Morning Market Update: Wednesday, March 23, 2011
Opening View: DJIA Poised to Test 12K; Fed Rejects Dividend Hike for Bank of America
Crude futures are flirting with $105 per barrel amid escalated fighting in the Middle East
by Andrea Kramer (akramer@sir-inc.com) 3/23/2011 8:10 AM
The Dow Jones Industrial Average (DJIA) snapped its winning streak on Tuesday, as the bulls took a breather from their post-earthquake rebound. Ahead of the bell, the major market indexes are once again lingering around breakeven, with Japan – which warned of dangerous levels of radioactive iodine in Tokyo’s tap water – and Libya likely to remain in the Street’s crosshairs. In addition, traders will be taking their cues from the latest round of earnings reports, as well as a round of housing data expected to hit the Street just after the open. From a technical standpoint, investors will also be watching a few key round-number levels, with the Dow and S&P 500 Index (SPX) churning around 12,000 and 1,300, respectively.
In equities news, Adobe Systems (ADBE) last night said adjusted fiscal first-quarter earnings rose 85% to 58 cents per share, surpassing the Street’s per-share projections by a penny. However, the company slashed its second-quarter revenue guidance to a range of $970 million to $1.02 billion, or 47 cents to 54 cents a share, citing an uncertain business environment in post-earthquake Japan, which accounted for approximately 13% of Adobe’s sales last year. Analysts, on average, were anticipating second-quarter earnings of 56 cents a share on sales of $1.03 billion. Ahead of the bell, the shares of ADBE are down about 1%.
Meanwhile, General Mills (GIS) said its fiscal third-quarter earnings jumped 18%, thanks to soaring profit at its international business. Excluding items, the company earned 56 cents per share, while sales powered 1.6% higher to $3.65 billion. Analysts, on average, expected per-share earnings of 56 cents on $3.69 billion in revenue. Looking ahead, Chairman and CEO Ken Powell predicted the highest earnings growth of the year to come in the fiscal fourth quarter, and reiterated the company’s full-year earnings guidance. At last check, GIS is up about 2%.
Finally, Bank of America (BAC) will likely be in focus today. In a regulatory filing, the blue chip said that after completing the government’s latest round of stress tests, the Federal Reserve has denied the bank’s proposed dividend boost, which BAC hoped to implement in the second half of the year. Nevertheless, the financial firm will be allowed to resubmit a revised capital plan, and said it still “intends to seek permission for a modest increase in its common dividend.” Ahead of the bell, the shares of BAC are headed 1.7% lower.
Earnings Preview
The earnings calendar features reports from the likes of Jabil Circuit (JBL), Paychex (PAYX), and Red Hat (RHT).
Economic Calendar
The Commerce Department will release its new-home sales figures today, with the weekly crude inventories report also on deck. Federal Reserve Chairman Ben Bernanke is also slated to deliver a speech at the Independent Community Bankers of America National Convention around midday. Thursday will feature the latest jobless claims, as well as February’s durable orders data. Finally, Friday ends with the government’s latest gross domestic product (GDP) estimate for the fourth quarter, as well as the Reuters/University of Michigan’s consumer sentiment index.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,150,735 call contracts traded on Tuesday, compared to 639,141 put contracts. The resultant single-session put/call ratio jumped to 0.56, while the 21-day moving average remained at 0.63.
Japanese stocks snapped a three-session winning streak today, after reports of radioactive iodine in Tokyo’s tap water overshadowed reports that Japanese financial institutions might provide more than $24.6 billion in loans to repair the Fukushima Daiichi nuclear power plant. In fact, Tokyo Electric Power Co. – which owns the earthquake-shattered plant – paced the declining equities, giving up 4.5%. By the close, Japan’s Nikkei index gave back almost 1.7%, while Hong Kong’s Hang Seng Index retreated 0.1%. Meanwhile, China’s Shanghai Composite added 1% on hopes that the country’s central bank will make efforts to curb inflation.
Elsewhere, European markets were mixed, as investors await the Portuguese Parliament’s vote on the government’s proposed austerity measures. Trading lower were retailers, with U.K.-based J. Sainsbury leading the laggards after forecasting a difficult consumer environment. Meanwhile, BMW bucked the trend lower in Germany, thanks to an upgrade to “outperform” at Bernstein. At last check, London’s FTSE 100 has ticked 0.5% higher, France’s CAC 40 has added almost 0.4%, and Germany’s DAX has surrendered 0.1%.
Currencies and Commodities
The U.S. dollar has gained a little ground this morning, as the U.S. Dollar Index was seen up about 0.1% at 75.50. Elsewhere, crude futures are poised to continue their run into the black. In electronic trading, the May crude futures contract has added about 0.5% to $105.44 per barrel. Finally, gold futures are also positioned to extend their winning streak, advancing 0.4% to flirt with $1,433.80 an ounce.
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