Opening View: DJIA, SPX Poised to Follow Europe into the Black

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U.S. stocks are set to follow their European peers into the black this morning. Relatively healthy debt auctions in both Spain and Italy have eased jitters about the region's fiscal situation, while unsurprising interest-rate decisions from the European Central Bank (ECB) and the Bank of England ( BOE ) have also fueled the bulls. On the home front, meanwhile, traders are awaiting data on jobless claims and retail sales, and digesting the latest earnings predictions from Chevron ( CVX ) and Tractor Supply Company ( TSCO ), to name a few. At last check, the Dow Jones Industrial Average (DJIA) is set to open with a 50-point lead, while the broader S&P 500 Index (SPX) is poised to extend its recent winning streak .

Dow, S&P and Nasdaq futures

In earnings news, Chevron (CVX - 107.77) last night warned that weak margins and volumes in refining will likely push fourth-quarter earnings "significantly" lower on a sequential basis. Furthermore, the company said its Gulf Coast refining margin fell "substantially," and its refined products output dropped by 180,000 barrels per day in the U.S. In addition, CVX said it expects its fourth-quarter results -- slated to hit the Street on Jan. 27 -- to include a foreign-exchange loss, versus a gain of nearly $450 million in the third quarter. Ahead of the bell, CVX is 1.7% lower.

Meanwhile, Tractor Supply Company (TSCO - 72.93) forecast stronger-than-expected fourth-quarter revenue, prompting the agricultural concern to up its full-year earnings guidance. Specifically, the firm projected net sales of $1.24 billion for the fourth quarter -- up 20.1% from the year-ago period, and topping analysts' estimates for revenue of $1.2 billion. As such, TSCO now expects to earn $2.97 to $2.99 per share in 2011, compared to its previous predictions for a per-share profit of $2.85 to $2.89. The company's full quarterly and annual results are scheduled for release on Feb.1. In pre-market trading, TSCO is poised to open with a 5.5% gain.

Finally, DragonWave Inc. (DRWI - 3.76) said its fiscal third-quarter loss widened to $8 million, or 23 cents per share, compared to last year's loss of $42,000, or breakeven on a per-share basis. Revenue was also on the decline, dropping to $11.8 million from $27 million in the year prior. Results for the chipmaker came in lower than expected, as analysts were calling for a slimmer loss of 18 cents per share on $13.6 million in sales. Looking ahead, DRWI is forecasting fiscal fourth-quarter sales to range from $12 million to $15 million. By comparison, analysts are predicting a heftier revenue of $16.3 million. At last check, DRWI is bracing for a 13.5% drop out of the gate.

Earnings Preview

Today's earnings docket will also feature reports from Essex Property Trust ( ESS ), Infosys ( INFY ), and Washington Federal (WFSL). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The weekly update on jobless claims is scheduled for today, accompanied by Commerce Department reports on business inventories and December retail sales. The week wraps up with the mid-month Thomson Reuters/University of Michigan consumer sentiment index, plus the Labor Department's report on the trade deficit and import/export prices.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,313,958 call contracts traded on Wednesday, compared to 725,244 put contracts. The resultant single-session put/call ratio arrived at 0.55, while the 21-day moving average was 0.68.

NYSE and Nasdaq summary

Volatility indices

Overseas Trading

Stocks in Asia ended mostly lower today, as inflation data out of China deflated expectations for easing monetary policy out of Beijing. Specifically, the Chinese government said consumer prices rose a year-over-year 4.1% in December, edging past analysts' expectations for a 4% rise. In Japan, meanwhile, data showing a steeper-than-anticipated drop in the country's current-account surplus weighed on exporters. Against this backdrop -- and ahead of the ECB's interest-rate decision -- Hong Kong's Hang Seng gave up 0.3%, the Shanghai Composite dipped about 0.1%, and Japan's Nikkei fell 0.7%.

On the other hand, stocks in Europe are higher at midday, thanks to strong bond auctions in Italy and Spain. Furthermore, investors are digesting the latest monetary-policy decisions, with both the ECB and the Bank of England opting to stand pat on interest rates. At last look, the German DAX has added 1.5%, the French CAC 40 is up 1.3%, and London's FTSE is 0.4% higher.

Overseas markets

Currencies and Commodities

The greenback has given back some of its gains this morning, with the U.S. dollar index down about 0.4%. Meanwhile, crude futures have rebounded from year-to-date lows , with the front-month contract up 1.3% to linger near $102.41 per barrel. Likewise, gold futures have continued their recent surge, with the precious metal last seen 1.1% higher at $1,658.20 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: BOE , CVX , ESS , INFY , TSCO

Schaeffer's Investment Research

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