Opening View: U.S. Stocks Pointed Lower Amid Domestic, Overseas Debt Concerns

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U.S. stocks are set to open the holiday-shortened week significantly lower today, thanks to escalating debt concerns on both sides of the Atlantic. At home, traders are jeering reports that the congressional "supercommittee" has failed to come up with a bipartisan plan to lower the U.S. deficit ahead of Wednesday's deadline. Overseas, meanwhile, Moody's threatened to revoke France's triple-A credit rating, while political leaders in China warned of an extended global recession. Against this gloomy backdrop, the Dow Jones Industrial Average (DJIA) is bracing for a 159-point drop, while the broader S&P 500 Index (SPX) is set to kick off an historically positive week by testing its footing in the 1,200 region.

Dow, S&P and Nasdaq futures

In equities news, Pharmasset (VRUS - 72.67) agreed to be acquired by Gilead Sciences (GILD - 39.88) for about $10.4 billion, or $137 per share -- a premium of 89% to VRUS' closing price of $72.67 on Friday. Including options, the deal -- expected to close in the first quarter of 2012 -- is valued at roughly $11 billion. GILD expects the acquisition will be dilutive to earnings through 2014, and will begin to add to its profit in 2015. At last check, GILD is headed for a 4.7% drop out of the gate, while VRUS is set to open about 86% higher.

Elsewhere, Alleghany Corp. (Y - 314.26) said it will buy insurance issue Transatlantic Holdings (TRH - 54.43) for $3.4 billion in cash and stock. Under the terms of the deal, TRH shareholders will receive $14.22 in cash and 0.145 Y share, for a total value of about $59.79 per share -- a premium of 9.8% to TRH's closing price of $54.43 on Friday. The deal is expected to close sometime in the first quarter of next year. Earlier this month, Validus Holdings ( VR ) offered $57.34 per share for Transatlantic. Ahead of the bell, TRH is pointed 4.7% higher.

In earnings news, Tyson Foods (TSN - 19.45) banked a fiscal fourth-quarter profit of $97 million, or 26 cents per share, down from its year-ago earnings of $213 million, or 57 cents per share. Sales for the quarter climbed 13% to $8.4 billion, but TSN's bottom line was pressured by increased grain and feed costs. The results were mixed, as analysts were looking for a profit of 32 cents per share on $8.2 billion in revenue. At last look, TSN is lingering just south of breakeven.

Earnings Preview

Today's earnings docket will also feature reports from Hewlett-Packard ( HPQ ), Tech Data ( TECD ), and Jack in the Box ( JACK ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The monthly report on existing home sales is the lone item on today's economic agenda. On Tuesday, the government's latest gross domestic product ( GDP ) estimates will hit the Street, as well as a report on business activity in the Richmond Fed district. Most notably, though, the Federal Open Market Committee's (FOMC) meeting minutes are slated for release at 2 p.m. EST. On Wednesday, Uncle Sam will release its weekly jobless figures a day early, thanks to the Thanksgiving holiday on Thursday. In addition, Wall Street will digest the regularly scheduled crude inventories report, the final Thomson Reuters/University of Michigan consumer sentiment index for November, and monthly data on durable goods orders and personal incomes and spending. The post-holiday economic calendar is bare on Friday, when U.S. markets will shut down at 1 p.m. EST.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 993,831 call contracts traded on Friday, compared to 909,293 put contracts. The resultant single-session put/call ratio arrived at 0.91, while the 21-day moving average was 0.71.

NYSE and Nasdaq summary

Volatility indices

Overseas Trading

Stocks in Asia ended lower today, thanks in part to data revealing an unexpected trade deficit for Japan in October. Fiscal anxiety out of the U.S. also weighed on investor sentiment, as the congressional supercommittee remained gridlocked just days ahead of the deadline to reach a budget agreement. With Europe's debt woes also lingering in the background, exporters and energy issues were among the hardest-hit. By the close, Hong Kong's Hang Seng fell 1.4%, South Korea's Kospi declined 1%, Japan's Nikkei gave up 0.3%, and China's Shanghai Composite lost 0.06%.

European equities are also in the red at midday, with French bond yields rising after Moody's warned that the country could be at risk of losing its top-notch triple-A credit rating. The ratings agency also cautioned of "significantly" increased risks to the German financial system, applying pressure to banking issues. At last check, the French CAC 40 and the German DAX have each shed 2.6%, and London's FTSE 100 is down about 1.9%.

Overseas markets

Currencies and Commodities

The greenback has gained ground this morning, with the U.S. dollar up 0.5%. On the other hand, crude futures have extended their pullback beneath the century mark, with the newly front-month contract down 1.5% to linger near $96.21 per barrel. Likewise, gold futures are also on the decline, with the precious metal last seen 1.3% lower at $1,703 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

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This article appears in: Investing , Options

Referenced Stocks: GDP , HPQ , JACK , TECD , VR

Schaeffer's Investment Research

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