Opening View: U.S. Futures Point Lower as Cisco Drags Dow Down

By
A A A

The Dow Jones Industrial Average (DJIA) rallied to a new two-year high of 12,254.23 on Wednesday, but pulled back to end the session at 12,239.89. Heading into the open, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 41 points and 6.5 points below fair value, respectively. Dragging the Dow down is a disappointing report from blue chip heavyweight Cisco Systems ( CSCO ), which reported earnings after the close on Wednesday.

Technically, the 12,200 region could provide a short-term floor for the DJIA, with the 12,050 region, site of the Dow's 10-day moving average, providing additional support against potential pullbacks. Resistance, meanwhile, could emerge in the 12,250-12,300 region. Turning to the SPX, the 1,315 area could emerge as a floor, as the index has closed three consecutive sessions above this level. Additional support for the SPX lies in the 1,305 region, which is home to the index's 10-day moving average. Resistance remains in the 1,320-1,325 area.

After the close last night, Cisco Systems Inc. ( CSCO ) posted second-quarter net income of $1.52 billion, or 27 cents per share, down from a profit of $1.85 billion, or 32 cents per share, in the same quarter last year. Non-GAAP earnings came in at $2.1 billion, or 37 cents per share, while total revenue rose 6% to $10.4 billion. Wall Street was anticipating a profit of 35 cents per share on revenue of $10.3 billion, according to Thomson Reuters . Gross margin slipped for the fourth consecutive quarter, falling to 60.2% from 64.5%. The blue chip behemoth is currently down 10.6% in premarket activity.

Meanwhile, Akamai Technologies Inc. ( AKAM ) reported that its fourth-quarter earnings soared 32% to $52.5 million, or 27 cents per share, from $39.7 million, or 21 cents per share, a year ago. On an adjusted basis, Akamai would have earned 40 cents per share. Revenue rose 12% to $284.7 million. According to Thomson Reuters , analysts were expecting a profit of 38 cents per share on revenue of $283.6 million.

Finally, PepsiCo, Inc. ( PEP ) announced this morning that its fourth-quarter earnings came in at $1.05 per share, surpassing analysts' estimate by a penny. The beverage giant said its sales increased 37% to $18.17 billion, boosted by acquisitions in 2010. However, PEP's downwardly revised 2011 forecast for earnings growth of 7-8% concerned traders, and the shares are off 2.5% in premarket activity.

Earnings Preview

On the earnings front, BorgWarner Inc. ( BWA ), PepsiCo Inc. ( PEP ), Philip Morris International Inc. ( PM ), Sprint Nextel Corp. (S), The Cheesecake Factory Inc. (CAKE), Hoku Corp. (HOKU), Kraft Foods Inc. (KFT), MannKind Corp. (MNKD), and Panera Bread Company (PNRA) are slated to release their quarterly earnings reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

We round out the week today with the December trade deficit and the University of Michigan's initial consumer sentiment index for February.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,426,111 call contracts traded on Wednesday, compared to 790,201 put contracts. The resultant single-session put/call ratio arrived at 0.55, while the 21-day moving average held at 0.54.

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

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

Overseas Trading

Overseas trading looks weak this morning, as just one of the 10 indexes that we track is trading in positive territory. The cumulative average return on the collective stands at a loss of 0.80%. In Asia, stocks fell as investors mulled the effects of declining crude prices. Japan's benchmark Nikkei fell 12.2%, to 10,605.65 on Thursday as investors took profits amid growing concerns of a pullback in the market. Meanwhile, European shares fell on Thursday following a round of lackluster earnings reports from companies such as Credit Suisse (CS) and Diageo plc (DGE).

Overseas markets

Currencies and Commodities

Crude futures fell on Wednesday thanks to an unexpected increase in domestic stockpiles, as well as growing concerns over the health of Saudi King Abdullah. Heading into the open, the March crude contract has slipped 31 cents to trade at $86.40 per barrel. Meanwhile, the U.S. Dollar Index has added 42 cents at 78.06. As a result, gold futures are down this morning; in London, gold has fallen $7.70 to trade at $1,357.80 an ounce.

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: AKAM , BWA , CSCO , PEP , PM

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

20,117,270
  • $8.4401 ▲ 6.43%
15,607,883
  • $104.63 ▲ 1.59%
15,498,432
  • $33.55 ▼ 2.75%
14,571,909
  • $16.61 ▲ 1.28%
10,000,732
  • $12.60 ▼ 1.79%
9,987,854
  • $97.71 ▲ 1.39%
8,547,798
  • $57.85 ▼ 17.63%
7,875,669
  • $13.11 ▲ 23.56%
As of 10/23/2014, 10:27 AM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com