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Opening View: DJIA Futures Waver as Moody's Downgrades Ireland

By: Schaeffer's Investment Research
Posted: 12/17/2010 7:45:00 AM
Referenced Stocks: CBOE;ORCL;RIMM;TTWO

The Dow Jones Industrial Average (DJIA) rallied 41 points on Thursday, but stopped just shy of the 11,500 mark, as overseas concerns overshadowed strong domestic economic data. What's more, we could be looking at a repeat performance this morning, as futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 4 points and 1 point below fair value, respectively. Wall Street has reacted with trepidation to news that Moody's Investors Service cut Ireland's credit rating by five notches to Baa1 from Aa2, with a negative outlook. What's more, many traders are disappointed with the European Union's response to euro-zone debt issues following a two-day summit. However, the market may get a lift from passage of the tax cut in the U.S. House. That package now goes to President Obama for his signature.

Technically, the 11,500 level remains a significant hurdle for the DJIA, with 11,550 the next potential sticking point for the blue chip barometer. Support should manifest in the 11,400-11,450 area. The SPX, meanwhile, has support in the 1,230-1,235 area, which is also home to its 10-day moving average. Resistance remains firms at the 1,245 level.

In equity news, Oracle Corp. ( ORCL ) posted a second-quarter profit of $1.87 billion, or 37 cents per share, as revenue jumped 47% to $8.6 billion. Excluding one-time items, Oracle said earnings for the period were 51 cents per share. Analysts were looking for earnings of 46 cents per share on $8.3 billion in revenue.

Also, Research In Motion Limited ( RIMM ) said that its third-quarter earnings soared 45% due to strong BlackBerry sales. For the quarter, RIMM earned $911.1 million, or $1.74 per share, as revenue soared 40% to $5.49 billion. Analysts were expecting earnings of $1.64 per share on revenue of $5.4 billion.

Finally, Take-Two Interactive Software ( TTWO ) reported net income of $53.8 million, or 58 cents per share, in the latest quarter. On a non-GAAP basis, earnings from continuing operations would have been $64 million, or 67 cents per share. Revenue rose 32% to $373.7 million. Analysts were expecting earnings of 31 cents per share on revenue of $325.2 million.

Earnings Preview

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Economic Calendar

The flood finally abates today, with only the Conference Board's leading indicators for November slated for release

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,581,687 call contracts traded on Thursday, compared to 777,076 put contracts. The resultant single-session put/call ratio arrived at 0.49 while the 21-day moving average slipped to 0.53.

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

Overseas Trading

Overseas trading is struggling 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 gain of 0.09%. Asian traders fretted over the possibility for more tightening measures out of Beijing. Taiwanese stocks, however, were a standout, soaring to a fresh 31-month high. European markets initially headed higher, but have since turned lower heading into midday activity, after Moody's Investors Service cut Ireland's credit rating. Also weighing on European stocks was disappointment over the European Union's response to the region's debt crisis.

Overseas markets

Currencies and Commodities

The U.S. dollar is headed lower in premarket trading, as the potential for tightening monetary policy in China and Moody's downgrade of Ireland is creating stiff headwinds for the greenback. At last check, the U.S. Dollar Index was down 0.52% at 79.77. That said, commodities are not benefiting from the weakening dollar, with crude futures adding a mere 4 cents to $88.44 per barrel. Also, gold futures are hovering just above breakeven, with the December contract up $2.60 at $1,373.60 an once in London.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

Unusual options activity - calls

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