Following yesterday's largest single-day percentage spike in the Dow in more than 5 years, U.S. futures are flat-to-higher this morning, indicative of a potentially positive start to the regular session of trading. Also in positive territory are stocks overseas, with the Shanghai Composite the only foreign index that we track not celebrating yesterday's news from the Federal Reserve. Making news this morning are several companies in the pharmaceutical sector, as well as teen clothier American Eagle.
IMS Health this morning reported that overall sales growth in the U.S. prescription arena fell to 3.8% in 2007, compared with growth of more than 8% in 2006. More specifically, total prescription sales nationally came in at $286.5 billion for the year. The slower sales growth was attributed to fewer new product approvals, a slowdown in year-over-year growth from Medicare Part D, the loss of exclusivity on branded medicines, and safety issues. Looking to the future, IMS predicts compound annual pharmaceutical sales growth through 2012 of 3% to 6%.
In other pharmaceutical news, Wyeth (WYE: sentiment, chart, options) and Progenics Pharmaceuticals (PGNX) this morning announced that the results from a phase 3 trial of post-operative ileus revealed the drug failed to meet its target of reducing the time of recovery of gastrointestinal function after segmental colectomy surgical procedures. Memory Pharmaceuticals (MEMY: sentiment, chart, options) also made headlines this morning, announcing it will reduce its payroll by 20%.
In earnings news, retailer American Eagle (AEO: sentiment, chart, options) showed that its quarterly profit fell to $140.5 million from $150.2 million a year ago. Sales, however, rose to $995.4 million from $973.4 million a year earlier. Earnings matched analysts' expectations, though sales came in lower than predictions. AEO's first-quarter guidance was reiterated at 25 to 27 cents per share, down from last year's first-quarter numbers of 35 cents a share.
Economic Calendar
The economic calendar greets the Street with the usual crude inventories report today, as well as February's Treasury Budget. Things will begin to heat up a bit on Thursday, with February's retail sales and import/export data, as well as January's business inventories report, and the latest initial jobless claims. For a complete rundown of days and times for this week's economic releases, please see the chart at the bottom of page 2.
Market Statistics
Equity option activity on the CBOE saw 1,173,610 put contracts traded on Tuesday, compared to 1,323,743 call contracts. The resultant single-session put/call ratio dipped to 0.89, while the 21-day moving average remained at 0.80.
**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 continues yesterday's trek into the black, with 10 of the 11 foreign indices that we track in positive territory. The cumulative average return on the collective stands at a gain of 1.26%. As most other overseas indices celebrated the Federal Reserve's announcement to increase liquidity in the market, the Shanghai Composite bucked the trend. After tacking on a gain of more than 2% in early trading, the index closed with a loss of 2.3% as investors weighed fears that the Chinese central bank will tighten its monetary policy to control inflation.
Across the pond in Europe, investors were also celebrating the recent Fed move. Financials seemed to profit the most, with UBS (UBS) tacking on 4.5% in overseas trading. British insurance firm Standard Life jumped nearly 10% on the Fed news, combined with the revelation that its underlying profit for 2007 more than doubled. In other news, British Chancellor of the Exchequer Alistair Darling is slated to deliver the budget to the House of Commons.
The U.S. Dollar Index rose about 0.1% during Tuesday's regular session of trading, as the dollar extended gains against its major foreign rivals on news that the Federal Reserve is coordinating with other central banks to boost liquidity in financial markets. According to the announcement, the Fed has a new temporary lending program that will allow participants in the bond markets to swap mortgage-backed securities for highly liquid Treasurys. Against this backdrop, the euro fell to $1.53 from the roughly $1.55 it was trading at in early London activity yesterday.
The futures contract on the 30-year bond (US/1 –116'31) dropped 1-17/32 yesterday, as Treasury prices fell sharply on a rally in the U.S. equities market, sending yields lower. The combination of the Fed's liquidity plan and the strength in the U.S. stock market lessened the safe-haven demand for the fixed-income market. Drilling down on the Fed, the central bank said it will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days, rather than the current overnight term. The group also authorized increases in temporary reciprocal currency programs with the European Central Bank and the Swiss National Bank.
Commodity Corner
The strength in the U.S. dollar put pressure on gold futures, as the malleable metal gained $4.20 to close at $976 an ounce yesterday. Gold's close was about $11.80 below its intraday high of $987.80, set earlier in the session. Silver prices weren't quite as resilient as gold, as the May contract dropped 2.2 cents to finish at $19.76 an ounce.
April-dated crude oil closed 85 cents (0.8%) higher at $108.75 per barrel, as a volatile day came to an end. The International Energy Agency announced lowered projections for world oil demand for the year, expecting a 2% jump from 2007. The agency noted that high crude prices will continue to "chip away" at oil consumption in the United States and other industrialized nations. In another announcement, the Energy Information Administration stated expectations for a slowing economy and record-high oil prices to hold U.S. oil demand growth to 40,000 barrels per day in 2008.
Unusual Put and Call Activity:
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To read more of our analysis on the market's biggest stories, please visit our Schaeffer's Daily Market Blog section throughout the trading day.
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