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Opening View: Bulls Look Ahead to PPI Inflation Reports

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The bears won on Tuesday, as downbeat GDP data from Germany and a largely unproductive meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel rekindled concerns over the fiscal health of the euro-zone, and sent "contagion" tremors across the Street. Back at home, lackluster housing data put the final nail in the bulls' coffin, sending all three indexes into the red by the close. However, the bulls have re-entered the ring, and morale seems to be high ahead of today's highly anticipated producer price index (PPI) and core PPI for July. Amid this backdrop, futures on the Dow Jones Industrial Average (DJIA ) are hovering 41 points north of fair value, while the S&P 500 Index (SPX ) is trading 6 points higher.

In earnings news, Dell Inc. (DELL - 15.80) last night reported second-quarter earnings of $890 million, or 48 cents per share, compared with a profit of $545 million, or 28 cents per share, in the year-ago quarter. On an adjusted basis, DELL said it earned 54 cents per share, topping the Street's consensus estimate for earnings of 49 cents per share. Revenue, on the other hand, docked at $15.66 billion, falling short of analysts' expectations for sales of $15.75 billion. Looking ahead, the company forecast flat current-quarter sales, and revised its full-year revenue growth outlook to 1% to 5%, from its previous guidance for growth of 5% to 9%. The Street has not responded well to this report, with DELL down 6.7% ahead of the open.

Analog Devices (ADI - 31.35) reported a fiscal third-quarter profit of $219.9 million, or 71 cents per share - up 11% from the year-ago quarter. Meanwhile, sales rose a year-over-year 5% to $757.9 million, Analysts, on average, were expecting a heftier profit of 73 cents per share on $780 million in revenue. The firm also forecast current-quarter earnings of 60 cents to 68 cents per share on sales of $715 million to $755 million, falling short of the Street's expectations for fiscal fourth-quarter earnings of 72 cents per share on revenue of $778 million.

Staples (SPLS - 14.22) said its fiscal second-quarter profit rose 36% to $176.4 million, or 25 cents per share, up from $129.8 million, or 18 cents per share, a year earlier. Excluding items, SPLS banked a profit of 22 cents per share, while revenue arrived at $5.82 billion. Analysts had expected the office supply firm to post a slimmer profit of 20 cents per share on revenue of $5.64 billion. For the fiscal year, Staples forecast earnings between $1.39 and $1.45 per share, notably higher than the consensus estimate for fiscal-year earnings of $1.36 per share. Investors seem quite pleased with this report, with the shares up 8.3% in pre-market trading.

Finally, teen retailer Abercrombie & Fitch (ANF - 71.02) said second-quarter profit climbed to $32 million, or 35 cents per share, up from $19.5 million, or 22 cents per share, a year ago. Revenue, meanwhile, jumped 23% to $916.8 million. Analysts had predicted ANF to report a profit of just 29 cents per share on revenue of $880.15 million. "We are pleased that our results for the quarter continued to reflect strong momentum, both in the US and Europe, resulting in a 71% increase in operating income for the quarter," said CEO Mike Jefferies. "Our strong top-line momentum and overall performance for the past several quarters give us confidence that we are well positioned to navigate through this environment," he said.

Earnings Preview

Today's earnings docket will feature reports from Target ( TGT ), BJ's Wholesale Club ( BJ ), Chico's ( CHS ), Hot Topic ( HOTT ), Limited Brands ( LTD ), Deere & Co. (DE), JDS Uniphase (JDSU), NetApp (NTAP), and Canadian Solar (CSIQ). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Initial and continuing jobless claims are on the calendar for Thursday, along with the consumer price index (CPI) and core CPI for July. Traders will also hear about existing home sales and the Conference Board's index of leading economic indicators for July, as well as the August Philadelphia Fed index. There are no major economic reports on Friday.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 871,701 call contracts traded on Tuesday, compared to 646,514 put contracts. The resultant single-session put/call ratio arrived at 0.74, while the 21-day moving average was 0.74.

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Overseas Trading

Asian markets ended mixed today, as traders kept a wary eye on less-than-stellar economic data out of the U.S. and Europe. Hong Kong-listed stocks eked out a win, after Vice Premier Li Keqiang unveiled new initiatives to encourage foreign investment. Likewise, equities in Korea managed a second straight daily gain, bouncing back from early weakness amid strength in telecom stocks. Elsewhere, a stronger yen kept Japanese exporters under pressure, even as Nintendo gained ground on healthy sales data. By the close, Japan's Nikkei fell 0.6%, China's Shanghai Composite dipped 0.3%, Hong Kong's Hang Seng added 0.4%, and South Korea's Kospi rose 0.7%.

Stocks are also having trouble picking a direction in Europe, where the grand plans of French President Nicolas Sarkozy and German Chancellor Angela Merkel have received a lukewarm reception. The duo on Tuesday proposed a tax on financial transactions, which has sparked some selling on brokers and exchange operators. However, the political leaders rejected the notion of jointly issued euro-zone bonds, disappointing those who hoped for a more comprehensive plan to attack the region's debt issues. At last check, the French CAC 40 is up 0.7%, the German DAX is down 0.4%, and London's FTSE 100 is off 0.3%.

Currencies and Commodities

Unusual Put and Call Activity:

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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