Opening View: Following Dismal May, DJIA, SPX Off to a Rough June Start

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The "sell in May and go away" axiom was proven true once again. The Dow Jones Industrial Average ( DJIA ) dropped 1.19% on Friday to end May with a loss of 7.9%. It was the Dow's worst May performance since 1940. What's more, June isn't getting off on the right foot, as the DJIA is currently trading about 114 points below fair value, potentially sending the blue-chip barometer down for another test of 10,000. Meanwhile, the S&P 500 Index ( SPX ) is headed toward a 15-point deficit on the open. The SPX finished Friday with a gain of 0.2%, but plummeted 8.2% for May. Finally, the CBOE Market Volatility Index ( VIX ) spiked 45% in May, closing above its 10-month moving average for the first time since March 2009.

In equity news, Hewlett-Packard Co. ( HPQ ) announced plans to spend $1 billion to automate its commercial data centers. As a result the company will eliminate about 9,000 jobs over the next several years. H-P expects to generate annualized gross savings of approximately $1 billion, and net savings after reinvestment in a range between $500 million and $700 million.

American International Group Inc. ( AIG ) has rejected efforts by the United Kingdom's Prudential ( PRU ) to lower the $35.5 billion selling price for AIG's Asian insurance unit. The deal is now likely dead.

Finally, Fitch Ratings lifted Oracle Corp.'s ( ORCL ) outlook to positive and affirmed its long-term issuer default rating at A. According to Fitch, Oracle has ample liquidity, and a strong customer renewal rate despite the economic downturn. Furthermore, the ratings agency said that it may upgrade Oracle's rating if the company can successfully integrate Sun Microsystems.

Earnings Preview

On the earnings front, Collective Brands Inc. ( PSS ) and Shanda Interactive Entertainment Ltd. ( SNDA ) are scheduled to release their quarterly reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

ISM

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 893,256 call contracts traded on Friday, compared to 522,284 put contracts. The resultant single-session put/call ratio arrived at 0.58, while the 21-day moving average held at 0.67.

Volatility indices

NYSE and Nasdaq summary

**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**

Dow, S&P and Nasdaq futures

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Overseas Trading

Overseas trading is abysmal this morning, as none of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 1.65%. In Asia, stocks slipped on concerns about slowing growth in China and Europe in the second half of the year. Elsewhere, European shares alo fell, with BP slumping after an attempt to plug the Gulf oil spill failed. Overseas market information comes to you courtesy of Schaeffer's Daily Bulletin .

Overseas markets

Currencies and Commodities

Weakness in the euro is once again providing lift for the U.S. dollar this morning. In fact, the euro plunged to yet another four-year low in European trading, hitting near $1.2143. Meanwhile, the U.S. Dollar Index tagged an annual high earlier in pre-market trading, and is currently sitting on a gain of 0.92% at 87.39. The stronger dollar and concerns about Chinese demand are weighing on crude futures, as black gold has plunged 2.53% to $72.10 per barrel heading into the open. Finally, the renewed global turmoil has placed a premium on gold prices, with the most active futures contract up $8.90 at $1,223.90 an ounce in London.

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


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