Opening View: DJIA, SPX Set to Steepen Pre-Holiday Deficits; AMAT, COST in Focus


Stocks finished a wishy-washy session on the south side of breakeven on Tuesday, as another dose of discouraging manufacturing data rained on the bulls' early parade. In pre-market trading today, the bears appear ready to resume the reins, with disappointing earnings showings from Applied Materials ( AMAT ) and Costco Wholesale ( COST ) fueling the proverbial fire. In addition, buyers are sticking to the sidelines ahead of the government's durable goods report for April, while crude oil futures are hovering beneath the century mark ahead of the weekly supplies data. As such, pre-Memorial Day history seems likely to repeat itself, with the Dow Jones Industrial Average (DJIA ) and broader S&P 500 Index (SPX ) poised to steepen their week-to-date deficits.

Dow, S&P and Nasdaq futures

In equities news, Take-Two Interactive (TTWO - 16.10) reported an adjusted loss of 18 cents per share for its fiscal fourth quarter, compared to an adjusted profit of 4 cents per share a year earlier. Revenue fell 22% to $182.3 million. Analysts, on average, were calling for a quarterly loss of 39 cents per share on sales of $147.8 million. Looking ahead, TTWO forecast full-year earnings of 10 cents to 35 cents per share on revenue of $1 billion to $1.1 billion, falling short of the Street's expectations for earnings of $1.12 per share on revenue of $1.29 billion.

Elsewhere, Applied Materials (AMAT - 13.71) said fiscal second-quarter earnings rose 85% to $489 million, or 37 cents per share. Excluding items, the firm earned 38 cents per share, topping analysts' predictions by a penny per share. Meanwhile, net sales jumped 25% to $2.86 billion, surpassing expectations for sales of $2.77 billion. For the current quarter, AMAT predicted earnings of 31 cents to 37 cents per share, compared to the Street's forecast for a per-share profit of 37 cents. At last check, AMAT has shed about 2.3%.

Moving on, Hormel Foods (HRL - 30.02) banked a fiscal second-quarter profit of $109.6 million, or 40 cents per share, up from its year-ago earnings of $77.9 million, or 29 cents per share. Sales for the quarter improved to $1.96 billion from last year's $1.70 billion. HRL's bottom-line results fell right in line with expectations, while revenue topped the Street's forecast of $1.82 billion. For the full fiscal year, HRL now anticipates a profit of $1.67 to $1.73 per share, up from its prior guidance of $1.62 to $1.68 per share. Ahead of the bell, HRL is set to open more than 3% higher.

Meanwhile, thanks to its recent legal settlement with Dish Network ( DISH ), TiVo Inc. (TIVO - 9.41) just ended its most profitable quarter on record. Specifically, the TV titan said it swung to a profit of $139 million, or $1.04 per share, in the first quarter, compared to a loss of $14.2 million, or 13 cents per share, in the year-ago quarter. Revenue declined 25% to $45.8 million. Analysts were anticipating a quarterly loss of 16 cents per share on $39.6 million in sales. However, TIVO expects to return to a loss of $25 million to $27 million in the second quarter, with sales expected to come in between $46 million to $48 million. The Street is projecting a second-quarter loss of $17.6 million on revenue of $42.8 million, excluding items. In pre-market trading, TIVO has added roughly 0.9%.

Finally, Costco Wholesale Corp. (COST - 81.35) said it earned $324 million, or 73 cents per share, in its fiscal third quarter, compared to a profit of $306 million, or 68 cents per share, a year prior. The most recent quarter included a pre-tax charge of 7 cents per share, while the year-earlier quarter included a Canadian tax benefit of 2 cents per share. Net sales rose 16% to $20.19 billion, while same-store sales jumped 12%. Analysts, on average, had forecast earnings of 77 cents per share on revenue of $20.14 billion. In pre-market trading, COST has surrendered roughly 1.7%.

Earnings Preview

Today's earnings docket will feature reports from American Eagle Outfitters ( AEO ), Computer Sciences ( CSC ), Frontline Ltd. (FRO), NetApp (NTAP), Polo Ralph Lauren (RL), Suntech Power Holdings (STP), and Toll Brothers (TOL), just to name a few. Keep your browser at for more news as it breaks.

Economic Calendar

The economic calendar heats up today, with weekly petroleum inventories, durable goods orders for April, and the Federal Housing Finance Agency's home price index for March on tap. On Thursday, the Commerce Department will issue its first-quarter gross domestic product (GDP) revision, while the Labor Department will release the latest data on weekly jobless claims. Meanwhile, the Kansas City Fed will unveil its manufacturing index for May. The economic schedule wraps up on Friday, with reports due out 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 979,960 call contracts traded on Tuesday, compared to 596,034 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

Stocks in Asia ended mostly lower today, with traders taking their cues from disappointing U.S. economic data and Europe's simmering debt crisis. In Tokyo, shares of Sony (SNE) dropped after the PlayStation parent confessed to another round of security breaches, while airlines fell in China amid resurgent oil prices. However, auto stocks performed well across the region, with Hyundai, Kia, and Toyota all trekking higher on expectations for a return to normal production activity. By the close, South Korea's Kospi tumbled 1.3%, China's Shanghai Composite surrendered 0.9%, Japan's Nikkei gave up 0.6%, and the Hong Kong Hang Seng eked out a gain of 0.07%.

Banks and automakers are on the upswing in Europe, but the broader indexes haven't been able to hold their footing on positive ground. With uncertainty still lingering about Greek's financial situation, and newer concerns on the radar about Spain and Italy, only a few opportunistic bargain hunters seem willing to buy. Meanwhile, the International Monetary Fund (IMF) is once again in the spotlight, as French Finance Minister Christine Lagarde launched an official bid to succeed Dominique Strauss-Kahn as the fund's managing director. Though she's viewed as a favorite for the job, Lagarde's candidacy is likely to raise hackles among emerging markets looking for a larger role in the IMF. At last check, London's FTSE 100 is off 0.07%, the German DAX has dipped 0.08%, and the French CAC 40 is 0.2% lower.

Overseas markets

Currencies and Commodities

The greenback has rebounded from yesterday's swoon, with the U.S. dollar index up about 0.2%. Elsewhere, black gold has lost some steam ahead of the government's weekly inventories report. At last check, the front-month crude contract is down $0.22, or 0.2%, at $99.37 per barrel. Meanwhile, gold futures have continued to power higher, with the front-month contract tacking on another $4.10, or 0.3%, to trade at $1,527.40 an ounce. In the same vein, silver futures have added $1.01, or 2.8%, to flirt with $37.14 an ounce.

Currencies and commodities

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This article appears in: Investing , Options

Referenced Stocks: AEO , AMAT , COST , CSC , DISH

Schaeffer's Investment Research

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