Opening View: Retail, Employment Data Could Stoke the Bullish Flames

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The bulls and bears played a tug-of-war on Wednesday, and -- despite a deluge of negative news from home and abroad -- the bulls emerged victorious. Checking into this morning's activity, it seems the bulls may be able to take the reins once again, as several upbeat retail reports have already hit the Street. Meanwhile, today's reports on weekly jobless claims and ADP payrolls data could provide additional fuel for the bulls, who seem willing to rally on any upbeat news. According to the ADP report, the U.S. private sector added 157,000 jobs last month, easily topping expectations for a gain of 95,000. Amid this backdrop, all three major indexes are pointing higher, with futures on the Dow Jones Industrial Average (DJIA ) trading 36 points north of fair value.

Dow, S&P and Nasdaq futures

A. Schulman (SHLM - 25.92) said that its fiscal third-quarter profit arrived at $18.8 million, or 60 cents per share, down 27% from its year-ago earnings of $25.8 million, or 91 cents per share. On an adjusted basis, SHLM earned 65 cents per share, while revenue jumped 45% to $611.1 million. By contrast, analysts were looking for a profit of just 64 cents per share on revenue of $548 million. "Gross profit and operating income improved from a year ago in each of our three regions as our efforts to focus on a higher-margin product mix continue to bear fruit in the Americas, Europe and Asia," said Chairman, President and CEO Joseph M. Gingo.

DragonWave (DRWI - 5.47) swallowed a fiscal first-quarter loss of $9.9 million, or 28 cents per share, while revenue plummeted 77% to $11.0 million. Gross margin for the period contracted to 42.0% from 43.6%. Wall Street was hoping for a slimmer quarterly deficit of 19 cents per share on $12.2 million in revenue. Looking ahead, DRWI predicted second-quarter revenue of $12 million to $15 million, falling short of analysts' expectations for $20 million.

After the close on Wednesday, OCZ Technology Group Inc. (OCZ - 8.34) reported a first-quarter profit of a penny per share on revenue of $73.8 million. Analysts, on average, had expected the tech firm to report a loss of one cent per share on $69.4 million in revenue. The company projected revenue between $310 and $345 million for fiscal 2012, surrounding the consensus estimate for revenue of $325.7 million. OCZ attributed the rise in revenue to an exponential increase in its core SSD segment sales. The shares have added 4.2% ahead of the open.

Same-store sales increased 12% in June, Limited Brands Inc. (LTD - 39.31) reported this morning. The Ohio-based retail concern also said that total sales jumped 12% to $1.08 billion, from $965.4 million in the year-ago period. Analysts had anticipated LTD to post a much slimmer same-store increase of 3.8%.

Earnings Preview

Today's earnings docket will feature reports from Conmed Healthcare Management ( CONM ), Helen of Troy ( HELE ), International Speedway ( ISCA ), Penford Corp. ( PENX ), Semileds Corp. ( LEDS ), WD 40 Co. (WDFC), and Zep Inc. (ZEP). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Employment data takes the spotlight today, with the day's docket featuring ADP's private-sector payrolls report for June, as well as the Labor Department's usual update on weekly jobless claims. Crude inventories will also hit the Street one day later than usual, due to the July 4 holiday. Ahead of Friday's opening bell, all eyes will be on the Labor Department's nonfarm payrolls report for June. Later in the session, traders will also hear about May's wholesale inventories.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 837,411 call contracts traded on Wednesday, compared to 594,613 put contracts. The resultant single-session put/call ratio docked at 0.71, while the 21-day moving average was perched at 0.74.

NYSE and Nasdaq summary

Volatility indices

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Overseas Trading

Stocks in China slipped today, as traders had a chance to respond to the central bank's latest interest-rate increase. Property stocks led the laggards on the mainland, even as banking issues rallied in Hong Kong. Tokyo-listed equities were pressured by news that the government may order stress tests for nuclear plants, as well as expectations for weak auto profits following the March earthquake and tsunami. Meanwhile, in Korea, construction and materials stocks paced the rally after Pyeongchang was selected to host the 2018 Winter Olympics. By the close, South Korea's Kospi gained 0.4%, Hong Kong's Hang Seng rose 0.06%, Japan's Nikkei dipped 0.1%, and China's Shanghai Composite fell 0.6%.

Central banks are also driving the action in Europe. The Bank of England opted to stand pat on rates today, but the European Central Bank announced a quarter-point increase to its main refinancing rate, marginal lending rate, and deposit facility rate. The move fell generally in line with expectations, and marks the ECB's second rate hike this year. Stocks are modestly higher at midday, with traders keeping their enthusiasm in check ahead of U.S. jobs data due out later in the session. At last look, the French CAC 40 is up 0.5%, while the German DAX and London's FTSE 100 have each added 0.4%.

Overseas markets

Currencies and Commodities

Crude oil has rebounded in pre-market trading, adding 0.6 point, or 0.7%. The dollar, meanwhile, has explored both sides of breakeven this morning, as anxiety over the highly anticipated rate decision from the ECB kept buyers on the sidelines. Ahead of the open, the U.S. dollar index was up 0.02 point, or 0.02%. Finally, gold has given up a portion of Wednesday's gains, dropping 3.4 points, or 0.2%, to trade at $1,525.80 an ounce.

Currencies and commodities

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This article appears in: Investing , Options

Referenced Stocks: CONM , HELE , ISCA , LEDS , PENX

Schaeffer's Investment Research

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