Morning Market Update: Wednesday, February 23, 2011
Opening View: DJIA Futures Point to Post-Plunge Rebound; Oil Extends Rally
Wall Street attempts to recover from heavy losses as unrest mounts in Libya
by Joseph Hargett (jhargett@sir-inc.com) 2/23/2011 7:58 AM
After logging its biggest single-session plunge since Nov. 22, the Dow Jones Industrial Average (DJIA) appears poised to bounce heading into the open this morning. In fact, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 40 points and 5.4 points above fair value, respectively. Political unrest in Libya remains a serious concern for investors, however, especially with crude futures adding nearly 1% in electronic trading after yesterday’s surge of more than 6%. What’s more, Hewlett-Packard Co. (HPQ) could create significant drag on both the Dow and the technology sector, with the stock plunging more than 9% in premarket trading due to a weaker-than-expected second-quarter forecast.
Technically, the DJIA plummeted past several short-term support levels on Tuesday, with the blue chip barometer finally coming to rest just above the 12,200 level. This region has provided a backstop for the Dow since Feb. 8. However, the DJIA breached key support at its 10-day moving average. This trendline, currently perched near 12,268 could create a headwind for the Dow, with additional resistance lying in the 12,300 region. The SPX, meanwhile, is perched on potential support at its 20-day moving average, in the 1,315 area. Look for resistance to potentially emerge in the 1,325 region.
In equities news, Lowe’s Companies Inc. (LOW) said that its net fourth-quarter earnings rose to $285 million, or 21 cents per share, from $205 million, or 14 cents per share, in the same period last year. Sales rose 3.1% to $10.5 billion. Wall Street was expecting earnings of 18 cents per share. Lowe’s also predicted a 2% rise in first-quarter sales, with earnings seen coming in at 34 cents per share to 38 cents per share. For fiscal 2011, the company expects total sales to rise 5%, on earnings of $1.60 to $1.72 per share.
After the close last night, Hewlett-Packard reported a first-quarter profit of $2.6 billion, or $1.17 per share, on revenue of $32.3 billion. HPQ said that adjusted income was $1.36 per share. Analysts were expecting earnings of $1.29 per share on revenue of $32.96 billion. Looking ahead, the company forecast current-quarter revenue in a range of $31.4 billion to $31.6 billion, with adjusted earnings seen arriving between $1.19 per share and $1.21 per share. Wall Street was expecting earnings of $1.25 per share for the current quarter, on revenue of $32.62 billion.
Finally, Chesapeake Energy Corp. (CHK) posted fourth-quarter net income of $180 million, or 28 cents per share. Excluding one-time items, adjusted income was $478 million, or 70 cents per share. Revenue fell to $1.98 billion from $2.22 billion in the same quarter last year. Wall Street was looking for earnings of 64 cents per share on $2.2 billion in revenue.
Earnings Preview
On the earnings front, Saks (SKS), Toll Brothers (TOL), and Transocean (RIG) are slated to release their quarterly earnings reports. Keep your browser at SchaeffersResearch.com for more news as it breaks.
Economic Calendar
On the economic front, the ICSC-Goldman Sachs chain store sales index will be joined by January’s existing home sales data. On Thursday, the government’s weekly report on crude supplies will hit the Street a day late, due to Monday’s holiday. Traders will also receive their regularly scheduled update on weekly jobless claims. Finally, we round out the week with a pair of key economic reports: the preliminary estimate on fourth-quarter gross domestic product (GDP), and February’s consumer sentiment index from Reuters/University of Michigan.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,656,143 call contracts traded on Tuesday, compared to 1,152,235 put contracts. The resultant single-session put/call ratio arrived at 0.70, while the 21-day moving average rose to 0.57.
**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**
Overseas Trading
Overseas trading remains in poor shape this morning, with only three of the 10 foreign indexes that we track in positive territory. The cumulative average return on the collective stands at a loss of 0.34%. Asian stocks were mostly lower, with Japan’s Nikkei leading the way south due to pressure from a rising yen. Property developers headed up the retreat in Hong Kong, following news that the government was considering proposals to increase available land. Unrest in the Middle East and North Africa remains a sticking point in Europe, though a few positive corporate earnings reports are helping to limit losses.
Currencies and Commodities
After surging more than 6% yesterday, crude futures are trekking higher once again. In electronic trading, the April futures contract is up 70 cents at $96.12 per barrel on reports of a potential civil war in Libya. Gold, however, has failed to follow suit, adding a mere $1.30 to hover just above $1,400 an ounce in London. Finally, the U.S. dollar is retreating versus most of its major foreign competitors this morning, sending the U.S. Dollar Index down 0.45% to 77.42 in premarket trading.
For an explanation of how to use this information, check out our Education Center topics onOption Volume and Open Interest Configurations.
