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Opening View: Futures Point Higher as Earnings in Focus

By: Schaeffer's Investment Research
Posted: 7/19/2011 8:07:00 AM
Referenced Stocks: AAPL;CMG;GS;JNJ;KO

Economic woes weighed on the Street on Monday, pressuring the Dow Jones Industrial Average (DJIA ) to close below the 12,400 level for the first time since June 29 -- and the S&P 500 Index (SPX ) and Nasdaq Composite (COMP ) swung to daily losses as well. However, it's a new day, and it seems that the bulls have dusted themselves off and re-entered the ring, ready for the day's slew of earnings reports. In fact, futures on all three major indexes are pointing higher, with the Dow hovering an impressive 75 points north fair value. Already, bulls have responded to Bank of America's (BAC - 9.72) quarterly report, which came out just moments ago. Let's take a look at the banking bigwig's results.

Dow, S&P and Nasdaq futures

Earlier this morning, BAC confessed to a second-quarter net loss of $8.8 billion, or 90 cents per share, compared to income of $3.1 billion, or 27 cents per share, in the year-earlier period. Adjusted net income arrived at 33 cents per share. Analysts had predicted BAC to post a quarterly loss of 85 cents per share. The financial heavyweight said the results reflected its efforts to resolve the repurchase exposure of Countrywide, as well as other mortgage-related costs. Meanwhile, credit costs dropped and fees from asset management and investment banking climbed. Ahead of the open, BAC is 0.1% higher.

Meanwhile, IBM Corp. (IBM - 175.28) said its second-quarter profit increased 8.2% to $3.66 billion, or $3.00 per share, from its year-ago earnings of $3.39 billion, or $2.61 per share. Excluding items, IBM banked an operating profit of $3.09 per share, while revenue rose 12% to $26.67 billion. Analysts, on average, were looking for a profit of $3.03 per share on $25.35 billion in revenue. Looking ahead, IBM predicted full-year earnings of $13.25 per share, up from its April forecast of $13.15 per share. The tech issue is up roughly 2% in pre-market trading.

The Mosaic Company (MOS - 66.46) pulled down a fiscal fourth-quarter profit of $649.2 million, or $1.45 per share -- an improvement of 64% over last year's earnings of $396.1 million, or 89 cents per share. Revenue for the quarter increased 54% to $2.86 billion. Both figures topped analysts' expectations, which called for a profit of $1.38 per share on $2.6 billion in revenue. "Looking to fiscal 2012, we anticipate another good year given continued healthy global nutrient demand," said President and CEO Jim Prokopanko.

Wynn Resorts (WYNN - 164.89) raked in a second-quarter profit of $122 million, or 97 cents per diluted share, more than doubling its year-ago net income of $52.4 million, or 42 cents per diluted share. On an adjusted basis, WYNN earned $200.8 million, or $1.60 per diluted share, while net revenue jumped 32% to $1.37 billion. Wall Street was looking for WYNN to report a tamer per-share profit of $1.03 on $1.28 billion in revenue. Ahead of the open, WYNN has added 2.1%.

Earnings Preview

Today's earnings docket will feature reports from Apple ( AAPL ), Coca-Cola Co. ( KO ), Goldman Sachs ( GS ), Chipotle Mexican Grill ( CMG ), Johnson & Johnson ( JNJ ), Peabody Energy (BTU), and Yahoo (YHOO). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Housing data continues today, with the release of home starts and building permits for June. Existing home sales for June will hit the Street on Wednesday, along with the usual update on U.S. petroleum supplies. A flurry of data will be released Thursday, including weekly jobless claims, the Philly Fed index for July, and the Conference Board's index of leading economic indicators for June. There are no major economic reports scheduled for Friday.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,125,839 call contracts traded on Monday, compared to 782,553 put contracts. The resultant single-session put/call ratio docked at 0.70, while the 21-day moving average was perched at 0.66.

NYSE and Nasdaq summary

Volatility indices

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

Overseas Trading

Asian markets ended mixed today, as strength in the tech sector helped to offset lingering macroeconomic woes. Rising risk aversion amid ongoing debt crises in Europe and the U.S. propelled the yen higher, weighing on Japanese exporters such as Canon and Honda Motor. However, well-received earnings from IBM helped prop up tech stocks in the region, while strength in banks and energy stocks helped Hong Kong's benchmark index to a positive finish. By the close, Japan's Nikkei declined 0.9%, China's Shanghai Composite dipped 0.7%, South Korea's Kospi pulled back 0.01%, and Hong Kong's Hang Seng added 0.5%.

European stocks are trading higher at midday, thanks in part to a rebound for beaten-down banking issues. The tech sector has emerged as a pocket of strength following Big Blue's quarterly results, while a solid earnings announcement from Novartis is also stoking some investor optimism. However, with euro zone finance leaders slated to meet later this week to address the Greek debt crisis, traders are keeping their exuberance mostly in check. At last look, the German DAX is up 1.3%, the French CAC 40 has tacked on 1.2%, and London's FTSE 100 is 0.4% higher.

Overseas markets

Currencies and Commodities

Gold has continued its record-breaking ascent this morning, adding 3.2 points, or 0.2%, to hover around $1,605.60 an ounce. The precious metal has rallied to new highs in recent sessions, as traders gravitate toward the "safe haven" investment. Meanwhile, the dollar has backpedaled 0.4 point, or 0.5%, this morning, as a result of rising demand for gold and anxieties over the global economic situation. Elsewhere, crude has edged higher in pre-market trading, up 0.9 point, or 0.9%, at last check.

Currencies and commodities

Unusual Put and Call Activity:

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Unusual options activity - puts

Unusual options activity - calls

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