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Opening View: DJIA Futures Plunge 100 Points; IBM, Texas Instruments Disappoint

By: Schaeffer's Investment Research
Posted: 7/20/2010 7:47:00 AM

Watch out below! Futures on the Dow Jones Industrial Average (DJIA) are trading more than 100 points below fair value heading into the open this morning, pointing toward a negative start to the day. While Wall Street cheered early earnings reports on Monday, last night's disappointing results from technology bellwethers IBM Corp. and Texas Instruments Inc. have swept away any lingering bullish investor sentiment. The S&P 500 Index (SPX) is also poised for an opening drop, with futures on the broad-market index off 12.5 points versus fair value. For those of you looking for a backstop, the DJIA could find immediate support near 10,000, with firmer support near 9,800 on a deepening pullback. As for the SPX, technical analysts will be harping on the 1,065 level today, as it is home to the index's "flash crash" lows, while support for a steeper decline could manifest near 1,045, which is home to the SPX's May and June lows. Finally, the CBOE Market Volatility Index (VIX) has trended lower during the past couple of weeks. Given today's prospects for a sharp sell-off, look for the VIX to pop back above the 30 level, and potentially hold there through Friday.

In earnings news, Harley-Davidson Inc. ( HOG ) reported this morning that its second-quarter net income rose to $71.16 million, or 59 cents per share, as revenue remained flat at $1.14 billion. Wall Street was expecting 42 cents per share on revenue of $1.12 billion. Looking ahead, Harley-Davidson said it expects to ship 201,000 to 212,000 motorcycles to dealers and distributors worldwide in 2010, down 5% to 10% from 2009.

After the close last night, Texas Instruments Inc. ( TXN ) reported a second-quarter profit of $769 million, or 62 cents per share, with revenue rising to $3.5 billion. Analysts had expected earnings of 62 cents per share, on revenue of $3.52 billion.

Finally, IBM Corp. ( IBM ) said its second-quarter net income rose to $3.4 billion, or $2.61 per share. Revenue for the quarter rose 2% to $23.7 billion. The company said foreign currency exchange rates reduced its revenue by roughly $500 million in the quarter. Analysts had expected IBM to post second-quarter earnings of $2.58 per share, and $24.17 billion in revenue.

Earnings Preview

On the earnings front, Biogen Idec Inc. ( BIIB ), Goldman Sachs Group Inc. ( GS ), Johnson & Johnson ( JNJ ), PepsiCo Inc. ( PEP ), Boston Scientific Corp. ( BSX ), Juniper Networks Inc. ( JNPR ), Seagate Technology ( STX ), VMware Inc. ( VMW ), and Yahoo! Inc. ( YHOO ) are scheduled to release their quarterly earnings reports today. Keep your browser at for more news as it breaks.

Economic Calendar

June's building permits and housing starts will hit the Street today, while the market will be graced with the weekly report on U.S. petroleum supplies tomorrow. Weekly initial jobless claims will be joined by June's existing home sales and June's leading economic indicators on Thursday. Friday ends the week as it began, with no reports slated for release.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,377,514 call contracts traded on Monday, compared to 722,787 put contracts. The resultant single-session put/call ratio arrived at 0.52, while the 21-day moving average slipped to 0.64.

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

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.

Overseas Trading

Overseas trading is in poor shape this morning, as only three of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 0.23%. In Asia, most stock indexes climbed, finding support from firmer Chinese shares as investors looked past disappointing earnings by tech bellwethers IBM and Texas Instruments. European shares fell, with banks lower after Hungary sold less of its debt than expected. Overseas market information comes to you courtesy of Schaeffer's Daily Bulletin .

Overseas markets

Currencies and Commodities

Uncertainty regarding a wave of key earnings reports has sent some investors retreating to the safe haven of the U.S. dollar this morning. At last check, the U.S. Dollar Index was up 0.32% at 84.78. Commodities, meanwhile, are taking the predicable path lower in response to the rising dollar. For instance, gold futures are down $4.00 at $1,177.90 in London, while crude oil has slipped 12 cents to trade at $76.78 per barrel in electronic trading.

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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