Opening View: Strong DJIA Earnings Overshadow 'Unusual Uncertainty'

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The Dow Jones Industrial Average (DJIA) took a nosedive late on Wednesday, after Federal Reserve Chairman Ben Bernanke described the U.S. economic outlook as "unusually uncertain." However true the statement may have been, the grim choice of words was unfortunate for Wall Street, as the DJIA plummeted to a triple-digit loss. Fortune is smiling this morning, however, as the parade of earnings from Dow-component Caterpillar Inc. ( CAT ), 3M Company ( MMM ), and AT&T Inc. ( T ) is being well received. In fact, futures on the DJIA are currently trading about 91 points above fair value, pointing toward a solid start to the regular session of trading. Look for resistance to materialize near the 10,250 level early in the day, with 10,350-10,400 capping any major rally in the Dow. Finally, the S&P 500 Index (SPX) is poised for an opening jump of nearly 10 points, which would place the SPX in contention with key short-term resistance in the 1,080-1,085 region.

In earnings news, 3M Company ( MMM ) posted a second-quarter profit of $1.12 billion, or $1.54 per share, as revenue rose to $6.73 billion. Wall Street analysts expected 3M to post earnings of $1.47 per share on revenue of $6.62 billion. Looking ahead, the company lifted its 2010 adjusted earnings target to $5.65-$5.80 per share from its earlier expectation of $5.40-$5.60 per share.

Elsewhere, Caterpillar Inc. ( CAT ) reported that its second-quarter profit climbed by 91% to $707 million, or $1.09 per share, as revenue rose to $10.4 billion. Analysts were looking for a profit of 83 cents per share, on revenue of $9.6 billion. Caterpillar also lifted its 2010 outlook to $3.15 to $3.85 per share, from its earlier view of $2.50 to $3.25 per share. "While there are significant economic concerns around the world that we are watching closely, orders have continued to outpace our shipments, and we expect to increase production in the second half of the year," the company said.

Finally, AT&T Inc. ( T ) reported net second-quarter income of $4.0 billion, or 68 cents per share, with revenue rising to $30.8 billion. Excluding a onetime gain, AT&T earned 61 cents per share, topping the consensus estimate for earnings of 57 cents per share. For 2010, AT&T upped its forecast due to expectations for "strong earnings per share growth" and higher free cash flow compared to the prior year.

Earnings Preview

On the earnings front Akeena Solar Inc. (AKNS), The Blackstone Group LP ( BX ), Bristol-Myers Squibb Co. ( BMY ), Continental Airlines Inc. ( CAL ), Eli Lilly & Co. ( LLY ), Fifth Third Bancorp ( FITB ), Nokia Corp. ( NOK ), PNC Financial Services ( PNC ), Travelzoo Inc. ( TZOO ), Amazon.com Inc. ( AMZN ), Capital One Financial Corp. ( COF ), The Cheesecake Factory Inc. ( CAKE ), E*Trade Financial Corp. ( ETFC ), The Mosaic Co. ( MOS ), SanDisk Corp. ( SNDK ), and Xerox Corp. ( XRX ) are scheduled to release their quarterly earnings report today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Weekly initial jobless claims will be joined today by June's existing home sales and June's leading economic indicators. Friday ends the week as it began, with no reports slated for release.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,149,301 call contracts traded on Wednesday, compared to741,497 put contracts. The resultant single-session put/call ratio arrived at 0.65, while the 21-day moving average held at 0.64.

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 in fine shape this morning, as eight of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 0.83%. In Asian trading, comments from Fed Chairman Ben Bernanke spooked traders in Japan, sending stocks down for a fifth straight session. Meanwhile, regional indexes in China extended their rally to four in a row on hopes that Beijing won't tighten policies in the near term. In Europe, stocks received a shot in the arm from a slew of stronger-than-expected economic reports, including the French and German purchasing mangers indexes, the euro-zone May industrial orders (which rose 3.8%), and a 0.7% rise in U.K. June retail sales.

Overseas markets

Currencies and Commodities

A jump in euro-zone industrial orders in May is providing drag for the U.S. dollar in European trading this morning. With the greenback down against the euro and the Japanese yen, the U.S. Dollar Index has plunged nearly 1% to 82.71 and is threatening to end its winning streak at three sessions. Capitalizing on the dollar's weakness, crude futures are up 0.73% at $77.12 in electronic trading, as black gold rebounds from Wednesday's sell-off. Finally, gold futures down $3.80 at $1,188.00 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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