Opening View: Hopes - and Futures - Rise Ahead of Fed Statement

By
A A A

This week started off with a thud. After digesting Friday night's U.S. credit rating downgrade from Standard & Poor's, the Dow Jones Industrial Average (DJIA ) suffered its worst loss since December 2008, surrendering over 600 points by the close. However, it's a new day -- and futures on all three major indexes are pointing higher (but given Monday's steep losses, this morning's rebound isn't all that surprising). This positive price action comes ahead of the Federal Open Market Committee's latest decision on monetary policy, scheduled for 2:15 p.m. Eastern. While the Fed's been noncommittal about additional monetary easing, Friday's downgrade has spurred hopes that additional assistance from the government could, perhaps, be on the horizon.

Dow, S&P and Nasdaq futures

On the earnings front, MGM Resorts International (MGM - 11.54) reported a second-quarter profit of $3.44 billion, or $6.22 per share, reversing a year-ago loss of $883 million, or $2 per share. Excluding a $3.5-billion benefit from the initial public offering of MGM China, the casino concern recorded a loss of 8 cents per share -- much narrower than the 13-cents per-share loss expected on the Street. Meanwhile, net revenue for the quarter jumped 17% to $1.81 billion, topping analysts' estimates for sales of $1.59 billion. Ahead of the open, MGM is up 2.5%.

Take-Two Interactive Software (TTWO - 11.07) reported a fiscal first-quarter loss of $8.7 million, or 11 cents per share. Excluding items, the firm said it earned 2 cents per share on revenue of $334.4 million -- falling woefully short of analysts' expectations for earnings of 9 cents per share on sales of $351.2 million. The company attributed the relatively weak quarter to a lackluster response to its Duke Nukem Forever game, and predicted fiscal second-quarter revenue in a range of $70 million to $85 million -- less than half the consensus forecast for current-quarter sales of $195 million.

DISH Network Corp. (DISH - 22.64) said that its second-quarter profit rose 30% to $335 million, or 75 cents per share, from $257 million, or 57 cents per share, a year ago. Meanwhile, revenue for the quarter jumped 13% to $3.59 billion. Analysts had expected DISH's quarterly earnings to arrive at 79 cents per share on revenue of $3.38 billion. The satellite TV titan confessed that net subscribers fell by 135,000 to 14.056 million during the quarter, due to increased competitive pressures.

Earnings Preview

Today's earnings docket will feature reports from Walt Disney ( DIS ), AOL ( AOL ), Demand Media ( DMD ), Capstone Turbine ( CPST ), Carrizo Oil & Gas ( CRZO ), Fuel Systems Solutions (FSYS), Harbin Electric (HRBN), James River Coal (JRCC), ReneSola (SOL), SunPower (SPWRA), Arena Pharmaceuticals (ARNA), Myriad Genetics (MYGN), Beazer Homes (BZH), Cree (CREE), EchoStar (SATS), Fossil (FOSL), and Orbitz Worldwide (OWW). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Today's docket features a report on second-quarter productivity and labor costs from the Bureau of Labor Statistics (BLS), along with the aforementioned FOMC statement. On Wednesday, we'll hear reports on wholesale inventories for June, the July Treasury budget, and weekly petroleum inventories. Initial and continuing jobless claims are due out on Thursday, along with June's trade balance. The economic calendar concludes on Friday with the release of retail sales for July, June's business inventories, and the preliminary Reuters/University of Michigan consumer sentiment index for August.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,626,572 call contracts traded on Monday, compared to 1,757,508 put contracts. The resultant single-session put/call ratio arrived at 1.08, while the 21-day moving average was 0.72.

NYSE and Nasdaq summary

Volatility indices

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

Overseas Trading

Stocks in Asia ended lower across the board, as traders took their cues from Wall Street's no-holds-barred sell-off. Energy and commodity stocks, such as Aluminum Corp. of China and Cnooc Ltd., were among the biggest losers on fears of weakening demand. However, Shanghai-listed issues held up relatively well, even though the country's consumer price index ballooned to 6.5% in July. Despite the steeper-than-forecast rise, many investors are hopeful that global economic woes will force the country's central bank to pump the brakes on its policy-tightening plan. By the close, China's Shanghai Composite slipped 0.03%, Japan's Nikkei lost 1.7%, South Korea's Kospi fell 3.6%, and Hong Kong's Hang Seng tumbled 5.7%.

European markets are mixed at midday, with just a few brave souls tiptoeing in to hunt for bargains in the aftermath of steep global losses. Traders are looking ahead to this afternoon's interest-rate decision from the U.S. Fed, with the central bank's statement likely to be scoured for any sign of potential stimulus efforts. Ahead of this announcement, banks and commodities are pacing the euro-zone laggards. At last check, the German DAX is down 1.3%, London's FTSE 100 is up 0.03%, and the French CAC 40 is 1.1% higher.

Overseas markets

Currencies and Commodities

The dollar is looking weak this morning, as increased anxieties over the future of the U.S. economy have lessened the greenback's appeal. Ahead of the open, the U.S. dollar index is down 0.4 point, or 0.5%. It's a similar story for crude, with the dollar-denominated asset down 1.5 points, or 1.9%, in pre-market trading. However, gold is looking stronger than ever this morning, with the precious metal up 53.8 points, or 3.1%, as traders flock to the safe haven asset in the wake of Friday's downgrade.

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

Every morning, our research staff analyzes the prior day and the overnight markets, and monitors the morning wires to give you an accurate preview of the day to come. If you enjoyed today's edition of Opening View, sign up here for free daily delivery, straight to your inbox, before the opening bell.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.


This article appears in: Investing , Options

Referenced Stocks: AOL , CPST , CRZO , DIS , DMD

Schaeffer's Investment Research

Schaeffer's Investment Research
  • See all for Schaeffer's Investment Research
  • View Print Version

More from Schaeffer's Investment Research:

Related Videos

Stocks

Referenced

Most Active by Volume

112,131,130
  • $74.98 ▲ 5.18%
57,963,905
  • $8.32 ▲ 8.33%
48,392,602
  • $3.45 ▼ 0.29%
45,276,527
  • $36.17 ▲ 4.21%
44,800,927
  • $17.84 ▲ 0.34%
44,539,649
  • $97.03 ▼ 0.16%
44,078,180
  • $15.62 ▲ 0.64%
43,461,551
  • $35.50 ▼ 1.06%
As of 7/24/2014, 04:04 PM