Opening View: Wall Street Looks to Recover Ahead of Data Deluge

              

Wall Street is looking to bounce back from yesterday's pounding, as U.S. stock futures are pointed slightly higher. What's more, commodities, one of the main catalysts for Monday's nearly 200-point plunge in the Dow Jones Industrial Average (DJIA), are trading higher in pre-market activity. However, investors shouldn't get too comfortable, as there is a deluge of economic data just waiting for release later this morning. Some of the highlights include May's housing starts, building permits, and the producer price index (PPI). The last is seen as an inflation indicator, and will be watched closely. In equity news, AT&T Inc. (T) was downgraded to "equal weight" at Barclays Capital, while Best Buy Co. (BBY) and Adobe Systems Inc. (ADBE) will release their quarterly reports later today.

In currencies and commodities, the U.S. Dollar Index is down 0.76% at 80.52 in electronic trading. Gold futures, meanwhile, are headed higher in London, with the front-month contract up $7.90 at $935.40 an ounce. Finally, crude oil futures are also trading higher in pre-market activity, with the August contract up 1.68% at $72.51 per barrel.

In earnings news, Tyco Electronics Ltd. (TEL: sentiment, chart, options) raised its third-quarter outlook to earnings of 10 cents per share to 17 cents per share, up from a previous outlook of a penny to 6 cents per share. The company also raised its revenue forecast for the quarter to a range of $2.45 billion to $2.55 billion, up from a previous range of $2.35 billion to $2.45 billion. Analysts are expecting third-quarter earnings of 3 cents per share on sales of $2.4 billion.

Elsewhere, La-Z-Boy Inc. (LZB: sentiment, chart, options) said that it swung to a fourth-quarter profit of $5.3 million, or 10 cents per share, from a loss of $4.4 million, or 9 cents per share, in the same quarter last year. Revenue fell to $284.5 million from $368 million last year.

Finally, Smithfield Foods Inc. (SFD: sentiment, chart, options) reported that it lost $78.8 million, or 55 cents per share, in the fourth quarter, compared to net income of $2.4 million, or 2 cents per share, in the year-ago period. Consolidated sales dipped slightly to $2.85 billion from $2.87 billion. Analysts were looking for a loss of 58 cents per share. "Fiscal 2009 was one of the most challenging years in over three decades for the company," Smithfield said. "We faced grain and oil markets that reached record highs and then fell precipitously. These input dynamics, combined with an oversupply of all proteins as well as a worldwide recession and credit constraints, put significant pressure on the business."

Earnings Preview

On the earnings front, Best Buy (BBY) and Adobe Systems (ADBE) are slated to release their quarterly reports today. Keep your browser at SchaeffersResearch.com throughout the day for more.

Economic Calendar

The economic calendar offers up a plethora of data today, including May's housing starts and building permits, May's producer price index (PPI), the core PPI, and May's capacity utilization and industrial production reports. On Wednesday, the May consumer price index (CPI), core CPI, and weekly U.S. petroleum supplies are slated for release. The calendar ends early on Thursday, with weekly initial jobless claims, May's leading economic indicators, and the Philadelphia Fed's manufacturing index. There are no economic reports scheduled for Friday.

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,629,787 call contracts traded on Monday, compared to 971,417 put contracts. The resultant single-session put/call ratio arrived at 0.60, while the 21-day moving average held at 0.64.

**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 is mixed, as six of the 10 foreign indices that we track are in positive territory. The cumulative average return on the collective stands at a loss of 0.28%. Trading in Asia closed broadly lower Tuesday, led by losses in banking and resource stocks, with investors wary that tentative signs of economic recovery don't match the scope of the recent gains in regional stock markets. In Tokyo, the Bank of Japan raised its assessment of economic conditions for a second time this year, saying that economic conditions have "begun to stop worsening." The central bank's monetary policy board also kept its interest-rate target at the current 0.1% level, as had been widely expected. Investors in Japanese shares appeared unfazed by the upbeat assessment. Financials were weak, with Mitsubishi UFJ FG closing down 4.8% and Mizuho Trust & Banking down 5%. Real estate firms were hit particularly hard coming off a four-session, 11% rally - Mitsui Fudosan closed down 6.4%, Mitsubishi Estate was off 6.6%, and Sumitomo Realty & Development dropped 5.6%.

Across the pond in Europe, stocks extended sharp losses suffered during the previous session, as investors pulled out of firms perceived as more exposed to economic trends such as banks. Financial stocks declined notably, with German insurance giant Allianz down 1.5% and French bank BNP Paribas down 1.6%. Investors in the financial sector were likely still weighing news out Monday afternoon when the European Central Bank warned that the stability of the euro zone's financial sector remains under threat. A downgrade by Moody's of the financial-strength ratings of 30 Spanish lenders after the market close on Monday didn't help sentiment much, although the agency said that the many of the downgrades were "moderate." Moody's also said that it could lower credit ratings for Swiss bank UBS, down 2.6%. Still, Santander shares advanced after Goldman Sachs upgraded the lender to "buy" from "neutral" to reflect near-term profit potential stemming from a repricing of its U.K. loan book.

The U.S. Dollar Index (DX/Y) rose 1.27% to trade at 81.78 on Monday, as the dollar rose against most of its major foreign competitors after weak U.S. economic data and worries over the European banking system boosted the greenback's appeal as a safe haven. The greenback also received a lift from dollar-friendly comments made by a Russian official and a reports that the Group of Eight nations is considering strategies for exiting their economic stimulus measures before inflation threats emerge. Against this backdrop, the dollar slipped to 97.63 yen, while the euro fell 1.7% to $1.3780.

The futures contract on the 30-year bond (US/1 – 115'05) rose 27/32 on Monday, as Treasurys rallied for a third straight session on the heels of downbeat economic data. Specifically, the National Association of Home Builders reported builders grew more pessimistic in June about sales over the medium term, sending their monthly sentiment index down one point to 15. Furthermore, the New York Empire State manufacturing index fell to negative 9.4 from a negative 4.6 in May, indicating the downturn broadened to more firms.

Commodity Corner

Monday's dollar rally, combined with a round of utterly disappointing economic data, translated to weakness in crude futures. Traders eyed the sharper-than-expected contraction in the New York Fed's manufacturing index, as well as cautious commentary from Dominique Strauss-Kahn, head of the International Monetary Fund (IMF). Speaking to the prime minister of Kazakhstan, Strauss-Kahn warned, "We haven't exited the [economic] crisis yet." Oil futures settled last Thursday at their highest price in nearly eight months, so the front-month contract was ripe for profit-taking. Crude for August delivery ended the day on a drop of $1.44, or 1.98%, at $71.31 per barrel.

Gold futures also swallowed a daily drop, as strength in the U.S. dollar sparked heavy selling. The greenback surged after Russian Finance Minister Alexei Kudrin said the dollar is in "good shape," and added that his country has no plans to switch to an alternate reserve currency. As traders rushed to buy the dollar, gold for August delivery gave up $13.20, or 1.4%, to finish at $927.50 per ounce.

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