Opening View: Bulls Bolstered by Bernanke, Banking
Stocks are headed for a higher open this morning, as futures on all three major indexes are pointing higher. An upbeat report from financial bigwig JPMorgan Chase & Co. (JPM - 39.62) seems to have bolstered the Street's morale -- and traders were already feeling pretty upbeat after Federal Reserve Chairman Ben Bernanke's promising comments on Wednesday. Specifically, Bernanke hinted at the possibility of additional stimulus measures, and the bulls seemed to take this news and run. Looking at today's calendar, the weekly update on jobless claims will also be released, along with retail sales for June and May's business inventories. Be sure to check back at SchaeffersResearch.com throughout the day for the latest updates.
Banking bigwig JPM reported that its second-quarter net income climbed 13% to $5.4 billion, or $1.27 per share, as more borrowers paid their loans on time. Meanwhile, revenue rose 7% to $27.4 billion. Analysts had predicted JPM to post a much tamer profit of $1.21 per share on $25.13 billion in revenue. According to CEO Jamie Dimon, the company has been "working hard" to address its past mistakes, and is committed to investing in new branches in the U.S. and overseas. Ahead of the open, JPM is up 2.3%.
Yum Brands (YUM - 55.58) banked a second-quarter profit of $316 million, or 65 cents per share, up 10% from its year-ago earnings of $286 million, or 59 cents per share. Excluding items, YUM earned 66 cents per share, while revenue improved 9.4% to $2.82 billion. Analysts, on average, were looking for a profit of just 61 cents per share on $2.70 billion in revenue. Strength in the Chinese market helped to offset weakness on the home front; same-store sales in China surged 18% during the recently concluded quarter, but U.S. same-store sales backpedaled 4%. Looking ahead, YUM upped its full-year earnings forecast to $2.83 per share, right in line with the consensus estimate.
Hartford Financial Services (HIG - 25.60) offered up its preliminary second-quarter results, with the insurance company warning that it expects net earnings of just 3 cents per share -- well below analysts' forecast for 72 cents per share. On an adjusted basis, HIG will break even for the quarter. The firm swallowed $447 million in pre-tax catastrophe losses during the three-month period, due in large part to a rash of severe tornadoes in the U.S. during April and May. HIG also confessed to higher-than-expected mesothelioma claims, which prompted the insurance issue to boost its asbestos reserves -- resulting in another pre-tax charge of $290 million. The company is scheduled to report its full second-quarter results on Wednesday, Aug. 3.
Marriott International, Inc. (MAR - 37.14) confessed to a second-quarter profit of 37 cents per share on $3 billion in revenue, in line with analysts' expectations for a profit of 37 cents per share on slightly higher revenue of $3.02 billion. Meanwhile, the hotel hotshot forecast fiscal 2011 earnings in the neighborhood of $1.35 to $1.45 per share, surrounding the consensus estimate for earnings of $1.41 per share. As a result of these lackluster numbers, MAR has dropped nearly 5% ahead of the open.
Today's earnings docket will feature reports from Google ( GOOG ), AngioDynamics ( ANGO ), Cubist Pharmaceuticals ( CBST ), Texas Industries ( TXI ), and Fairchild Semiconductor ( FCS ). Keep your browser at SchaeffersResearch.com for more news as it breaks.
A round of inflation data kicks off today, with the producer price index (PPI) and core PPI for June. The economic calendar wraps up on Friday with the consumer price index (CPI) and core CPI for June, the preliminary Reuters/University of Michigan consumer sentiment index for July, the Empire State manufacturing index, and reports on industrial production and capacity utilization.
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 987,876 call contracts traded on Wednesday, compared to 656,094 put contracts. The resultant single-session put/call ratio docked at 0.66, while the 21-day moving average was perched at 0.69.
Asian markets ended mixed today, after Moody's warned late Wednesday that it may downgrade U.S. debt amid ongoing partisan budget debates. The news weighed heavily on banking stocks, and gave the Japanese yen a safe-haven boost -- thereby applying pressure to exporters. However, commodity stocks powered higher as oil and gold prices advanced. By the close, Japan's Nikkei was down 0.3%, China's Shanghai Composite rose 0.5%, Hong Kong's Hang Seng edged up 0.06%, and South Korea's Kospi eked out a 0.02% rise.
European stocks are taking the U.S. debt downgrade warning a little harder, with the major regional indexes pointed lower at midday. Traders are also considering a disappointing bond offering from Italy, where yields surged to a three-year peak as the cash-strapped country looked to unload 5 billion euros' worth of long-term debt. Meanwhile, German tech giant SAP is taking a dive after the company admitted to softer sales trends during the second quarter. At last check, the French CAC 40 is off 0.8%, London's FTSE 100 is down 0.6%, and the German DAX is 0.3% lower.
Currencies and Commodities
Gold has continued its record-breaking rally this morning, adding 5.9 points, or 0.4%, to hover at $1,591.40 an ounce. The precious metal has been boosted by ongoing concerns about the economic recovery in Europe and the U.S., with traders taking refuge in the "safe haven" asset. Against this backdrop, the U.S. dollar is trading lower this morning, down 0.1 point, or 0.1%. It's the same story for crude, as the August-dated contract has shed 0.1 point, or 0.1%, ahead of the open. This reverses Wednesday's EIA-induced rally; the organization said yesterday that crude inventories fell by 3.1 million barrels last week, compared to economists' expectations for a slimmer 1.8-million-barrel drop.
Unusual Put and Call Activity:
Unusual Put and Call Activity:
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