Morning Market Update: Tuesday, March 8, 2011
Opening View: DJIA Futures Rise as Oil Prices Retreat from 29-Month Highs
OPEC lends a hand, promises to boost production
by Joseph Hargett (jhargett@sir-inc.com) 3/8/2011 8:08 AM
The Dow Jones Industrial Average (DJIA) shed nearly 80 points on Monday, as rising oil prices turned a midday pullback into a full rout. However, Wall Street could get some relief today, as members of the Organization of the Petroleum Exporting Countries (OPEC) have pledged to boost output in order to limit crude’s meteoric rise. Additionally, a solution to the turmoil in Libya may be nearing, as reports indicate that Col. Muammar Gaddafi is in talks to step down. Against this backdrop, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 18 points and 4 points above fair value, respectively.
Technically, the DJIA continues to bounce between support in the 12,000-12,050 region and resistance near 12,250. The blue chip barometer continues to be plagued by its 10-day and 20-day moving averages, which recently completed a bearish cross. However, the Dow still maintains key support at its rising 10-week trendline. The SPX, meanwhile, is currently perched on its own 10-week moving average, which is lending additional support to the round-number 1,300 region. Resistance remains overhead at 1,333.58, which marks a double of the index’s March 2009 low .
In earnings news, Brown-Forman Corp. (BF’A) reported that its third-quarter net income rose 30% to $140.7 million, or 96 cents per share, as revenue advanced 12% to $962.4 million. Wall Street was looking for a profit of 86 cents per share. For fiscal 2011, the company said it sees earnings of $3.35 to $3.45 per share, compared to the current consensus estimate for a profit of $3.31 per share.
Also, Qualcomm Inc. (QCOM) announced that its board has approved a 13% hike in its quarterly dividend to 21.5 cents per share from 19 cents. The boost lifts QCOM’s annual payout to 86 cents per share. The new rate will be applied to quarterly dividends paid after March 25.
After the close last night, Urban Outfitters Inc. (URBN) reported fourth-quarter net income of $75.2 million, or 45 cents per share, on revenue that rose 14% to $668.4 million. Same-store sales for the quarter, however, dipped 2%. Analysts were expecting a profit of 52 cents per share on $674.8 million in revenue.
Earnings Preview
On the earnings front, Suntech Power (STP), Dick’s Sporting Goods (DKS), AeroVironment (AVAV), and Korn/Ferry (KFY) are slated to release their quarterly earnings reports. Keep your browser atSchaeffersResearch.comfor more news as it breaks.
Economic Calendar
Today, the economic calendar offers up the latest report on chain-store sales from ICSC-Goldman Sachs, while tomorrow brings us word on wholesale inventories for January, the latest MBA mortgage applications survey, and the regularly scheduled update on domestic petroleum supplies from the Energy Information Administration (EIA). The weekly report on jobless claims hits the Street on Thursday, along with import/export data for January. We wrap up the week on Friday with the preliminary Thomson Reuters/University of Michigan consumer sentiment survey for March, along with comments from New York Fed President William Dudley.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,199,597 call contracts traded on Monday, compared to 758,772 put contracts. The resultant single-session put/call ratio arrived at 0.63, while the 21-day moving average held at 0.58.
Overseas Trading
Overseas trading appears stronger this morning, with seven of the 10 foreign indexes that we track in positive territory. The cumulative average return on the collective stands at a gain of 0.36%. In Asian trading, easing political concerns in India boosted investor sentiment, while infighting in Tokyo continued to put pressure on the current administration, limiting gains in Japan. In Europe, news that OPEC members were stepping up production was greeted by enthusiasm. On the economic front, Germany reported that factory orders rose 2.9% in January, versus expectations for a rise of 2.5%.
Currencies and Commodities
Oil prices are retreating this morning, with the April contract slipping 19 cents to $105.25 per barrel in electronic trading. Black gold’s meteoric rise to a 29-month high yesterday placed considerable pressure on the equities market, but reports that key members of OPEC are boosting output have cooled oil’s advance in early trading. Meanwhile, the U.S. Dollar Index is rebounding a bit this morning, with the index adding 0.27% to 76.70. Finally, gold futures are finding it hard to make headway in overseas trading, with the April futures contract up a mere $1.10 at $1,435.60 an ounce in London.
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