Opening View: SPX Ready to Rumble with 1,300, Despite Fresh Fears Over Europe's Fiscal Health

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Stocks performed a mid-session about-face on Wednesday, with energy- and material-related equities pacing an afternoon run into the black. Ahead of the bell, the major market indexes are poised to continue their climb in parity with crude oil futures, which have rocketed above $106 per barrel amid escalating tension in the Middle East and North Africa. Furthermore, the Street appears ready to put concerns about Europe's fiscal health on the proverbial back burner, after Portugal's prime minister resigned in the wake of parliament's rejection of further austerity measures. At last check - and ahead of data on jobless claims and durable goods - the Dow Jones Industrial Average (DJIA ) is in position to extend its trek north of 12,000, while the S&P 500 Index (SPX ) looks ready to once again battle the round-number 1,300 level.

In equities news, Caterpillar ( CAT ) last night reiterated its forecast for 2011 earnings of $6 per share, which represents a 45% improvement over the same period a year ago. Furthermore, the blue chip said it's "confident" that it will meet its 2012 goals, and vowed to invest $5 billion by 2015 to boost production capacity in the wake of escalating demand. "We're on a roll and we're in a hurry," Chairman and CEO Douglas Oberhelman told analysts at a Las Vegas trade show. Ahead of the bell, the shares of CAT are positioned to extend their recent quest for new highs.

On the earnings front, Micron Technology ( MU ) stepped into the earnings spotlight last night, reporting a net profit of $72 million, or 7 cents per share, on revenue of $2.3 billion for the fiscal second quarter. In comparison, analysts were expecting earnings of 2 cents per share on sales of $2.07 billion. While the firm said it can't yet determine whether Japan' nuclear crisis will be positive or negative for the company, it's expecting demand from customers to strengthen from the current quarter to next. In pre-market trading, MU is flirting with a 6% lead.


Meanwhile, Red Hat ( RHT ) last night said adjusted fourth-quarter earnings - excluding items - soared 43% to $33.5 million, or 26 cents a share, while revenue rose a year-over-year 25% to $244.8 million. The results were better than the Street expected, with analysts, on average, calling for adjusted earnings of 22 cents a share on sales of $235.9 million. "The strong demand we experienced was largely driven by customers who are modernizing their data centers and preparing their infrastructure for cloud computing," said President and CEO Jim Whitehurst. At last check, RHT is poised to open more than 13% higher.

Finally, Starbucks Corp. ( SBUX ) revealed plans to launch single-serve beverage machines via a new partnership with Courtesy Products. What's more, the coffee king said the machines will cost less than Keurig brewers, which retail for approximately $179.99. Separately, SBUX also announced that it's extended its contract with Italian retail and catering operator Autogrill SpA for another 10 years. Furthermore, the duo said they're planning to open 120 North American stores over the next decade. Ahead of the bell, the shares of SBUX are slightly lower.

Earnings Preview

The earnings calendar features reports from the likes of Best Buy ( BBY ), China Sunergy (CSUN), ConAgra Foods (CAG), GameStop (GME), Lennar Corp. (LEN), Talbots (TLB), Darden Restaurants (DRI), Finish Line (FINL), Oracle Corp. (ORCL), and Research In Motion Limited (RIMM). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The economic calendar today will feature the latest jobless claims, as well as February's durable-goods data. Finally, Friday ends with the government's latest gross domestic product (GDP) estimate for the fourth quarter, as well as the Reuters/University of Michigan's consumer sentiment index.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,123,251 call contracts traded on Wednesday, compared to 687,310 put contracts. The resultant single-session put/call ratio jumped to 0.61, while the 21-day moving average remained at 0.63.

Volatility indices

NYSE and Nasdaq summary

Dow, S&P and Nasdaq futures

Trading the News: A Contrarian View. Check out this special report from Bernie Schaeffer here.

Overseas Trading

Asian stocks finished a wishy-washy session mostly higher today, with energy- and material-related securities pacing the advancers. In Japan, however, automakers weighed on the broader equities market; leading the laggards was Nissan Motor, which gave up more than 4.5% after its CEO told Bloomberg News that dozens of Japanese parts suppliers were negatively impacted by the March 11 earthquake. In China, meanwhile, China Life Insurance (LFC) dropped 1.9% after a flood of post-earnings downgrades. By the close, the Nikkei surrendered almost 0.2%, while the Shanghai Composite fell almost 0.1%. Elsewhere, South Korea's Kospi jumped 1.2%, with Hyundai Motor blazing the trail higher on the heels of an upbeat earnings outlook.

European markets were also mostly higher, at last check, as investors await the start of the European Union's (EU) two-day summit in Brussels. Garnering notable attention in the U.K. were Kingfisher PLC and Next PLC, which both posted stronger-than-anticipated earnings. However, limiting stocks' upward momentum was the Portuguese parliament's rejection of more austerity measures, which prompted the resignation of Prime Minister Jose Socrates. At last look, London's FTSE 100 has ticked 0.8% higher, France's CAC 40 has added 0.5%, and Germany's DAX has advanced nearly 1.2%.

Overseas markets

Currencies and Commodities

The U.S. dollar has lost a little ground this morning, as the U.S. Dollar Index was seen fractionally lower at 75.79. Elsewhere, after tagging a 29-month high on Wednesday, crude futures are poised to continue their run into the black. In electronic trading, the May crude futures contract has added another 0.6% to trade around $106.41 per barrel. Finally, gold futures are also positioned to extend their run for record highs, advancing 0.3% to flirt with $1,442.20 an ounce.

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: BBY , CAT , MU , RHT , SBUX

Schaeffer's Investment Research

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