALXN , APKT , AXP , EBAY

Schaeffer's Investment Research

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