Opening View: DJIA, SPX Linger North of Breakeven; GOOG, OVTI, BCSI On the Radar

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History was determined to repeat itself yesterday, with the bulls notching another Thursday-before-Memorial Day victory . Ahead of the bell this morning, futures are trading cautiously higher, as investors await data on personal incomes and spending, home sales, and consumer sentiment. Elsewhere, pre-market traders seem to be shrugging off news that Fitch Ratings revised its outlook on Japan's sovereign debt to negative from stable, as well as the Group of Eight's (G8) warning that higher commodity prices could hamper a "self-sustained" global economic recovery. Furthermore, the Street appears to be taking a couple of poorly received tech-sector earnings with a proverbial grain of salt, with OmniVision Technologies (OVTI) and Blue Coat Systems ( BCSI ) both set to drop at the opening bell. Against this backdrop, the Dow Jones Industrial Average (DJIA ) is lingering about 28 points north of fair value, while the S&P 500 Index (SPX ) is up roughly 4.2 points.

Dow, S&P and Nasdaq futures

In equities news, eBay (EBAY - 30.66), along with its PayPal Inc. unit, last night sued Google Inc. (GOOG - 518.13) and two executives for stealing mobile payment-related trade secrets. Specifically, the companies said former eBay employee Osama Bedier -- who joined GOOG on Jan. 24 of this year -- recruited PayPal employee Stephanie Tilenius, thereby breaking contractual agreement. "By hiring Bedier, with his trade secret knowledge of PayPal's plans and understanding of Google's weaknesses as viewed by the industry leader (PayPal), Google bought the most comprehensive and sophisticated critique of its own problems available," the suit said. At last check, EBAY is fractionally higher, while GOOG is lingering near breakeven.


In earnings news, OmniVision Technologies (OVTI - 36.42) said fiscal fourth-quarter profit soared to $34 million, or 56 cents per share, from $3.5 million, or 7 cents per share, a year earlier. Excluding items, OVTI earned 66 cents per share, besting analysts' expectations by a penny. Meanwhile, revenue jumped 64% to $258.3 million. Going forward, the company forecast current-quarter earnings of 64 cents to 77 cents per share on sales of $265 million to $285 million. Analysts, on average, were calling for a fiscal first-quarter profit of 69 cents per share on revenue of $277 million. At last check, OVTI is poised to drop 4.6% out of the gate.

Elsewhere, Marvell Technology Group (MRVL - 14.56) said first-quarter earnings fell a year-over-year 29% to $146.9 million, or 22 cents per share. Excluding items, per-share earnings docked at 29 cents, while revenue fell 6.2% to $802.4 million. The results fell short of expectations, as the Street was anticipating a profit of 30 cents per share on revenue of $825.6 million. "The first quarter of fiscal 2012 was a tough one for us," admitted Chief Financial Officer Clyde Hosein, who said an unexpected product shift at Research In Motion Limited (RIMM) -- a notable MRVL customer -- exacerbated weak seasonality. However, MRVL predicted adjusted second-quarter earnings of 37 cents per share, plus or minus a couple of pennies, on sales of $870 million to $910 million. Analysts, on average, forecast current-quarter earnings of 34 cents per share on revenue of $875.4 million. In pre-market trading, MRVL has powered about 8.5% higher.

Finally, Blue Coat Systems Inc. (BCSI - 22.36) said fiscal fourth-quarter earnings fell a year-over-year 62% to $9 million, or 18 cents per share. Excluding items, per-share earnings fell to 30 cents from 40 cents, in line with analysts' expectations, but on the low end of the company's own guidance. Revenue dropped 9% to $120.7 million, lagging the Street's projections for sales of $121.5 million. After cutting its current-quarter guidance earlier this month, BCSI once again slashed its estimates last night. Now, the firm expects to record a fiscal first-quarter profit of 18 cents to 25 cents per share on sales of $110 million to $117 million -- weaker than analysts' estimates for a per-share profit of 33 cents on $122 million in revenue. Ahead of the bell, BCSI is bracing for a 10% drop.

Earnings Preview

Today's earnings docket will also feature reports from Graham Corporation ( GHM ), Mentor Graphics ( MENT ), and SeaDrill Limited ( SDRL ), just to name a few. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The economic schedule wraps up today with reports on personal incomes and spending, pending home sales for April, and the final Reuters/University of Michigan consumer sentiment index for May.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 825,387 call contracts traded on Thursday, compared to 501,822 put contracts. The resultant single-session put/call ratio docked at 0.61, while the 21-day moving average remained at 0.65.

NYSE and Nasdaq summary

Volatility indices

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Overseas Trading

It was a hot-and-cold day for Asian markets. Stocks in Tokyo declined, with exporters tracking lower as the yen strengthened versus the U.S. dollar. Sony (SNE) was a notable laggard, after the PlayStation maker offered a softer-than-expected fiscal-year earnings forecast. Meanwhile, Hong Kong's Petrochina was a standout on news of a ramped-up investment from parent company China National Petroleum. Over in China, small caps continued to blaze the path lower, while South Korean equities continued to rise on bargain-hunting. By the close, Hong Kong's Hang Seng added about 1%, South Korea's Kospi rose 0.4%, Japan's Nikkei gave up 0.4%, and China's Shanghai Composite lost roughly 1% to bring its weekly loss to a hefty 5.2%.

European stocks are pointed higher at midday, with bank stocks leading the way. Reports of favorable legislation incited some optimism, after the Financial Times suggested that European banks may be able to dodge some of the stricter Basel III capital requirements. A spokesman for the EU has since denied the speculation; nevertheless, upbeat brokerage notes are providing lift for the group. Citigroup raised its rating on the banking sector to "overweight," while Societe Generale started coverage of Barclays, HSBC, Lloyds, and Royal Bank of Scotland with bullish "buy" endorsements. At last look, the French CAC 40 is up 1.1%, London's FTSE 100 has gained 0.9%, and the German DAX is 0.4% higher.

Overseas markets

Currencies and Commodities

The greenback has continued its slide this morning, with the U.S. dollar index down about 0.5%. Elsewhere, after backpedaling in the wake of revived demand concerns on Thursday, black gold has clawed its way back atop the century mark. At last check, the front-month crude contract is fractionally higher at $100.26 per barrel. Meanwhile, gold futures have also bounced back from their light-volume slump, with the front-month contract adding $2.30, or about 0.2%, to trade at $1,526 an ounce. In the same vein, silver futures have rebounded $0.33, or roughly 0.9%, to flirt with $37.66 an ounce.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

Unusual options activity - calls

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This article appears in: Investing , Options

Referenced Stocks: BCSI , CBOE , GHM , MENT , SDRL

Schaeffer's Investment Research

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