Tuesday's interest rate news from the Federal Reserve put some of the wind back into the bulls' sails, pushing the major indexes into the black by the close. Specifically, the Fed said it would be keeping interest rates at "exceptionally low levels" for the next two years, which was welcome news to investors. However, these gains appear to be short-lived, with all three indexes pointing lower. Specifically, the Dow Jones Industrial Average (DJIA ) is hovering roughly 89 points below fair value, while futures on the S&P 500 Index (SPX ) are trading 6.2 points lower.
Dow component Walt Disney Co. (DIS - 34.70) banked a fiscal third-quarter profit of $1.48 billion, or 77 cents per share, up 11% from its year-ago earnings of $1.33 billion, or 67 cents per share. Adjusted earnings arrived at 78 cents per share, while revenue for the quarter climbed 6.7% to $10.68 billion. The results surpassed analysts' expectations, as Wall Street was looking for a profit of 73 cents per share on $10.46 billion in revenue. Disney's studio entertainment division was a notable pocket of weakness during the quarter, with earnings down 60% on a year-over-year basis. "Lower theatrical results reflected the strong performance of Toy Story 3 and Iron Man 2 in the prior year compared to Cars 2 and Thor in the current year," explained the entertainment giant in its earnings release.
SunPower (SPWRA - 16.24) swallowed a second-quarter loss of $147.9 million, or $1.51 per share -- much wider than its year-ago deficit of $6.2 million, or 7 cents per share. Excluding items, the alternative energy issue lost 19 cents per share, even as revenue ramped up 54% to $592.3 million. Gross margin was crushed during the recently concluded quarter, plummeting to 3.2% from 22.9%. Looking ahead, SunPower predicted third-quarter earnings of 5 cents to 15 cents per share, falling woefully short of Wall Street's forecast for a profit of 19 cents per share. The firm also trimmed its full-year earnings outlook to a range between 75 cents and $1.25 per share, down from its June guidance of $1.20 to $1.70 per share.
In M&A news, Capital One Financial Corp. (COF - 40.82) announced that it would be purchasing the U.S. credit card division of HSBC Holdings plc (HBC - 44.92) for a cool $2.6 billion. Capital One will raise as much as $1.25 billion for the purchase, the firm said, in order to maintain a roughly 9.5% Tier 1 capital ratio. The deal includes some $30 billion of credit-card loans, as well as "private label" credit cards issued by banks. This acquisition will make Capital One the third-largest issuer of private credit cards, and is slated to close in the second quarter of 2012. COF is up nearly 9.8% ahead of the open.
Today's earnings docket will feature reports from Cisco Systems ( CSCO ), Computer Sciences ( CSC ), InterClick ( ICLK ), Macy's ( M ), Polo Ralph Lauren ( RL ), Advance Auto Parts (AAP), Bankrate (RATE), MBIA (MBI), News Corp. (NWS), Jack in the Box (JACK), and Ultra Petroleum (UPL). Keep your browser at SchaeffersResearch.com for more news as it breaks.
Today's docket features reports on wholesale inventories for June, the July Treasury budget, and weekly petroleum inventories. Initial and continuing jobless claims are due out on Thursday, along with June's trade balance. The economic calendar concludes on Friday with the release of retail sales for July, June's business inventories, and the preliminary Reuters/University of Michigan consumer sentiment index for August.
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,642,992 call contracts traded on Tuesday, compared to 1,454,262 put contracts. The resultant single-session put/call ratio arrived at 0.89, while the 21-day moving average was 0.73.
Stocks in Asia ended higher today, keeping pace with Wall Street's rebound. Banking giant HSBC provided a boost for Hong Kong-listed equities, after the company announced plans to sell its U.S. retail card business to Capital One. Elsewhere in the region, commodity stocks helped lead the advance, with the sector clawing back from recent losses. However, concerns about a prolonged period of weakness in the U.S. economy provided a safe-haven boost for the yen, which kept a lid on Japanese exporters. By the close, Hong Kong's Hang Seng added 2.3%, Japan's Nikkei gained 1.1%, China's Shanghai Composite tacked on 0.9%, and South Korea's Kospi rose 0.3%.
European indexes are also on the upswing at midday, as traders express some relief over the U.S. Fed's vow to act as needed to support the economy. A few well-received earnings reports are also stoking investor optimism, with Germany's Commerzbank AG and Britain's Standard Life gaining ground after their respective quarterly results. At last check, the German DAX has added 1.6%, London's FTSE 100 is up 0.8%, and the French CAC 40 is 0.2% higher.
Currencies and Commodities
The dollar has slumped this morning, as traders have responded negatively to Tuesday's news that the Fed will be keeping interest rates unchanged for the next two years. As a result, the U.S. dollar index is down 0.8 point, or 1%, in pre-market trading. On the other hand, oil futures have climbed higher this morning, with Tuesday's interest rate news providing a lift for black gold. It's the same story for gold, too, with the precious metal continuing to rise in the midst of the current economic hullabaloo. With the state of the economic recovery constantly on traders' minds, this "safe haven" asset has enjoyed a record-breaking ascent lately. Ahead of the open, gold futures are up nearly 20 points, or 1.1%, to trade around $1,762.50 an ounce.
Unusual Put and Call Activity:
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