Opening View: DJIA, SPX Headed Back to Earth on Post-Rally Profit-Taking

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After skyrocketing to gains of roughly 3% or better yesterday, the major market indexes are set to take a rally respite today. It appears speculators are looking to cash in their chips this morning, after winning big in the wake of yesterday's highly anticipated fiscal plan from the European Union ( EU ) . Furthermore, with the initial relief rally out of the way, it seems Wall Street is now focused on the implementation and execution of the aforementioned plan, which includes bolstering the scope of the European Financial Stability Facility (EFSF). Against this backdrop, the Dow Jones Industrial Average (DJIA) is trading close to 42 points below fair value, while the broader S&P 500 Index (SPX) is set to open with a modest drop of roughly 5 points.

Dow, S&P and Nasdaq futures

In earnings news, Merck (MRK - 34.31) reported third-quarter earnings of $1.69 billion, or 55 cents per share, up from $342 million, or 11 cents per share, a year earlier. Excluding items, earnings rose to 94 cents from 85 cents per share. Revenue, meanwhile, jumped 8.1% to $12.02 billion. The results exceeded expectations, as analysts were anticipating an adjusted per-share profit of 91 cents on $11.61 billion in sales. Looking ahead, MRK upped its full-year earnings guidance to a range of $3.72 to $3.76 per share, from its previous projections for a per-share profit of $3.68 to $3.76. At last check, MRK is headed 1.9% higher.

Las Vegas Sands (LVS - 45.40) reported an adjusted third-quarter profit of $444.8 million, or 55 cents per share, up from its year-ago earnings of $265.2 million, or 34 cents per share. Revenue for the quarter ramped up 26.2% to a record $2.41 billion. Analysts, on average, were expecting LVS to earn 52 cents per share on $2.34 billion in revenue. The casino operator attributed the upside surprise to "stronger results across our portfolio of properties in the U.S., Macau and at Marina Bay Sands in Singapore." In pre-market trading, LVS is poised to soar 3.4%.

Elsewhere, Crocs (CROX - 17.00) reported third-quarter earnings after the close last night. CROX said profit came in at $30.2 million, or 33 cents per share, representing a 20.8% increase over year-ago earnings of $25 million, or 28 cents per share. Revenue, meanwhile, jumped 27.5% to $274.9 million. CROX's results came in stronger than analysts' expectations for earnings of 32 cents per share on $274.3 million in sales. Looking ahead, the comfortable footwear concern is projecting fourth-quarter profit of 3 to 5 cents per share on revenue of $200 million to $205 million. Ahead of the bell, CROX is lingering about 0.3% north of breakeven.

Finally, Electronic Arts (ERTS - 24.50) reported a fiscal second-quarter loss of $340 million, or $1.03 per share, compared to a loss of $201 million, or 61 cents per share, in the year-ago period. Excluding items, the company banked a profit of 5 cents per share, while adjusted revenue rose 17% to $1.03 billion. Analysts, on average, were expecting a loss of 4 cents per share on revenue of $966.6 million. For the third quarter, ERTS raised its earnings-per-share forecast to a range between 85 cents and 95 cents on adjusted revenue of $1.55 billion to $1.65 billion. Meanwhile, analysts were predicting a third-quarter profit of 93 cents per share on revenue of $967 million. At last look, ERTS is set to open with a 4.1% drop.

Earnings Preview

Today's earnings docket will also feature reports from Chevron ( CVX ), Arch Coal ( ACI ), Biogen Idec ( BIIB ), BorgWarner ( BWA ), Lear Corp. (LEA), Newmont Mining (NEM), Newell Rubbermaid (NWL), Pilgrim's Pride (PPC), Provident Financial Services (PFS), and Weyerhaeuser (WY). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The economic agenda wraps up the week with the personal income and spending figures for September, the government's third-quarter employment cost index, and the final Thomson Reuters/University of Michigan consumer sentiment index for October.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,765,401 call contracts traded on Thursday, compared to 902,824 put contracts. The resultant single-session put/call ratio arrived at 0.51, while the 21-day moving average was 0.69.

NYSE and Nasdaq summary

Volatility indices

Overseas Trading

Stocks in Asia ended higher today, following suit with blowout gains on Wall Street. Traders cheered the newly struck European debt deal, which provided support for exporters across the region. Meanwhile, Samsung sparked a halo lift for its fellow Korean tech stocks after unseating Apple as the world's leading maker of smartphones, with the firm offering an upbeat fourth-quarter forecast to boot. By the close, Hong Kong's Hang Seng added 1.7%, China's Shanghai Composite gained 1.6%, Japan's Nikkei rose 1.4%, and South Korea's Kospi tacked on 0.4%.

On the other hand, major European indexes are modestly lower at midday. After notching healthy gains on Thursday, stocks are easing back in the wake of an Italian bond auction, which saw 10-year yields balloon to 6.06% -- the highest rate seen since Italy joined the euro zone. At last check, the French CAC 40 is off 0.4%, London's FTSE 100 is down 0.2%, and the German DAX is roughly 0.1% lower.

Overseas markets

Currencies and Commodities

The greenback has reclaimed some ground this morning, with the U.S. dollar index up 0.2% at last check. Crude futures, meanwhile, have pared their recent gains, with the front-month contract down $1.62, or 1.7%, to linger near $92.34 per barrel. Finally, gold futures are backpedaling from five-week highs, with the precious metal last seen $8.10, or 0.5%, lower at $1,739.60 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

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This article appears in: Investing , Options

Referenced Stocks: ACI , BIIB , BWA , CVX , EU

Schaeffer's Investment Research

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