Opening View: DJIA, SPX Hover South of Breakeven Amid Reports of a China-Italy Deal

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Thanks to an eleventh-hour rebound , stocks kicked off the week on a high note yesterday. This morning, however, futures are pointed modestly lower, after China reportedly hampered enthusiasm about a deal to buy Italian debt. Specifically, a Financial Times report suggesting that China will make "significant purchases of Italian bonds and investments in strategic companies" sparked optimism across the globe, but an alleged interview with a Chinese banking official in Market News International indicated the deal was far from done. Against this ambiguous backdrop, investors are taking a relatively cautious approach, with the Dow Jones Industrial Average (DJIA) trading just south of breakeven ahead of the bell.

Dow, S&P and Nasdaq futures

In earnings news, Cracker Barrel (CBRL - 39.86) said fourth-quarter profit fell 36% to $17.5 million, or 75 cents per share, from $27.4 million, or $1.14 per share, in the year-ago quarter. Excluding items, the restaurateur said it earned $1 per share, topping Wall Street's expectations for a profit of 94 cents per share. Revenue, meanwhile, remained relatively flat at $613 million, falling short of the consensus estimate for sales of $619.9 million. Looking ahead, CBRL expects to earn $4.05 to $4.20 per share in fiscal 2012, compared to analysts' average estimate for a per-share profit of $4.25. However, the company hiked its quarterly dividend by 14% to 25 cents per share and approved a stock buyback plan of up to $65 million.

Elsewhere, Pharmacyclics (PCYC - 10.98) reported an adjusted fourth-quarter loss of $9.1 million, or 15 cents per share, while revenue arrived at $1.39 million. The results fell short of Wall Street's consensus estimates, which called for a slimmer loss of 14 cents per share on $2.7 million in revenue. "While all three of our in-clinic molecules performed admirably, Btk Inhibitor PCI-32765 was in all forms of measurement truly outstanding," said Chairman and CEO Bob Duggan. "We plan to initiate our first Phase III trial for 32765 in this fiscal year ending June 30, 2012."

Finally, Intersil (ISIL - 10.65) last night cut its third-quarter revenue guidance, citing weaker-than-expected demand. Now, the semiconductor concern expects to earn $184 million to $188 million in the current quarter, compared to its previous projections for earnings between $205 million and $213 million. However, CEO Dave Bell offered some words of encouragement. "We now see signs that inventory is stabilizing, with bookings likely recovering to consumption rates during the remainder of the third quarter," he said. Ahead of the bell, the shares of ISIL are up 3.5%.

Earnings Preview

Today's earnings docket will also feature reports from Best Buy ( BBY ), Majesco Entertainment ( COOL ), K12 Inc. ( LRN ), and PMFG Inc. ( PMFG ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Today, the government's monthly report on import and export prices, as well as Uncle Sam's latest Treasury budget, is set to hit the Street. On Wednesday, a batch of housing data from the Mortgage Bankers Association ( MBA ), the producer price index (PPI) for August, last month's retail sales figures, business inventories for July, and the usual crude inventories report are on the docket. Thursday features the weekly jobless figures from the Labor Department, the Empire State manufacturing index, the Philly Fed business index, the consumer price index (CPI), and industrial production and capacity utilization for August. Friday wraps up with the preliminary Reuters/University of Michigan consumer sentiment index for September.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 849,212 call contracts traded on Monday, compared to 610,703 put contracts. The resultant single-session put/call ratio arrived at 0.72, while the 21-day moving average was 0.75.

NYSE and Nasdaq summary

Volatility indices

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Overseas Trading

Stocks in Asia stumbled toward the finish line today, with trading volume still relatively light amid regional holiday celebrations. Early in the session, cautious optimism was inspired by the aforementioned Financial Times report suggesting that China will make "significant purchases of Italian bonds and investments in strategic companies." With the cash-strapped European country in desperate need of a financial lifeline, the news helped Japan's benchmark to a positive finish -- but traders on the Chinese mainland seemed a little less enthusiastic about the plan. By the close, Japan's Nikkei added roughly 1%, while China's Shanghai Composite slipped 1.1%. Markets in Hong Kong and South Korea were closed for holiday.

European indexes are mixed at midday, with traders digesting a potential Chinese "rescue" of Italy. However, French banks are still under heavy pressure, even after BNP Paribas refuted a Wall Street Journal allegation that the bank cannot obtain U.S. dollar funding. The speculation is also weighing on sector peer Societe Generale, which has battled its own liquidity rumors in recent weeks. At midday, the German DAX is up 0.9%, London's FTSE 100 has given up 1.4%, and the French CAC 40 is 0.6% lower.

Overseas markets

Currencies and Commodities

The greenback is on the decline this morning, with the U.S. dollar index down 0.5% at last look. Elsewhere, after snapping a two-session losing streak on Monday, crude oil futures have continued their upward momentum, with the front-month contract up 88 cents, or 1%, at $89.19 per barrel. Finally, gold futures have bounced back from yesterday's drubbing, tacking on $2.80, or 0.2%, to flirt with $1,816.10 an ounce.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

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This article appears in: Investing , Options

Referenced Stocks: BBY , COOL , LRN , MBA , PMFG

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