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Opening View: DJIA, SPX Ready to Rally as Apple Inc., General Electric Lead the Earnings Party

Posted
4/21/2011 8:07:00 AM
By: Schaeffer's Investment Research
Referenced Stocks:AAPL;BIIB;COF;FITB;GE

After skyrocketing to a multi-year high on Wednesday, the Dow Jones Industrial Average (DJIA ) is set to end the holiday-shortened week on an even higher note. Fueling the bullish momentum has been an onslaught of encouraging earnings reports, with Apple Inc. ( AAPL ) leading the pack after recording a 95% jump in first-quarter profit. Meanwhile, a bevy of blue chips are also poised for earnings-induced gains, with Honeywell (HON), Travelers (TRV), and General Electric ( GE ) all emerging from the big-cap earnings confessional. Against this backdrop, the DJIA is trading about 70 points above fair value, while the broader S&P 500 Index (SPX ) is braced for a 10-point jump at the opening bell.

Dow, S&P and Nasdaq futures

In equities news, Apple Inc. (AAPL - 342.41) reported a first-quarter profit of $5.99 billion, or $6.40 per share, and said revenue skyrocketed 83% to $2467 billion. The results handily topped the Street's estimates for earnings of $5.37 per share on $23.4 billion in sales. The firm said "demand was stunning" for its iPad 2, and that iPhone sales more than doubled from a year ago. What's more, the tech titan said it's "extremely happy" with its progress in China, where iPhone sales are up nearly 250%. At last check, the shares of AAPL are flirting with a 5% lead.

Elsewhere, Honeywell (HON - 58.74) said first-quarter profit jumped 44% to $705 million, or 88 cents per share, while net sales soared 15% to $8.91 billion. Analysts, on average, expected first-quarter earnings of 82 cents per share on sales of $8.63 billion. In addition, the blue chip upped its current-year adjusted earnings guidance to between $3.80 and $3.95 per share, compared to its previous projections for per-share earnings of $3.60 to $3.80. Ahead of the bell, HON is headed for a gain of around 2.4%.

Meanwhile, fellow blue chip Travelers Companies (TRV - 59.13) reported a first-quarter profit of $839 million, or $1.92 per share, on revenue of $6.3 billion. The results exceeded the Street's forecast, which called for earnings of $1.49 per share on sales of $5.31 billion. Furthermore, the firm said it's "cautiously but increasingly optimistic" about its operating environment, and that its board approved hiking its quarterly dividend by 14% to 41 cents per share. In pre-market trading, TRV is lingering around breakeven.

Finally, General Electric (GE - 20.40) surpassed analysts' expectations with its first-quarter results. The conglomerate raked in a profit of $3.36 billion, or 31 cents per share, while revenue improved 6% to $38.45 billion. On an adjusted basis, GE earned 33 cents per share. Wall Street's consensus estimates called for a profit of 28 cents per share on revenue of $34.64 billion. Additionally, GE raised its quarterly dividend by one penny to 15 cents per share. At last check, the shares of GE are set to gap about 2.5% higher.

Earnings Preview

Today's earnings docket will also feature reports from Morgan Stanley (MS), Capital One Financial ( COF ), Philip Morris (PM), Fifth Third Bancorp ( FITB ), and Biogen Idec Inc. ( BIIB ), just to name a few. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

We'll wrap up the holiday-shortened week today with weekly jobless data, the Conference Board's index of leading economic indicators, and reports on Philadelphia-area manufacturing.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,534,919 call contracts traded on Wednesday, compared to 796,745 put contracts. The resultant single-session put/call ratio docked at 0.52 -- the lowest since April 1 -- while the 21-day moving average remained at 0.59.

NYSE and Nasdaq summary

Volatility indices

The spring 2011 issue of SENTIMENT magazine is now available here.

Overseas Trading

Asian stocks ended in the black again today, as investors celebrated another round of encouraging earnings reports from the U.S. tech sector. Along with Apple-related stocks like Elpida Memory and Toshiba Corp., commodity-related equities paced the advancers amid rising crude oil and gold prices. By the close, the Shanghai Composite added 0.7%, Hong Kong's Hang Seng rallied 1%, and Japan's Nikkei tacked on a healthy 0.8%. South Korea's Kospi, meanwhile, soared 1.3% to hit an all-time high.

European markets were also trading notably higher in the wake of Apple's upbeat earnings report. In addition, Akzo Nobel and Schneider Electric SA were both garnering positive headlines, with the former reporting a sharp rise in quarterly profit, and the latter announcing a notable increase in sales. However, telecom stocks were struggling thanks to a profit warning from sector peer KPN NV. At last check, London's FTSE has added 0.3%, France's CAC 40 has advanced 0.7%, and Germany's DAX has soared close to 0.9%.

Overseas markets

Currencies and Commodities

After tumbling to a 13-month nadir against the euro on Wednesday, the greenback has continued its decline, with the U.S. dollar index down almost 0.7%. Elsewhere, crude futures have extended yesterday's surge on lingering concerns about supplies. At last check, the June-dated contract has added 0.5% to flirt with $112.03 per barrel. In the same vein, gold futures continue to put the $1,500-an-ounce marker in the rearview mirror. In pre-market action, the front-month contract has tacked on 0.6% to trade at $1,507.90 an ounce.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

Unusual options activity - calls

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