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Opening View: Stocks Poised to Rebound as Hopes High Ahead of ISM Report
By: Schaeffer's Investment Research
Stocks are looking to stage a rebound this morning, with futures on all three major indexes pointing cautiously higher. After eight straight days of losses on the Dow Jones Industrial Average (DJIA ), futures on the blue-chip barometer are currently trading 22 points above fair value. Investors virtually ignored Tuesday's news that Congress had agreed to a solution for the debt ceiling dilemma, choosing instead to focus their energies on the personal incomes and spending report, which wasn't pretty. However, today it seems that the Street woke up on the bullish side of the bed, with hopes high ahead of the Institute for Supply Management's ( ISM ) service sector report for July. Economists are expecting a reading of 53.5, up slightly from June's reading of 53.3. Of possible concern to bulls, though, are these very expectations -- as we saw on Tuesday how devastating a "miss" was to the market.
Media titan Time Warner Inc. (TWX - 34.00) said its second-quarter profit rose to $638 million, or 59 cents per share, from $562 million, or 49 cents per share, in the year-ago period. Excluding items, TWX boasted a profit of 60 cents per share, easily beating analysts' prediction for a profit of 56 cents per share. Meanwhile, revenue rose to $7.03 billion, also topping analysts' prediction for revenue of $6.82 billion. Time Warner attributed the upbeat report to strong advertising sales, and CEO Jeff Bewkes said the company was benefiting from the trend toward digital media. "We're...making progress shaping the business models that will benefit us as the digital transition continues," he said, adding, "the acquisition in May of Flixster, Inc. underscores our commitment to accelerate the digital transition of home entertainment."
Meanwhile, sector peer Comcast Corporation (CMCSA - 22.73) said its second-quarter profit jumped to $1.02 billion, or 37 cents per share, from $884 million, or 31 cents per share, a year ago. Excluding items, Comcast earned 42 cents per share in the second quarter, while revenue increased 51% to $14.3 billion. Analysts had predicted CMCSA to post a profit of 41 cents per share on slimmer revenue of $13.65 billion. "We are confident that the strategic investments we continue to make at NBCUniversal and Comcast Cable are strengthening our businesses, driving profitable growth and building value for our shareholders," the company explained. The Street seems to be pleased by this news, with shares of the media mogul up 2.7% ahead of the open.
Elsewhere, CBS Corp. (CBS - 26.28) reported a second-quarter profit of $395 million, or 58 cents per share - more than double the $150 million, or 22 cents per share, earned a year ago. Revenue, meanwhile, grew 7.7% to $3.59 billion. Analysts, on average, were anticipating a profit of 45 cents per share on sales of $3.55 billion. The media mogul attributed the solid quarter to increased demand for non-print advertising, as well as new deals for licensing and digital streaming.
ValueClick (VCLK - 17.60) reported an adjusted second-quarter profit of 28 cents per share, exceeding the Street's forecast for a per-share profit of 19 cents. Furthermore, revenue came in at $125.1 million, besting analysts' expectations for sales of $121.3 million. In addition, the firm said it signed an agreement to purchase privately held advertising company Dotomi for about $295 million in cash and stock. The purchase is expected to close later this month, and should to be accretive to earnings by 2012, VCLK said.
Finally, Cephalon Inc. (CEPH - 79.95) unveiled an adjusted second-quarter profit of $1.86 per share - down from its adjusted profit of $2.05 per share a year earlier, and falling short of analysts' projections for earnings of $2.07 per share. Likewise, the company reported sales of $738.3 million, compared to Wall Street's expected revenue of $764.4 million. The company attributed the relatively weak quarter to declining sales of its central-nervous-system drugs, which fell 4.8% from the year-ago quarter. CEPH's core profit decline marks the first for the firm in three years.
Today's earnings docket will feature reports from Clorox ( CLX ), MasterCard ( MA ), Agrium ( AGU ), Intrepid Potash ( IPI ), Garmin (GRMN), Dendreon (DNDN), Clean Harbors (CLH), GT Solar (SOLR), MEMC Electronic Materials (WFR), Tesla Motors (TSLA), and Zipcar (ZIP). Keep your browser at SchaeffersResearch.com for more news as it breaks.
Employment data starts to hit the Street today, when ADP releases its report on private-sector payrolls for July. Also on tap are June's factory orders and the usual report on weekly petroleum inventories. Thursday's lone economic report is the regularly scheduled update on weekly jobless claims. On Friday, all eyes will be on the Labor Department's nonfarm payrolls report for July. Later in the session, the Fed weighs in on June's consumer credit trends.
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 968,588 call contracts traded on Tuesday, compared to 669,703 put contracts. The resultant single-session put/call ratio docked at 0.69, while the 21-day moving average remained at 0.66.
Stocks in Asia were hammered today by global growth concerns, thanks to another round of gloomy U.S. data. The usual European suspects are also sparking anxiety, with Italian and Spanish bond yields skyrocketing. Exporters were particularly hard hit as traders lost their collective risk appetite; in Tokyo, Toyota Motor pulled back after confessing to its first unprofitable quarter in two years, while Korean peers Kia and Hyundai also swooned. By the close, South Korea's Kospi slid 2.6%, Japan's Nikkei fell 2.1%, Hong Kong's Hang Seng lost 1.9%, and China's Shanghai Composite shed 0.03%.
European markets are also trading lower, with traders pricing in some caution ahead of three solid days' worth of U.S. employment data. Societe Generale is leading the laggards in France after warning it may fall short of its 2012 profit guidance, but UBS and Credit Suisse are showing some resilience after the Swiss National Bank intervened to rein in the soaring franc. At last check, London's FTSE 100 is down 1.3%, the German DAX is off 0.9%, and the French CAC 40 has given up 0.5%.
Currencies and Commodities
Gold futures are trading over 24 points, or 1.5%, higher this morning, as the "safe-haven" investment continues to lure buyers. The recent bout of market weakness amid ongoing economic turmoil has created the ideal scenario for gold, which has rallied to a series of record highs during the past few weeks. On the other hand, the dollar continues its bout of weakness, with the greenback shedding 0.5 point, or 0.6%, as a result of the aforementioned economic anxieties. In fact, it's the same story for crude, with the September-dated contract down 0.5 point, or 0.5%, ahead of the open.
Unusual Put and Call Activity:
Unusual Put and Call Activity:
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