Opening View: DJIA, SPX Set to Extend Upward Momentum; MSFT, THC, ATVI on the Radar


Stocks started the week on a bullish note on Monday, with a round of corporate deal-making and a rally in the commodities pits helping to offset a credit-rating downgrade for Greece. In pre-market action this morning, the major equity indexes are positioned to continue their path into the black, thanks to reports of another looming bailout for the debt-strapped nation, as well as encouraging economic data out of China. On the equities front, Microsoft Corp. (MSFT) has taken center stage amid news of a Skype buyout, while Activision Blizzard ( ATVI ) is headlining the latest batch of earnings reports. However, traders will also be keeping a close eye on black gold, with crude oil futures falling after a margin hike from CME Group. Ahead of the bell, the Dow Jones Industrial Average (DJIA ) is set to open with a 39-point lead, while the broader S&P 500 Index (SPX ) is ready to tack on about 5.9 points at the open.

Dow, S&P and Nasdaq futures

In equities news, Microsoft Corp. (MSFT - 25.83) has announced that it will acquire Internet communications bigwig Skype in a deal valued at $8.5 billion, confirming an earlier report by Reuters. The acquisition has been approved by the boards of both companies -- setting up Skype CEO Tony Bates to take on the new title of President, Microsoft Skype Division. At last check, MSFT is flirting with a fractional loss.

Elsewhere, Community Health Systems (CYH - 31.08) last night withdrew its sweetened bid for Tenet Healthcare (THC - 6.52), which rejected the updated offer of $3.52 billion, or $7.25 per share, saying the bid undervalued the company. In pre-market trading, CYH is hovering around the flat line, while THC has given up about 1.7%.

On the earnings front, Activision Blizzard (ATVI - 11.53) pulled down a first-quarter profit of $503 million, or 42 cents per share, while total revenue rose 11% to $1.45 billion. On an adjusted basis, ATVI earned 13 cents per share on revenue of $755 million. Analysts, on average, were looking for net income of just 8 cents per share on $668.1 million in revenue. Plus, ATVI upwardly revised its financial guidance for the remainder of the year. The video game giant now expects adjusted earnings of 73 cents per share for 2011, compared to its prior view of 70 cents, with total revenue expected to arrive at $4.05 billion, up from an earlier forecast of $3.95 billion. Wall Street's consensus estimates are calling for a full-year profit of 72 cents per share on revenue of $4.00 billion. Ahead of the bell, ATVI has tacked on 0.6%.

Meanwhile, Rackspace Hosting (RAX - 43.27) reported net income of $13.8 million for the first quarter, or 10 cents per diluted share, while net revenue rose 28.6% to $230.0 million. The results were mixed, with analysts looking for a profit of 11 cents per share on revenue of $226.3 million. "Our plan for 2011 is to become more competitive and seize the massive market opportunity ahead of us, while improving the economics of our model by becoming more capital-efficient," said President and CEO Lanham Napier in a statement. In pre-market trading, RAX is flirting with breakeven.

Finally, Clean Energy Fuels (CLNE - 15.65) swung to a first-quarter net loss of $9.8 million, or 14 cents per share, slimmed-down from its year-ago deficit of $24.4 million, or 41 cents per share. On an adjusted basis, CLNE swallowed a smaller per-share loss of 5 cents, while revenue for the quarter surged 67% to $65.3 million. Analysts were anticipating a wider loss of 9 cents per share on slightly more robust revenue of $65.8 million. At last check, CLNE is poised to open roughly 1.7% lower.

Earnings Preview

Today's earnings docket will feature reports from Walt Disney ( DIS ), Arena Pharmaceuticals ( ARNA ), Eagle Bulk Shipping ( EGLE ), Energy Conversion Devices ( ENER ), General Maritime Corp. (GMR), General Steel Holdings (GSI), Harbin Electric (HRBN), Fossil Inc. (FOSL), Helen of Troy (HELE), JA Solar Holdings Co. (JASO), Molycorp (MCP), Real Goods Solar (RSOL), and STEC Inc. (STEC), just to name a few. Keep your browser at for more news as it breaks.

Economic Calendar

The economic agenda heats up today, with the latest import and export data, as well as the Commerce Department's wholesale inventories report for March, on the docket. Wednesday will feature the regularly scheduled crude inventories data, as well as Uncle Sam's reports on the trade balance and Treasury budget. On Thursday, the Street will digest the Labor Department's weekly jobless figures and producer price data, as well as the government's business inventories report for March and retail sales data for April. Finally, Friday will feature April's consumer price index (CPI) and core CPI, along with the Reuters/University of Michigan consumer sentiment index.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 850,619 call contracts traded on Monday, compared to 540,780 put contracts -- the lightest overall option volume of 2011. The resultant single-session put/call ratio docked at 0.64, while the 21-day moving average remained at 0.61.

NYSE and Nasdaq summary

Volatility indices

The spring 2011 issue of SENTIMENT magazine is now available here.

Overseas Trading

Stocks in Asia ended mostly higher today, after data showed China's trade surplus widened by more than expected in April. In addition, investors showed optimism ahead of a round of key inflationary data tomorrow, which could influence Beijing's monetary policy. In Japan, meanwhile, Sumitomo Heavy Industries and Toshiba Corp. paced the advancing equities after both unveiling solid earnings reports, while Chubu Electric Power gained close to 2% after agreeing to shutter three nuclear reactors at its Hamaoka power plant. By the close, Hong Kong's Hang Seng added almost 0.8%, Shanghai-listed stocks tacked on 0.6%, and Japan's Nikkei advanced nearly 0.3%.

Elsewhere, European stocks are in the black today, thanks to growing expectations for another financial bailout for Greece. The debt-strapped country is expecting a new 60 billion euro aid package to be approved as early as next month, The Wall Street Journal reported. At last check, London's FTSE 100 has soared 1.2%, France's CAC 40 has rallied 1.4%, and Germany's DAX is up almost 1.5%.

Overseas markets

Currencies and Commodities

The U.S. dollar index is trading with fractional gains this morning, thanks to continued concerns about Greece's fiscal health and reports that China's trade surplus widened by more than expected last month. Elsewhere, after rebounding back above the century mark on Monday, crude oil futures have declined after CME Group said it will raise margin requirements for black gold. Ahead of the bell, June-dated crude futures have shed $0.90, or 0.9%, to flirt with $101.65 per barrel. Meanwhile, gold futures are trading 0.8% higher to linger around the $1,515-an-ounce marker, while silver has extended yesterday's bounce by $1.35, or almost 3.7%.

Currencies and commodities

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This article appears in: Investing , Options

Referenced Stocks: ARNA , ATVI , DIS , EGLE , ENER

Schaeffer's Investment Research

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