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Opening View: After a Volatile Week, Traders Anxiously Await Today's Economic Reports

By: Schaeffer's Investment Research
Posted: 8/12/2011 8:08:00 AM
Referenced Stocks: CBOE;CNTY;JCP;MENT;TREE

After what can only be characterized as a volatile week, today is probably not going to be much different. There are several key economic reports due out today, notably July retail sales and August consumer confidence. Analysts are expecting consumer confidence to fall to a reading of 62 in August from 63.7 in July. However, today's consumer confidence report will not reflect Friday's S&P downgrade -- so it seems that things will ultimately get worse before they get better. Ahead of today's reports, futures on the Dow Jones Industrial Average (DJIA ) and S&P 500 Index (SPX ) are trading just a few points above fair value.

Dow, S&P and Nasdaq futures

In earnings news... Nvidia (NVDA - 13.41) swung to a second-quarter profit of $151.6 million, or 25 cents per share -- neatly reversing its year-ago loss of $141 million, or 25 cents per share. Excluding items, NVDA earned 32 cents per share, while revenue climbed 25% to $1.02 billion. Analysts, by contrast, were expecting a profit of 25 cents per share on $1.01 billion in revenue. Looking ahead, NVDA predicted third-quarter revenue to arrive between $1.06 billion and $1.08 billion, north of Wall Street's forecast for $1.05 billion. Ahead of the open, NVDA is up nearly 13%.

Nordstrom (JWN - 42.33) banked a second-quarter profit of $175 million, or 80 cents per share, up 20% from its year-ago earnings of $146 million, or 66 cents per share. Revenue for the period improved 12% to $2.81 billion, boosted by a 7.3% gain in same-store sales. Wall Street was looking for a profit of 74 cents per share on $2.7 billion in revenue. For the full year, Nordstrom upped its earnings forecast to a range between $2.95 and $3.10 per share, thanks to stronger-than-anticipated same-store sales trends. The consensus estimate among analysts currently stands at $3.05 per share.

Finally, DeVry Inc. (DV - 53.39) reported a fourth-quarter profit of $75.2 million, or $1.08 per share, compared to $71.6 million, or 99 cents per share, in the year-ago period. Meanwhile, revenue for the quarter rose 8% to $546.70 million. Analysts had estimated a slimmer profit of $1.03 per share on revenue of $546 million. Chief Executive Officer Daniel Hamburger expressed displeasure with the results, explaining, "We were not satisfied with our short-term enrollment performance this quarter as total students declined to around 119,000." The CEO went on to explain that the recent regulations on for-profit institutions, along with the struggling economy, have had an adverse effect on enrollment. Traders are not pleased with this news, with the shares down 8.8% ahead of the open.

Earnings Preview

Today's earnings docket will feature reports from J.C. Penney ( JCP ), Century Casinos ( CNTY ), Mentor Graphics ( MENT ), and Tree.com ( TREE ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Aside from the aforementioned retail sales report for July and Reuters/University of Michigan consumer sentiment index for August, today's agenda also features a report on June's business inventories.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,485,474 call contracts traded on Thursday, compared to 930,061 put contracts. The resultant single-session put/call ratio arrived at 0.63, while the 21-day moving average was 0.73.

NYSE and Nasdaq summary

Volatility indices

The summer 2011 issue of SENTIMENT magazine is now available here.

Overseas Trading

Asian markets ended mixed today, with automakers and other exporters taking a hit amid ongoing concerns about the health of the global economy. However, Canon bucked the downtrend in Tokyo after unveiling a healthy stock buyback program. On the other hand, energy issues led the path higher in China, where stocks racked up their third straight winning session. By the close, South Korea's Kospi lost 1.3%, Japan's Nikkei declined 0.2%, Hong Kong's Hang Seng added 0.1%, and China's Shanghai Composite added 0.5%.

Banking stocks are leading the charge in Europe, with markets firmly higher at midday. Regulators in France, Italy, Belgium, and Spain have now banned short selling in an attempt to curb out-of-control volatility, and beaten-down financial names have so far been the primary beneficiaries of this move. At last check, the German DAX is up 2.2%, the French CAC 40 has gained about 2%, and London's FTSE 100 is 1.5% higher.

Overseas markets

Currencies and Commodities

Crude futures are trading slightly lower this morning, giving back a portion of Thursday's gains. Oil ended yesterday's session at its highest level all week, as bulls cheered an upbeat report on jobless claims. Ahead of the open, crude futures are trading 0.1 point, or 0.2%, lower. Conversely, gold has edged higher this morning, bouncing back after Thursday's news that CME Group had increased its margin requirements. This news sparked a sell-off on gold, but this morning, gold futures have rebounded 4.7 points, or 0.3%, to hover around $1,756.20 an ounce. Finally, the U.S. dollar index is down 0.1 point, or 0.2%, as U.S. investors await today's slew of economic reports.

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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