After breaching key support levels on Monday, the major market indexes are poised to chip away at their already-steep week-to-date losses this morning. Energy-related stocks -- as well as crude oil futures -- are pointing north ahead of the bell, after analysts at Goldman Sachs lifted their longer-term forecast for Brent prices, while AutoZone ( AZO ) and GT Solar (SOLR) are among the equities celebrating solid turns in the earnings spotlight. In addition, a relatively robust round of economic data out of Germany has helped to ease concerns about the fiscal health of Europe, though fears remain over whether Greece will restructure its debt. Against this cautiously optimistic backdrop -- and ahead of housing and manufacturing data -- the Dow Jones Industrial Average (DJIA ) is trading almost 24 points north of fair value, while the broader S&P 500 Index (SPX ) is poised to open with a two-point lead.
In equities news, J.M. Smucker (SJM - 76.91) hiked the list price for most of its coffee products for the fourth time in a year, as the company passes on the cost of escalating coffee futures. The increase -- 11%, on average -- applies to such brands as Dunkin' Donuts, Millstone, and Folgers.
On the earnings front, AutoZone (AZO - 276.78) reported fiscal third-quarter earnings of $227.4 million, or $5.29 per share -- up 12% on a year-over-year basis, exceeding expectations for earnings of $4.98 per share. Sales for the quarter rose 8.6% to $2 billion, surpassing the Street's forecast for revenue of $1.92 billion. Gross margin increased to 51.2% from 50.7%, while domestic same-store sales advanced 5.3% from the year-ago quarter. Ahead of the bell, AZO has tacked on nearly 3%.
Meanwhile, Sanderson Farms (SAFM - 45.99) swung to a fiscal second-quarter net loss of $16.3 million, or 74 cents per share, from a profit of $35.1 million, or $1.62 per share, a year prior. Excluding items, the firm said it lost 56 cents per share -- narrower than the loss of 86 cents per share expected on the Street. Revenue fell 1.6% to $479.3 million, surpassing analysts' forecast for sales of $471.2 million. Looking ahead, the company cautioned that it expects "grain prices to remain high and volatile for the rest of this year, as there is no margin for error with the 2011 grain crop." In pre-market trading, SAFM is roughly 0.2% higher.
Elsewhere, Perfect World (PWRD - 23.95) said last night that its first-quarter net income slipped 14% to $40.3 million, or 76 cents per diluted American depositary share ( ADS ), even as revenue advanced 15% to $110.1 million. The results were impacted by a 52% surge in operating costs, which sent PWRD's gross margin backpedaling to 85% from 86.1%. Excluding items, PWRD raked in 84 cents per diluted share, surpassing Wall Street's forecast for 54 cents per share. At last check, PWRD is set to open about 6% higher.
Finally, GT Solar (SOLR - 11.62) banked a fiscal fourth-quarter profit of $51.9 million, or 41 cents per share -- up 56% on a year-over-year basis -- while revenue jumped 39% to $271.6 million. Both figures exceeded analysts' expectations, which called for earnings of 34 cents per share on $223.7 million in revenue. Looking ahead, SOLR upped its 2012 revenue forecast to a range between $1.0 billion and $1.1 billion, compared to its prior view of $850 million to $1.0 billion. Wall Street, by contrast, was looking for fiscal 2012 revenue of $966.4 million. Plus, SOLR now expects full-year gross margins of 42%-44%, up from its earlier guidance of 40%-42%. Ahead of the bell, SOLR is poised to rally roughly 12.5%.
Today's earnings docket will feature reports from Applied Materials ( AMAT ), Collective Brands (PSS), Cracker Barrel Old Country Store ( CBRL ), KongZhong ( KONG ), Medtronic (MDT), Take-Two Interactive Software (TTWO), and TiVo (TIVO), just to name a few. Keep your browser at SchaeffersResearch.com for more news as it breaks.
The economic calendar will feature the Commerce Department's report on new home sales for April, as well as the Richmond Fed's manufacturing index for May. The pace picks up on Wednesday, with the day's docket featuring weekly petroleum inventories, durable goods orders for April, and the Federal Housing Finance Agency's home price index for March. On Thursday, the Commerce Department will issue its first-quarter gross domestic product (GDP) revision, while the Labor Department will release the latest data on weekly jobless claims. Meanwhile, the Kansas City Fed will unveil its manufacturing index for May. The economic schedule wraps up on Friday, with reports due out on personal incomes and spending, pending home sales for April, and the final Reuters/University of Michigan consumer sentiment index for May.
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 901,403 call contracts traded on Monday, compared to 627,534 put contracts. The resultant single-session put/call ratio docked at 0.70, while the 21-day moving average inched higher to 0.65.
Most Asian markets managed modest gains today, bouncing back from Monday's losses as traders moved into bargain-hunting mode. However, stocks in China slid after a negative note from Goldman Sachs aggravated economic concerns sparked by a softer-than-anticipated manufacturing report. The brokerage firm cut its Chinese growth estimates for 2011 and 2012, while simultaneously hiking its inflation forecast for 2011, citing "both a sharper and more extended slowdown" in the country than previously expected. By the close, China's Shanghai Composite shed 0.3%. Meanwhile, South Korea's Kospi tacked on 0.3%, Japan's Nikkei rose 0.2%, and Hong Kong's Hang Seng added 0.09%.
Stocks in Europe are on the mend at midday, with a dose of robust economic data helping investors shrug off lingering debt concerns for the euro zone. The Ifo Institute's German business confidence index held firm at 114.2 in May, besting analysts' expectations for a monthly decline. Mining issues are also a pocket of strength, thanks to rebounding commodity prices. At last check, the German DAX is up 0.7%, London's FTSE 100 has gained 0.4%, and the French CAC 40 has added 0.1%.
Currencies and Commodities
The greenback has given back some of yesterday's gains this morning, with the U.S. dollar index down about 0.2%. Elsewhere, black gold bounced back from its greenback-induced slump, after Goldman Sachs lifted its crude forecasts on concerns about ebbing supplies from Libya. Now, the brokerage firm expects crude oil will rise to $140 per barrel by the end of next year, compared to its previous forecast for a rise to $120 per barrel. At last check, the front-month crude contract is up $1.29, or 1.3%, at $98.99 per barrel. Meanwhile, gold futures have continued to power higher, with the front-month contract $7.30, or 0.5%, higher at $1,522.70 an ounce. In the same vein, silver futures have tacked on nearly $1, or 2.8%, to flirt with $35.90 an ounce.
Unusual Put and Call Activity:
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