The technology sector is in trouble this morning, as traders have reacted negatively to Dell Inc.'s (DELL) third-quarter earnings report. The company said that profit plunged 57%, and it missed Wall Street's expectations by 5 cents per share. What's more, Dell's miss arrives on the heels of Bank of America's downgrade of several semiconductor stocks on Thursday. As a result, U.S. stock futures on the Dow Jones Industrial Average (DJIA) have plummeted 80 points to 10,247, or about 63 points below fair value.
The U.S. Dollar Index is on the rise again, gaining 0.46% to trade at 75.64 in pre-market activity. Commodities, meanwhile, are down only modestly in comparison. Specifically, the December gold futures contract has slipped $1.60 to $1,140.10 an ounce, while crude oil for January delivery is off 51 cents at $77.54 per barrel in electronic trading.
In earnings news, Dell Inc. (DELL) reported that its third-quarter profit plunged 57% to $337 million, or 17 cents per share, from $727 million, or 37 cents per share, last year. Revenue declined 15% to $12.9 billion from $15.2 billion a year ago. Excluding one-time items, Dell would have earned 23 cents per share. Analysts had forecast earnings of 28 cents per share on revenue of $13.2 billion.
Elsewhere, D.R. Horton Inc. (DHI) reported a fourth-quarter loss of $231.9 million, or 73 cents per share, compared with $799.9 million, or $2.53 per share, in the year-ago period. The home builder said the latest quarter's results included $192.6 million in pretax charges related to inventory and land. Home-building revenue for the September quarter dropped to $1 billion from $1.8 billion in the same quarter the previous year.
Finally, Gap Inc. (GPS) could buck the downtrend today, after the company reported that its third-quarter profit rose 25% to $307 million, or 44 cents per share, from a profit of $246 million, or 35 cents per share, last year. Sales rose 1% to $3.59 billion. Same-store sales for the quarter were flat, compared to a 12% decline in the year-ago quarter. Gap said its operating margin was the highest in a decade at 13.9%. Analysts had forecast 42 cents per share. The company also announced a $500 million share repurchase program.
Earnings Preview
The earnings calendar ends the week with reports from AnnTaylor Stores Corp. (ANN) and The J.M. Smucker Company (SJM). Keep your browser at SchaeffersResearch.com throughout the day for more.
Economic Calendar
The economic calendar is devoid of reports today. Next week is shortened by the Thanksgiving holiday, but there is no shortage of data. We start off slow, with only October's existing home sales on tap Monday. Tuesday picks up the pace, with preliminary third-quarter gross domestic product (GDP), September's S&P/Case-Shiller Home Price Index, November's consumer confidence index, and the Federal Housing Finance Agency's (FHFA) September home price index.
We hit the mother lode on Wednesday, with October's personal income/spending indexes, the personal consumption expenditures (PCE) price index for October, weekly initial jobless claims, October's durable goods orders, the November University of Michigan consumer sentiment index, October's new home sales figures, and weekly U.S. petroleum supplies. The market is closed on Thursday for Thanksgiving, and trading wraps up early on Friday due to the holiday.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,403,722 call contracts traded on Thursday, compared to 1,028,342 put contracts. The resultant single-session put/call ratio arrived at 0.73, while the 21-day moving average rose to 0.63.
**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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Overseas Trading
Overseas trading looks sickly this morning, as only one of the 10 foreign indexes that we track is in positive territory. The cumulative average return on the collective stands at a loss of 0.41%. In Asia, most markets closed lower as technology shares sagged after their U.S. peers took a beating, while an overnight pullback in commodity prices weighed down resource stocks. Elpida Memory lost 2% and Toshiba gave up 2.2% in Tokyo, while Samsung Electronics fell 0.5% in Seoul. ProMOS Technologies sank 3.7% and Chi Mei Optoelectronics fell 2.6% in Taipei, while Wipro gave up 2.1% in Mumbai. Japanese banking stocks staged a modest rebound after a string of declines on concerns about equity-dilution from capital-boosting measures. Shares of Mitsubishi UFJ Financial Group gained 1.1%, Mizuho Financial Group added 1.9% and Resona Holdings climbed 2.5%.
But analysts remained cautious about banks after a government proposal to provide debt relief to small businesses passed the Lower House on Friday and awaited clearance in the Upper House of the Parliament. Earlier in the day, the Bank of Japan's board members decided to leave the policy target rate unchanged at 0.1% -- a rate it has held since December last year - to try and revitalize the overall economy by capping borrowing rates. The board said it would keep financial conditions very accommodative.
Turning to Europe, shares pulled back after making some early gains in the session. The construction and chemical sectors were among the top performers in percentage terms, with Saint Gobain shares up 1.2% in Paris and BASF shares up 1.3% in Frankfurt. Volkswagen shares rose 1.2% after it said that its supervisory board has approved the contracts relating to its planned multi-stage takeover of rival Porsche. The company said the agreement was a further important step towards the takeover, which would be completed over the course of 2011 under the plans. Porsche shares were up 0.5%. Cable & Wireless shares gained 3.2% after it was upgraded to "overweight" from "neutral" at JPMorgan. "Cable & Wireless has underperformed the sector and the FTSE by 19% and 25% year-to-date despite heavy emerging markets exposure. This reflects sensitivity to recessionary pressures. But with expectations rebased post the first half, we believe focus will now shift to C&W's above-average gearing into cyclical recovery," the broker said.
The U.S. Dollar Index (DX/Y) rose 0.15% to trade at 75.30 on Thursday. The dollar gained ground versus most of its foreign rivals as weak U.S. economic data prompted a return to the greenback as a safe-haven investment. However, currency traders remained cautious on the dollar, which finished off its morning lows, as it remains trapped in a tight trading range after hitting a 15-month low earlier in the week. Against this backdrop, the euro slipped to $1.4913, while the dollar dipped to 88.92 yen.
The futures contract on the 30-year bond (US/1 – 120'26) added 10/32 on Thursday. Treasurys rebounded on the session, as bond traders drew strength from the belief that a sluggish economy would protect U.S. debt. Still, gains were limited, as traders prepared for the government's plan to sell a record amount of debt next week. Specifically, the Treasury Department said it will sell $22 billion in two-year notes on Monday, $42 billion in five-year notes on Tuesday, and $32 billion in seven-year notes on Wednesday.
Commodity Corner
Crude futures finished in the red for the first time in four sessions on Thursday, thanks to a rebound in the dollar and fresh demand-related concerns. More specifically, the government's report that first-time filings for unemployment benefits remained at uncomfortably elevated levels last week sparked fears that domestic energy demand could remain weak. What's more, the latest oil statistics from China failed to boost black gold, after the world's second largest oil consumer said demand for petroleum rose 10.2% in October, compared to the period a year ago. As a result, January-dated crude surrendered $2.05, or 2.56%, to settle at $78.05 per barrel.
Elsewhere in the commodities pits, gold futures eked out yet another gain yesterday, as a selling spree in the equities market increased the metal's safe-haven appeal. In addition, investors were encouraged after the World Gold Council reported that gold demand surged 15% from the second to third quarters, rallying to 800.3 metric tons, or $24.7 billion in dollar terms. By the close, gold for December delivery added 70 cents to finish at $1,141.90 an ounce.
Unusual Put and Call Activity:
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