Wall Street could be in for a rough ride today, as traders react to Alcoa Inc.'s (AA) disappointing fourth-quarter earnings report. The shares are down nearly 6% in pre-market activity, a development that could bode ill for the rest of the market. Specifically, Schaeffer's analyst Rocky White noted in an early-October edition of Monday Morning Outlook that the S&P 500 Index (SPX) performs poorly following a negative reaction to AA's report. The market is already following Alcoa's lead, with U.S. stock futures on the Dow Jones Industrial Average (DJIA) down 71 points to 10,605, or about 76 points below fair value. As for the CBOE Market Volatility Index (VIX), the "fear" barometer bounced off the 17 level in intraday trading yesterday, and could head sharply higher in today's trading. That said, the VIX could find some resistance near the 20 level, a region that had previously acted as stiff support.
Checking in on currencies and commodities, the U.S. Dollar Index is basically flat this morning, with the greenback edging 0.09% higher to trade at 77.08 in pre-market activity. Commodities are also trading in a tight range, though with a negative bias due to the slightly positive dollar. Specifically, February gold futures are down $2.50 at $1,148.90 an ounce, while February crude oil is off 73 cents at $81.77 per barrel.
In earnings, Alcoa Inc. (AA) reported a net loss of $277 million, or 28 cents per share, as sales fell 4% to $5.4 billion. Excluding charges, Alcoa said it earned 1 cent per share, missing expectations for a profit of 5 cents per share. Expectations were high heading into the report, with the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.45 indicating that calls more than doubled puts among near-term options. This ratio also ranks below 81% of those taken during the past year.
Elsewhere, Electronic Arts Inc. (ERTS) cut its 2010 fiscal year earnings and revenue forecasts. For the full year, the company now expects to earn 40 cents per share to 55 cents per share (excluding items), on revenue in a range of $3.6 billion to $3.68 billion. For the third quarter, ERTS estimates it will lose between 24 cents and 32 cents per share, on revenue of $1.23 billion to $1.25 billion. Options traders had their sights set high prior to the announcement, with ERTS' SOIR coming in at 0.46, in the 13th percentile of its annual range. What's more, 16 of the 32 analysts following the shares rate them a "buy" or better.
On the earnings front, Infosys Technologies Limited (INFY), KB Home (KBH), and SUPERVALU INC. (SVU) will release their quarterly reports. Keep your browser at SchaeffersResearch.com for more earnings news as it breaks.
The economic calendar offers up only the November trade balance today, while tomorrow picks up the pace with the December Treasury budget, the Fed's Beige Book, and weekly U.S. petroleum supplies. The real deluge begins on Thursday, as traders will see weekly initial jobless claims, December retail sales, December import/export prices, and November business inventories. The week closes with data on consumer inflation in the form of the December consumer price index (CPI), while the Empire State manufacturing index for January, December's capacity utilization and industrial production reports, and the January University of Michigan's consumer sentiment index are also on the docket.
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,864,880 call contracts traded on Monday, compared to 905,193 put contracts. The resultant single-session put/call ratio arrived at 0.49, while the 21-day moving average held at 0.59.
**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.**
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