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Opening View: DJIA Poised for Triple-Digit Drop as Nuclear Nerves Sweep Street
3/15/2011 8:12:00 AM
By: Schaeffer's Investment Research
For just the second time since late January, the Dow Jones Industrial Average (DJIA) surrendered round-number support at the 12,000 level on Monday. In the same vein, the broader S&P 500 Index (SPX) pared its intraday losses, but ended south of the 1,300 level for the first time in six weeks. What's more, it looks like the indexes are poised to extend yesterday's retreat, as the Street joins in a global sell-off stemming from warnings of a radiation leak in Japan.
Ahead of the bell, the Dow is trading about 175 points below fair value, while the SPX is down almost 31 points, and the COMP is flirting with a 51-point deficit. Overseas, a third explosion at Japan's Fukushima Daiichi nuclear power plant triggered fears of widespread radiation. While the Bank of Japan pledged to inject 20 trillion yen ($245 billion) into the markets, the move did little to ease the pain, with the country's key index spiraling more than 10% lower.
In equities news, General Electric ( GE ) is poised to deepen its slide today, after giving up more than 2% on Monday. The company had a hand in building the Fukushima Daiichi nuclear power reactors in Japan, which malfunctioned as a result of the earthquakes and tsunami. The blue chip has vowed to donate $5 million to relief efforts, and has engineers on standby in Wilmington, N.C., to offer technical assistance to the Japanese government, according to the Wall Street Journal .
Meanwhile, fellow Dow component Hewlett-Packard ( HPQ ) is making headlines this morning, after CEO Leo Apotheker stepped up to the podium at the company's analyst meeting. In his first speech outlining his plans for the tech titan, Apotheker announced a 50% boost to its quarterly dividend, and said it's seeking double-digit percentage increases to its dividend every year. Nevertheless, the shares of HPQ are poised to follow their broad-market brethren lower, with the shares down about 2% in pre-market action.
Elsewhere, Kraft Foods ( KFT ) Chief Financial Officer Timothy McLevish last night said he'll depart the company later this year, in order to pursue opportunities in general management. The CFO will be succeeded by David Brearton, an operations executive at Kraft.
Finally, Brown Shoe ( BWS ) stepped into the earnings spotlight this morning, confessing to a weaker-than-anticipated fourth-quarter profit. More specifically, the firm said it earned $3.4 million, or 8 cents per diluted share, compared to net earnings of $5 million, or 12 cents a share, a year earlier. Analysts, on average, expected the footwear firm to record a per-share profit of 15 cents. Sales, meanwhile, jumped 6.8% to $604.5 million, also missing the Street's estimates.
The economic calendar kicks off with a vengeance today, with the release of the latest New York-region manufacturing data, last month's import and export figures, the National Association of Home Builders' monthly housing market index, and the Federal Open Market Committee's (FOMC) highly anticipated interest rate decision. On Wednesday, the Street will get word on February's housing starts and building permits, as well as the latest producer price data and regularly scheduled crude inventories report. Finally, the economic calendar will wind down on Thursday with the government's weekly jobless claims and the Conference Board's index of leading indicators, as well as the latest data on consumer prices, industrial production, and manufacturing activity in the Philadelphia region.
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,039,940 call contracts traded on Monday, compared to 708,242 put contracts. The resultant single-session put/call ratio jumped to 0.68, while the 21-day moving average edged higher to 0.60.
Japanese equities plummeted today, after Prime Minister Naoto Kan warned of a "substantial amount" of a radiation from the faulty Fukushima Daiichi plant, which saw yet another nuclear reactor explode. Exacerbating those fears were reports of radiation levels at 23 times the norm in the Tokyo level. Against this backdrop, the Nikkei swallowed a hefty loss of more than 1,000 points, or nearly 10.6%. Elsewhere in the region, Hong Kong's Hang Seng gave up about 2.9%, while the Shanghai Composite surrendered 1.4%.
European stocks took a cue from their Asian neighbors, as equities with Japanese exposure paved the path lower. At last check, London's FTSE 100 Index gave up nearly 2%, France's CAC 40 tumbled 3.2%, and the German DAX backpedaled almost 4.1%.
Currencies and Commodities
The U.S. dollar is slightly higher this morning, as the U.S. Dollar Index was seen up about 0.7% at 76.85. Elsewhere, crude futures are also headed lower, reversing yesterday's slim gains to hover south of the psychologically significant century mark. In electronic trading, the April crude futures contract has fallen $2.82 to $99.37 per barrel. Finally, gold futures have also tumbled, giving up almost 1.1% to linger in the $1409.90 neighborhood.
Unusual Put and Call Activity:
Unusual Put and Call Activity:
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