Opening View: Wall Street Looks to Extend Gains, In Spite of Dire Fed Projections

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In spite of a drama-filled G-20 summit, a European Central Bank policy meeting, and pessimistic projections from the Federal Reserve, U.S. stock futures are pointed higher, albeit slightly, ahead of today's session. Specifically, German Chancellor Angela Merkel and French President Nicolas Sarkozy have suspended Greece's most recent tranche of aid pending the country's referendum, tentatively scheduled for Dec. 4.

Bringing things back a little closer to home, following yesterday's policy meeting, Fed Chairman Ben Bernanke expressed his continued frustration with the current state of fiscal instability, as the Federal Reserve lowered its projections for the U.S. economy for the third time this year. Investors are hoping this morning's unemployment claims provide a brief ray of hope ahead of tomorrow's highly anticipated nonfarm payrolls report for October. Against this backdrop, the Dow Jones Industrial Average (DJIA) finds itself trading 51 points north of fair value, while the broader S&P 500 Index (SPX) is set to open about 5 points higher.

Dow, S&P and Nasdaq futures

In earnings news, Transocean Ltd. (RIG - 55.99) last night stepped into the earnings confessional. RIG swung to a third-quarter loss of $71 million, or 22 cents per share, compared to its year-ago profit of $368 million, or $1.15 per share. The results were negatively impacted by roughly $9 million in expenses related to "the Macondo well incident," as RIG described the catastrophic oil spill in its company release. Meanwhile, revenue dropped by 1.7% to $2.24 billion. RIG's quarterly results came in weaker than expected, as analysts, on average, had been looking for earnings of 79 cents per share on revenue of $2.36 billion.

Meanwhile, Qualcomm (QCOM - 52.18) said its fiscal fourth-quarter profit jumped 22% to $1.06 billion, or 62 cents per share, from $865 million, or 53 cents per share, in the year-ago period. Excluding items, QCOM reported a profit of 80 cents per share. Revenue, meanwhile, increased 39% to $4.12 billion. The San Diego-based company's results beat analysts' forecast for earnings of 78 cents per share on $4 billion in revenue. QCOM is now expecting a fiscal 2012 profit of $3.42 to $3.62 per share, with sales expected to range between $18 billion and $19 billion. Wall Street was looking for a full-year profit of just $3.47 per share on $17.29 billion in sales. For the current quarter, the wireless chip manufacturer expects earnings of 86 cents to 92 cents per share on $4.35 billion to $4.75 billion in revenue, while analysts are predicting a first-quarter profit of 85 cents per share on $4.24 billion in sales. Shares of QCOM are trading about 9% higher ahead of the bell.

Finally, Kraft Foods (KFT - 34.64) banked a third-quarter profit of $922 million, or 52 cents per share, up 22% from its year-ago earnings of $754 million, or 43 cents per share. On an adjusted basis, earnings arrived at 58 cents per share, while revenue increased 12% to $13.2 billion. The results surpassed Wall Street's expectations, which called for a profit of 55 cents per share on $12.81 billion in revenue. Looking ahead, KFT hiked its full-year forecast. The food giant is now predicting operating earnings of $2.27 per share on 6% revenue growth, up from its prior outlook for a profit of $2.25 per share on 5% revenue growth. KFT was last seen up just over 2% in pre-market trading.

Earnings Preview

Today's earnings docket will also feature reports from American International Group ( AIG ), Starbucks ( SBUX ), Kellogg ( K ), Sara Lee ( SLE ), Eastman Kodak ( EK ), Chesapeake Energy (CHK), Alpha Natural Resources (ANR), CBOE Holdings (CBOE), NYSE Euronext (NYX), MGM Resorts (MGM), Agrium (AGU), CBS Corp. (CBS), DirecTV (DTV), Estee Lauder (EL), LinkedIn (LNKD), and SunPower (SPWRA). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

As usual, today's calendar features weekly jobless claims. Also on the day's docket are the ISM services index, third-quarter productivity and labor costs, and factory orders. Bright and early Friday morning, all eyes will be on the Labor Department's nonfarm payrolls report for October.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 785,840 call contracts traded on Wednesday, compared to 522,020 put contracts. The resultant single-session put/call ratio arrived at 0.66, while the 21-day moving average was 0.67.

NYSE and Nasdaq summary

Volatility indices

Overseas Trading

Stocks in Asia pulled back today, pressured by familiar anxiety over the euro zone. European leaders on Wednesday warned Greece that it won't receive any additional aid until the country decides whether it will remain in the euro zone, heightening anxiety ahead of the G-20 summit. These developments weighed on banking stocks, with HSBC emerging as a notable laggard in Hong Kong. By the close, Hong Kong's Hang Seng fell 2.5%, Japan's Nikkei declined 2.2%, South Korea's Kospi tumbled 1.5%, and China's Shanghai Composite bucked the trend to add 0.2%.

On the other hand, the major European benchmarks are modestly higher at midday. Somewhat perversely, traders seem hopeful that the beleaguered Greek government may collapse, postponing the threatened referendum on the bailout package. At midday, the French CAC 40 is up 1.9%, the German DAX has added 1.8%, and London's FTSE 100 is 0.4% higher.

Overseas markets

Currencies and Commodities

Currencies and commodities

Unusual Put and Call Activity:

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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.



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This article appears in: Investing , Options

Referenced Stocks: AIG , EK , K , SBUX , SLE

Schaeffer's Investment Research

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