Opening View: Manufacturing, Sentiment Data Could Push Major Indexes to Weekly Gains

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This week wraps up with the ISM manufacturing index and The Reuters/University of Michigan consumer sentiment index for June -- two key reports which could push the major market indexes to weekly victories. U.S. stocks rallied on Thursday following another victory in Greece and an upbeat manufacturing report from the home front. However, ahead of today's events, it seems that investors are marking time, with futures trading right around breakeven. Specifically, futures on the Dow Jones Industrial Average (DJIA ) are trading about 13.7 points north of fair value, while futures on the S&P 500 Index (SPX ) are down 0.5 point.

Dow, S&P and Nasdaq futures

Apollo Group (APOL - 43.68) raked in a fiscal third-quarter profit of $212.4 million, or $1.51 per share, down from its year-ago earnings of $179.3 million, or $1.18 per share. Excluding items, earnings from continuing operations checked in at $1.45 per share, while revenue slipped 7.6% to $1.24 billion. However, the results surpassed analysts' expectations, which called for a profit of just $1.33 per share on $1.2 billion in revenue.


Smith & Wesson (SWHC - 3.00) confessed that its fiscal fourth-quarter profit plunged 57% to $1.14 million, or 2 cents per share, even as net sales rose 7.7% to a record $111.8 million. Operating expenses for the quarter jumped to $28.4 million from $23.7 million on a year-over-year basis, due to higher legal expenses and downsizing costs. For the current quarter, SWHC anticipates sales of $92 million to $95 million, falling short of the consensus estimate of $98 million. SWHC has jumped 3.3% higher in pre-market trading.

Xyratex Ltd. (XRTX - 10.26) swallowed a fiscal second-quarter loss of $4.6 million, or 15 cents per share, down substantially from a profit of $43.7 million, or $1.39 per share, in the same quarter of 2010. On an adjusted basis, XRTX lost 6 cents per share. Meanwhile, revenue tumbled 26% to $338.5 million. Wall Street was betting on the firm to break even on a per-share basis, with revenue expected to weigh in at a slightly healthier $339.5 million. For the third quarter, XRTX predicted a profit of 1 penny to 19 cents per share, with revenue ranging between $336 million and $376 million. Analysts, on average, were looking for third-quarter earnings of 21 cents per share on $350 million in revenue. Ahead of the open, XRTX was down 5.5%.

Finally, Research In Motion Limited (RIMM - 28.85) announced on Thursday that it will form a committee of independent directors in order to review its management structure. NEI Investments, RIMM's institutional shareholder, had proposed for RIMM to divide the roles of CEO and chairman. The company said it will appoint a committee of independent directors to study the issue and make a recommendation to the board. The smartphone stock has been struggling in 2011, shedding over 50% of its value year-to-date.

Earnings Preview

Today's earnings docket will feature a report from Rada Electronic Industries ( RADA ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The week wraps up with the ISM manufacturing index, the final Reuters/University of Michigan consumer sentiment index for June, May's construction spending report, and auto and truck sales for June.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,038,101 call contracts traded on Thursday, compared to 563,066 put contracts. The resultant single-session put/call ratio docked at 0.54, while the 21-day moving average was perched at 0.75.

NYSE and Nasdaq summary

Volatility indices

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

Overseas Trading

Markets in Asia ended mixed today, with gains in Tokyo and Seoul contrasting with a minor loss in Shanghai. Automakers led the charge in Korea, as sector peers Kia and Hyundai reported healthy sales for the month of June. Meanwhile, in Japan, a corporate sentiment survey came in weaker than expected -- but the data also showed that business conditions are expected to improve over the near term. On the other hand, traders in China were disappointed by a pair of weak reports on manufacturing activity, which rekindled concerns about a sudden slowdown in growth for the key emerging market. By the close, South Korea's Kospi climbed 1.2%, Japan's Nikkei rose 0.5%, and China's Shanghai Composite slipped 0.1%. Hong Kong's Hang Seng is closed for holiday.

Stocks in Europe are testing the waters around breakeven at midday, as investors catch their collective breath after two days of solid Greece-related gains. Unlike their Korean counterparts, auto stocks in the region are showing some weakness, pressured by a French report showing a double-digit percentage decline in new car registrations last month. Plus, traders seem unwilling to make any major moves ahead of U.S. manufacturing and sentiment data due out later this morning. At last look, London's FTSE 100 is up 0.3%, the German DAX has slipped 0.01%, and French CAC 40 is down 0.1%.

Overseas markets

Currencies and Commodities

The dollar has gained ground against its peers this morning, adding 0.1 point, or 0.2%, ahead of the open. The greenback advanced on Thursday following a round of robust economic data from the home front. With a stronger dollar generally comes a weaker demand for dollar-denominated commodities, which is what we're seeing this morning. At last check, crude oil had given up a portion of Thursday's gains, shedding 0.7 point, or 0.7%, in pre-market trading. Meanwhile, gold futures have surrendered 12.3 points, or 0.8%, this morning.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

Unusual options activity - calls

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This article appears in: Investing , Options

Referenced Stocks: CBOE , RADA , RIMM

Schaeffer's Investment Research

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