Markets

Opening View: DJIA Looks North, Despite Fitch Downgrades; RIMM, Zynga in Focus

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U.S. stocks are set to pare their hefty week-to-date deficits today, despite another round of downgrades in the financial sector. Specifically, Fitch Ratings last night cut the long-term default ratings of six global banks, including Bank of America ( BAC ), Goldman Sachs ( GS ), and Citigroup ( C ). Instead, it appears investors have turned their attention to Wall Street's newest high-profile member: Farmville parent Zynga, which will make its debut at $10 per share on the Nasdaq today. Furthermore, a solid earnings showing from Adobe Systems ( ADBE ) is helping to overshadow another unimpressive quarter for BlackBerry maker Research In Motion Limited ( RIMM ), which is on pace to start the session in new-low territory. At last check, the Dow Jones Industrial Average (DJIA) is trading about 84 points north of fair value, while the broader S&P 500 Index (SPX) is headed for near 11-point jump.

On the earnings front, Adobe Systems (ADBE - 24.46) reported a fiscal fourth-quarter profit of $173.7 million, or 35 cents per share, down 35% from $268.9 million, or 53 cents per share, in the year-ago period. Excluding items, earnings rose to 67 cents from 56 cents per share in the previous year. Meanwhile, revenue rose 14% to $1.15 billion. Analysts, on average, were expecting a profit of 60 cents per share on revenue of $1.09 billion. Looking ahead, ADBE is expecting an adjusted first-quarter profit of 54 cents to 59 cents per share on revenue of $1.03 billion to $1.08 billion. Wall Street, meanwhile, is predicting current-quarter earnings of 58 cents per share on revenue of $1.05 billion. For the full year, ADBE projected adjusted earnings of $2.37 to $2.47 per share, and reiterated expectations for revenue growth of 4% to 6%. For comparison, analysts, on average, are calling for a full-year profit of $2.44 on sales of $4.35 billion. Ahead of the bell, ADBE is set to open 5.6% higher.

Meanwhile, Research in Motion Limited (RIMM - 15.13) reported a fiscal third-quarter profit of $265 million, or 51 cents per share, a 71% drop from last year's profit of $911.1 million, or $1.74 cents per share. Excluding various charges, including a $54-million charge related to service-related troubles and a $485-million tab for unsold PlayBook inventory , earnings arrived at $1.27 per share. Revenue was also on the decline, dropping 6% to $5.17 billion. RIMM's bottom-line results came in better than expected, as analysts were calling for adjusted earnings of $1.19 per share on sales of $5.26 billion. Looking ahead, RIMM is projecting a fiscal fourth-quarter profit of 80 cents to 95 cents per share on revenue of $4.6 billion to $4.9 billion, well below analysts' expectations for earnings of $1.17 per share on sales of $5.1 billion. In pre-market action, RIMM is bracing for a 9.7% drop.

Finally, citing lagging sales at its Olive Garden chains, Darden Restaurants (DRI - 43.74) reported fiscal second-quarter income of $53.7 million, or 40 cents per share, down 28% from $74.5 million, or 53 cents per share, a year earlier. Excluding items, the restaurateur said it earned 41 cents per share, in line with expectations. Revenue also matched the consensus forecast on Wall Street, improving 6.1% to $1.83 billion. For fiscal 2012, DRI reaffirmed its expectations for adjusted per-share earnings growth of 4% to 7%, with revenue expected to increase 6% to 7%. At last look, DRI is poised to open just south of breakeven.

Earnings Preview

There are no other notables on the earnings docket today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

This week's slate of economic events wraps up today with the release of the consumer price index (CPI).

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 681,138 call contracts traded on Thursday, compared to 650,193 put contracts. The resultant single-session put/call ratio arrived at 0.95, while the 21-day moving average was 0.72.

Overseas Trading

Stocks in Asia finished higher today, as investors took heart in a round of generally positive U.S. economic data. In fact, Shanghai-listed equities broke a six-session slump, boosted by reports that the country's central bank intervened in currency markets to prop up the yuan. The news was particularly supportive for property issues and banks, and commodity names also caught a halo lift. However, regional gains were relatively tame, as traders digested downbeat comments on the euro-zone crisis by Christine Lagarde of the International Monetary Fund (IMF). By the close, China's Shanghai Composite climbed 2%, Hong Kong's Hang Seng rose 1.4%, South Korea's Kospi added 1.2%, and Japan's Nikkei tacked on 0.3%.

European indexes are edging higher at midday, with traders mostly shrugging off a fresh round of bank downgrades from Fitch. The ratings agency lowered its issuer default and viability ratings for financial firms in Europe and the U.S., including heavy hitters like BNP Paribas, Deutsche Bank, and Barclays. Despite these negative notes, investors were encouraged by solid manufacturing and employment data from the U.S., although the gains have been made amid relatively light volume. At last check, London's FTSE 100 is up 0.6%, the German DAX has added 0.03%, and France's CAC 40 is down almost 0.1%.

Currencies and Commodities

The greenback is pointed lower this morning, with the U.S. dollar index down 0.2%. Crude oil, meanwhile, has bounced back from one-month lows, with the front-month contract last seen 0.5% higher at $94.57 per barrel. Gold futures are also set to recover from their recent drubbing, with the malleable metal up 1.2% to trade at $1,596.30 an ounce.

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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