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Opening View: DJIA, SPX Head South on Blue-Chip Earnings, Greek Debt Standoff
By: Schaeffer's Investment Research
U.S. stocks are pointed lower in pre-market action, as Wall Street eyes both Europe and the latest batch of blue-chip earnings reports. Specifically, Greece remains in the overseas spotlight, with the cash-strapped nation still attempting to negotiate a deal with private creditors . On the home front, meanwhile, DuPont ( DD ) was among the notable Dow components to step into the earnings confessional, while Texas Instruments ( TXN ) and VMware ( VMW ) are setting the tone for the tech sector. Against this busy backdrop, the Dow Jones Industrial Average (DJIA) is trading almost 59 points below fair value, while the broader S&P 500 Index (SPX) is poised to snap its winning streak .
In earnings news, DuPont (DD - 49.35) reported fourth-quarter income of $373 million, or 40 cents per share -- relatively flat with the year-ago period. Excluding items, DD earned 35 cents in the fourth quarter. Net sales increased 14% to $8.43 billion. Analysts, on average, were anticipating an adjusted per-share profit of 33 cents on revenue of $8.53 billion. At last check, DD is trading just south of breakeven.
VMware, Inc. (VMW - 86.00) last night reported both fourth-quarter and full-year earnings. For the quarter, VMW's profit rose to $200 million, or 46 cents per share, a 67% jump over last year's profit of $120 million, or 28 cents per share. On an adjusted basis, VMW earned 62 cents per share, while revenue climbed a year-over-year 27% to $1.06 billion. The quarterly results just beat analysts' expectations for adjusted earnings of 60 cents per share on $1.05 billion in revenue. Earnings doubled for fiscal 2011, arriving at $724 million, or $1.68 per share, with revenue increasing 32% to $3.77 billion. Excluding items, the tech concern banked a full-year profit of $2.17 per share. Looking ahead, VMW sees fiscal first-quarter and full-year revenue to range between $1.02 billion and $1.04 billion, and $4.48 billion and $4.6 billion, respectively, with analysts forecasting revenue of $1.02 billion and $4.51 billion, respectively. In pre-market trading, VMW is pointed 5.2% higher.
Texas Instruments (TXN - 33.19) reported a fourth-quarter profit of $298 million, or 25 cents per share - down 68% from $942 million, or 78 cents per share, a year ago. Revenue, meanwhile, dipped 3% to $3.42 billion. Analysts, on average, were calling for a heftier per-share profit of 39 cents, though sales exceeded the consensus forecast of $3.25 billion. Plus, as Chairman and CEO Rich Templeton noted, "Revenue in the fourth quarter was higher than expected across all our major product lines, reinforcing our belief that we're at the bottom of this downturn." Going forward, TXN forecast first-quarter earnings of 16 cents to 24 cents per share on sales of $3.02 billion to $3.28 billion. For comparison, Wall Street expects current-quarter earnings of 41 cents per share on revenue of $3.23 billion. Ahead of the bell, TXN is set to open with a 0.9% lead.
Finally, Western Digital (WDC - 34.71) said its fiscal second-quarter profit fell 36% to $145 million, or 61 cents per share, from last year's profit of $225 million, or 96 cents per share. On an adjusted basis, WDC's earnings came in at $1.51 per share. Revenue slipped 19% to $2 billion. Results for the hard-drive maker topped predictions, as Wall Street was looking for earnings of 71 cents per share on $1.84 billion in sales. For the current quarter, WDC forecast an adjusted profit of $1.15 to $1.45 per share on sales of $2 billion to $2.15 billion. Analysts are expecting a profit of 91 cents per share on sales of $2.05 billion. At last look, WDC is pointed 5.2% higher.
Today's earnings docket will also feature reports from McDonald's ( MCD ), Johnson & Johnson ( JNJ ), Travelers (TRV), Verizon Communications (VZ), Apple (AAPL), Yahoo (YHOO), Coach (COH), Baker Hughes (BHI), EMC Corp. (EMC), Harley-Davidson (HOG), and AK Steel (AKS). Keep your browser at SchaeffersResearch.com for more news as it breaks.
The economic calendar kicks off today, with the Richmond Fed's business activity survey on tap, and President Obama's State of the Union address slated to hit airwaves after hours. On Wednesday, the latest pending home sales data and the regularly scheduled crude inventories report will hit the Street, though traders will most likely be consumed by the Federal Open Market Committee's (FOMC) interest-rate decision and Fed Chairman Ben Bernanke's post-meeting speech. Thursday's economic agenda heats up with reports on jobless claims, durable goods, new home sales, and the Conference Board's index of leading indicators. Finally, Friday wraps up with the government's fourth-quarter gross domestic product (GDP) estimate, as well as the final Thomson Reuters/University of Michigan consumer sentiment figures for January.
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,314,148 call contracts traded on Monday, compared to 852,437 put contracts. The resultant single-session put/call ratio arrived at 0.65, while the 21-day moving average was 0.62.
Stocks in Tokyo ended slightly higher today, with traders looking past a stand-off between Greece and its private bondholders. Toyota Motor (TM) was a notable gainer, one day after the automaker unveiled plans to cut 350 jobs from its Australian manufacturing operations. Meanwhile, the European Union's decision to block oil imports from Iran provided a tailwind for energy stocks. However, equities trimmed their gains after the Bank of Japan lowered its growth forecasts for fiscal 2011 and 2012, citing "the slowdown in overseas economies" as one catalyst behind the move. By the close, Japan's Nikkei was up 0.2%. Markets in Hong Kong, China, and South Korea remain closed for holiday.
European markets are in the red at midday, with traders on edge after euro-zone finance ministers rejected a restructuring offer from Greek bondholders. Also stoking anxiety is a Wall Street Journal report suggesting that Portugal may need another bailout, as the country attempts to dig out from a 9 billion euro debt load that matures in September 2013. At last look, the French CAC 40 is down 1.2%, the German DAX is off 1%, and London's FTSE 100 is 0.8% lower.
Currencies and Commodities
The greenback is trading fractionally higher this morning, with the U.S. dollar index up almost 0.1% at last check. Crude oil, meanwhile, remains stuck south of the century mark , with the front-month contract down 0.3% to linger near $99.26 per barrel. Elsewhere, gold futures have pulled back from six-week highs , with the malleable metal down 0.6% to flirt with $1,668.10 an ounce.
Unusual Put and Call Activity:
Unusual Put and Call Activity:
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