Back to Main

Will the Dow Make It Five In a Row?

By: Schaeffer's Investment Research
Posted: 5/17/2012 8:20:00 AM
Referenced Stocks: CBOE;DLTR;GLD;SPX;XBI

After losing ground in the last four trading sessions, futures on the Dow Jones Industrial Average (DJI) are wallowing in the red ahead of the bell. In fact, it could be another ugly day for U.S. stocks, with the S&P 500 Index ( SPX ) and the Nasdaq Composite (COMP) falling in step with European markets.

Among equities in focus, Wal-Mart Stores (WMT ) is on pace to enjoy a post-earnings pop; short sellers piled on Red Robin Gourmet Burgers (RRGB ) in the weeks leading up to its quarterly announcement; and, near-term calls were the options of choice on Hot Topic (HOTT ) ahead of earnings.

And now, on to the numbers...

Dow, S&P and Nasdaq futures

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,185,196 call contracts traded on Wednesday, compared to 1,052,281 put contracts. The resultant single-session put/call ratio arrived at 0.89, while the 21-day moving average was 0.73.

NYSE and Nasdaq summary

Volatility indices

From the Trading Floor

Sapp contends, "The 1,333 on the SPX is still right here, even though we're trading all around it. If we don't sustain a bounce back above it soon, we're likely headed for 1,300 . The 148 level on the SPDR Gold Trust ( GLD ) is also pretty important. It has been moving in unison with equities lately, and I would think a bounce in GLD would mean a bounce in the market. It's still all about the euro zone, though."

Currencies and Commodities

Currencies and commodities

In earnings news, Wal-Mart Stores, Inc. (WMT - 59.19) said its first-quarter profit rose 10% on a year-over-year basis to $3.74 billion, or $1.09 per share, while revenue edged up 8.5% to $113.02 billion. The results beat analysts' expectations for earnings of $1.04 per share on $110.54 billion in sales. Traders on the International Securities Exchange (ISE), Chicago Board Options Exchange ( CBOE ), and NASDAQ OMX PHLX (PHLX) bought to open 2.83 calls for every put in the 10 sessions prior to today's announcement. WMT is 2.9% higher in pre-market trading.

Red Robin Gourmet Burgers (RRGB - 35.75) reported a first-quarter profit of $10.6 million, or 71 cents per share -- up 21% from the year-ago period. Excluding items, RRGB earned 58 cents per share, as revenue increased 4.4% to $299.5 million. Analysts were looking for a healthier profit of 66 cents per share on $306 million in revenue. Short sellers increased their bearish exposure by 11.9% in the last two reporting periods, and short interest now accounts for 12.1% of the stock's float.

Hot Topic (HOTT - 9.88) swung to a first-quarter profit of $3.8 million, or 9 cents per share, while revenue rose by 6.4% to $171.5 million -- the latter boosted by a 7.5% increase in same-store sales. Analysts, on average, had expected earnings of 8 cents per share on sales of $171.6 million. Short-term calls were preferred on HOTT ahead of earnings, with the stock's Schaeffer's put/call open interest ratio resting at 0.30.

Earnings and Economic Data

Today's round-up includes weekly jobless claims , the Philadelphia Fed's manufacturing index, and the Conference Board's index of leading economic indicators. Wall Street can expect earnings reports from Dollar Tree ( DLTR ), GameStop (GME) , The Gap (GPS), Applied Materials (AMAT) , Aruba Networks (ARUN), Autodesk (ADSK) , Marvell Technology Group (MRVL), Intuit (INTU) , Aeropostale (ARO), Advance Auto Parts (AAP) , The Children's Place Retail Stores (PLCE), Pacific Sunwear (PSUN) , Brocade Communications Systems (BRCD), and (CRM) .

Overseas Trading

Stocks in Asia ended mostly higher today, despite reports that the European Central Bank (ECB) has stopped offering liquidity to several undercapitalized Greek banks. Instead, traders focused on data showing that Japan's economy expanded by a stronger-than-forecast 1% during the first quarter, which helped equities recover from the previous session's steep losses. By the close, China's Shanghai Composite advanced 1.4%, Japan's Nikkei tacked on 0.9%, South Korea's Kospi rose 0.3%, and Hong Kong's Hang Seng fell 0.3%.

On the other hand, the major European indexes are firmly in the red at midday. A report on gross domestic product (GDP) showed Spain's economy shrinking during the first quarter, and yields on the country's 10-year notes jumped north of 6% during a debt auction. Meanwhile, shares of newly nationalized lender Bankia plummeted amid news of massive customer withdrawals. At last look, both the London FTSE 100 and the French CAC 40 are down 1.5%, while the German DAX has declined 1.3%.

Overseas markets

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.