Wall Street is in a holding pattern heading into the open this morning, as U.S. stock futures on the Dow Jones Industrial Average (DJIA) are up two points at 10,424, or about eight points below fair value. Traders are standing pat ahead of key economic data, with preliminary third-quarter gross domestic product (GDP) and November's consumer confidence index both scheduled for release later this morning. Meanwhile, the banking sector could come under fire today, after China's banking regulator warned the nation's lenders to strictly comply with capital requirements or face sanctions. Also impacting banks, traders are taking notice of a report from Standard & Poor's, which said that bank capital strength varies widely under its new methodology. U.S. banks are close to the global average but with a wide variation, the report said.
The U.S. Dollar Index is basically flat this morning, adding about 0.03% to trade at 75.11 in pre-market activity. Commodities, meanwhile, are following suit, with December gold futures rising $5.10 to $1,169.50 an ounce, and crude oil for January delivery slipping 9 cents to $77.45 per barrel in electronic trading.
In earnings news, Hewlett-Packard Corp. (HPQ) reported a fourth-quarter profit of $2.4 billion, or 99 cents per share, up from a profit of $2.1 billion, or 84 cents per share, for the year-earlier period. Revenue was $30.8 billion, down from $33.6 billion for the same quarter the previous year. Adjusted income was $1.14 per share. Analysts were looking for a profit of $1.13 per share, on revenue of $30.4 billion.
Elsewhere, Analog Devices Inc. (ADI) said that its fourth-quarter net income fell to $105.6 million, or 36 cents per share, from $143.9 million, or 49 cents per share, in the same period last year. Revenue fell 13% to $572 million. Wall Street was expecting a profit of 26 cents per share on $523.8 million in revenue.
Finally, H.J. Heinz Co. (HNZ) said its second-quarter net income fell to $237.3 million, or 73 cents per share, from $276.7 million, or 87 cents per share, in the year-ago period. Excluding one-time items, Heinz earned 76 cents per share. Revenue grew 2.5% to $2.67 billion, led by growth in emerging markets and acquisitions. Analysts expected earnings of 70 cents per share on revenue of $2.6 billion. Looking ahead, Heinz raised its full-year outlook to $2.72 to $2.82 per share, surrounding analyst expectations for $2.75 per share.
Earnings Preview
The earnings calendar is beginning to wind down, with reports from American Eagle Outfitters (AEO), Brocade Communications Systems Inc. (BRCD), Dollar Tree Inc. (DLTR), and TiVo Inc. (TIVO) scheduled for release today. Keep your browser at SchaeffersResearch.com throughout the day for more.
Economic Calendar
We pick up the pace today, 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 1,661,114 call contracts traded on Monday, compared to 856,989 put contracts. The resultant single-session put/call ratio arrived at 0.52, while the 21-day moving average held at 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 weak this morning, as only three of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 0.67%. In Asia, markets closed mostly lower Tuesday, with Chinese stock investors locking in profits after the country's banking regulator warned banks about their capital positions, raising fears that lenders may have to sell shares to raise capital. Shares of Bank of China lost 4% and China Construction Bank shed 3.4% in Hong Kong; in Shanghai, they fell 2.3% and 2.9%, respectively. Elsewhere, Japanese Finance Minister Hirohisa Fujii said deflation is primarily a concern for monetary policy, rather than fiscal policy. Also, data due later in the week is forecast to show Japan's core consumer price index fell 2.2% year-to-year in October, after a 2.3% decline the previous month. Financial shares were hit hard, with Takefuji ending 6.8% lower after Moody's downgraded its ratings on Friday, while fellow consumer-finance company Aiful fell 4.8%. Persistent worries about capital raising hurt banks, with Mizuho Financial Group sliding 2.5% and Sumitomo Mitsui Financial Group shedding 4.4%.
Turning to Europe, shares dropped, with banks leading the decline after a report from ratings agency Standard & Poor's raised worries about capital levels in the sector. UBS, down 2.1%, BBVA, down 1.2%, and Allied Irish Banks, down 2.5%, were among the lenders with the lowest risk-adjusted capital ratios, according to the report. On the economic front in Europe, the Ifo Institute's closely watched indicator of German business sentiment rose to its highest level in more than a year in November, boosted by a more positive outlook on exports and an improving view of the current business situation. Carrefour shares rose 3.4% to 32.62 euros after JPMorgan upgraded the French supermarket group to "overweight" from "neutral" on Tuesday and added it to its analyst focus list. The broker believes that the worst of the deflationary cycle has passed and that the comparison base is set to get much easier. It also believes there is a 20% probability of a partial break-up of the group, which it estimates would lead to a value of 52 euros per share.
The U.S. Dollar Index (DX/Y) fell 0.68% to trade at 75.11 on Monday. Currency traders reacted to weekend comments from Federal Reserve Bank of St. Louis President James Bullard. Bullard said on Sunday that the U.S. should continue buying mortgage-backed securities past the first quarter of 2010, when asset purchases are due to end. The speech was contrary to European Central Bank's actions, which announced its first tightening steps on Friday. Against this backdrop, the euro jumped to $1.4999, while the dollar actually rose to 89.07 yen.
The futures contract on the 30-year bond (US/1 – 120'29) edged 1/32 higher on Monday. Long-term Treasurys clung to slight gains on the session, as traders digested a two-year note auction that received sufficient demand. The auction marks the first such debt sale of some $118 billion scheduled for this holiday-shortened week. The Treasury Department sold $44 billion in two-year notes at a yield of 0.802%. Today, the government will offer up $42 billion in five-year notes, while $32 billion in seven-year notes will hit the auction block tomorrow.
Commodity Corner
The ailing greenback and encouraging economic data gave crude futures a lift on Monday. Specifically, customs data indicated that China's implied oil demand advanced 10% in October, compared to the period a year ago. Furthermore, escalating geopolitical tensions between Iran and the West helped buoy black gold. However, crude for January delivery couldn't quite topple the $80-per-barrel market by the close, finishing with a gain of 9 cents, or 0.12%, at $77.56 per barrel.
Gold futures surged into all-time high territory on Monday, boosted by a negative session for the U.S. dollar. Bullard's dovish suggestion that the central bank should extend its plan to purchase mortgage-backed securities effectively reignited the market's inflationary fears -- particularly in the wake of a solid report on existing home sales -- which, in turn, stoked demand for the malleable metal as a currency hedge. After tagging a record intraday peak of $1,174 per ounce, gold for December delivery finished the session on a gain of $17.90, or 1.56%, at $1,164.70 per ounce.
Unusual Put and Call Activity:
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