Back to main

Opening View: U.S. Stock Futures Edge Higher Ahead of Expiration

Posted
1/21/2011 8:00:00 AM
By: Schaeffer's Investment Research
Referenced Stocks:AMD;BAC;BBT;GE;GOOG

Futures on the Dow Jones Industrial Average (DJIA) are trending cautiously higher in premarket trading, as Wall Street turns its attention toward blue chip earnings and January options expiration. The potential for additional tightening in Chinese monetary policy sent stocks lower on Thursday, but quarterly reports from General Electric Co. ( GE ) and Bank of America Corp. ( BAC ) are helping to boost investor sentiment heading into the open. In fact, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 25 points and 4 points above fair value, respectively. With options expiring after the close today, we could see a high-volume day as traders reposition themselves.

Technically, the DJIA continues to hold firm above support at the 11,800 level, though the blue chip barometer received a fair amount of help from its 10-day moving average yesterday. Look for continued support in the 11,750-11,800 area, while the Dow should meet with resistance in the 11,850-11,900 region. As for the SPX, the broad-market barometer enters today below its 10-day moving average -- the first such occurrence since Nov. 30, 2010. The index has support in the 1,270 region, though, with its 20-day trendline rising into the region. Resistance remains at 1,290, with the 1,300 creating a longer-term hurdle overhead.

In equity news, General Electric ( GE ) posted fourth-quarter net income of $4.54 billion, or 42 cents per share. Earnings from continuing operations rose 33% to $3.9 billion, or 36 cents per share, topping the consensus estimate for a profit of 32 cents per share. Revenue grew 1% to $41.4 billion, marking the first increase in nine quarters. Chief Executive Jeff Immelt said the company expects continued earnings growth in 2011 and 2012.

Also, Bank of America Corp. ( BAC ) released its fourth-quarter results this morning, immediately giving analysts headaches. The company reported numerous charges, including $4.1 billion to handle mortgage repurchases and a $2 billion write-down on home loans and insurance business. The banking giant also increased its legal reserves and boosted gains from asset sales, which were required as a condition of exiting TARP. Excluding items, BAC reported earnings of just 4 cents per share, though the plethora of write-downs and charges may make for difficult comparisons to the consensus expectations for a profit of 18 cents per share. Investors are clearly a bit taken aback, with BAC shares down nearly 1% in premarket activity.

After the close last night, Google Inc. ( GOOG ) posted fourth-quarter earnings of $2.54 billion, or $7.81 per share, with net revenue coming in at $6.37 billion. Excluding one-time items, Google earned $8.75 per share. Wall Street was expecting a profit of $8.06 per share and $6.05 billion in net revenue. Additionally, Google announced that Eric Schmidt will be stepping down as CEO, with co-founder Larry Page taking over the reins in April.

Finally, Advanced Micro Devices Inc. ( AMD ) said that it banked a fourth-quarter profit of $375 million, or 50 cents per share. On a non-GAAP basis, AMD said earnings would have been $106 million, or 14 cents per share. Revenue was flat at $1.65 billion. Analysts were expecting earnings of 11 cents per share on revenue of $1.63 billion.

Earnings Preview

On the earnings front, BB&T Corp. ( BBT ), Schlumberger Limited (SLB), and SunTrust Banks Inc. (STI) are slated to release their quarterly earnings reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

There are no major economic reports scheduled for release today.

Market Statistics

Equity option activity on the CBOE saw 1,943,446 call contracts traded on Thursday, compared to 1,337,018 put contracts. The resultant single-session put/call ratio arrived at 0.69, while the 21-day moving average edged higher to 0.52.

Volatility indices

NYSE and Nasdaq summary

**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**

Dow, S&P and Nasdaq futures

Trading the News: A Contrarian View. Check out this special report from Bernie Schaeffer here.

Overseas Trading

Overseas trading is mixed this morning, as six of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 0.33%. Inflationary fears continue to dog Asian trading, sending most of the region broadly lower. However, Chinese shares closed higher as bargain hunting took hold. European markets are attempting to rebound from yesterday's losses, with the banking sector leading the way higher following news that Royal Bank of Scotland Group could submit a plan to emerge from the government's asset-protection scheme earlier than expected.

Overseas markets

Currencies and Commodities

The U.S. dollar is headed lower once again this morning, with the greenback off 0.36% at 78.54 heading into the open. Crude futures have rallied in the wake of the dollar's decline, with black gold gaining 52 cents to $90.11 per barrel in electronic trading. Gold, however, hasn't been as lucky. After falling to a near two-month low on Thursday, the front-month gold contract has dropped another $2.40 to $1,344.10 an ounce in London.

Currencies and commodities

Unusual Put and Call Activity:

For an explanation of how to use this information, check out our Education Center topics on Option Volume and Open Interest Configurations .

Unusual options activity - puts

Unusual options activity - calls

Every morning, our research staff analyzes the prior day and the overnight markets, and monitors the morning wires to give you an accurate preview of the day to come. If you enjoyed today's edition of Opening View, sign up here for free daily delivery, straight to your inbox, before the opening bell.