Wall Street is still digesting the Federal Open Market Committee's policy statement this morning, as traders come to the sobering conclusion as to why the Fed decided to leave interest rates at record lows for an extended period. While the Fed believes that the economy is improving, the rates are staying low out of concern for the strength of the recovery. U.S. stock futures are trading lower against this backdrop, but while futures on the Dow Jones Industrial Average (DJIA) are down 2 points at 9,783, they are still trading some 26 points above fair value. Meanwhile, the Street must still prepare for tomorrow's nonfarm payrolls report and the continued flood of corporate earnings, including reports from Cisco Systems Inc. (CSCO), Cardinal Health Inc. (CAH), and Sirius XM Radio (SIRI). In currencies and commodities, the U.S. Dollar Index is trading basically flat, having risen a mere 0.06% to hover near 75.80 in pre-market activity. Meanwhile, the December gold futures contract has posted a slight gain, adding $1.80 to trade at $1,089.30 an ounce. Finally, crude oil for December delivery is down 45 cents at $79.95 per barrel in electronic trading. On the earnings front, Cisco Systems Inc. (CSCO) reported a first-quarter profit of $1.8 billion, or 30 cents per share, compared with a profit of $2.2 billion, or 37 cents per share, last year. Revenue came in at $9 billion, down from $10.3 billion a year ago. Adjusted income was 36 cents per share. Wall Street was expecting earnings of 31 cents per share on revenue of $8.75 billion.
Elsewhere, Cardinal Health Inc. (CAH) said that it swung to a third-quarter loss of $38.2 million, or 11 cents per share, from a profit of $249.1 million, or 69 cents per share, last year. Revenue rose 6% to $24.8 billion from $23.4 billion. Excluding charges of 71 cents per share for restructuring, earnings from continuing operations would have been 54 cents per share in the third quarter. Analysts were looking for earnings of 43 cents per share on sales of $24.2 billion.
Finally, Sirius XM Radio (SIRI) said its third-quarter loss narrowed to $149.1 million, or 4 cents per share, from a loss of $4.9 billion, or $1.93 per share, in the year-ago period. Excluding one-time charges, the company broke even for the quarter. Wall Street analysts expected a loss of 2 cents per share. Revenue rose to $629.6 million from $612.8 million. The firm ended the third quarter with 18.5 million total subscribers, a decrease of 2%. The company expects 2010 revenue growth of mid- to high-single digits, and growth in free cash flow compared to 2009.
Earnings Preview
The earnings calendar is still packed, and includes Coeur d'Alene Mines Corp. (CDE), CVS Caremark Corp. (CVS), MGM MIRAGE (MGM), CBS Corp. (CBS), Crocs Inc. (CROX), NVIDIA Corp. (NVDA), and Starbucks Corp. (SBUX). Keep your browser at SchaeffersResearch.com throughout the day for more.
Economic Calendar
On the earnings front, preliminary third-quarter productivity will be joined by weekly initial jobless claims today. We end the week tomorrow with a bang, as September's wholesale inventories, September's consumer credit report, and the coup de grâce October's nonfarm payrolls, unemployment rate, average work week, and hourly earnings.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,508,591 call contracts traded on Wednesday, compared to 908,222 put contracts. The resultant single-session put/call ratio arrived at 0.60, while the 21-day moving average held at 0.60.
**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.**
Every morning, our research staff analyzes the prior day and the overnight markets, and monitors the morning wires to give you an accurate preview of the day to come. If you enjoyed today's edition of Opening View, sign up here for free daily delivery, straight to your inbox, before the opening bell.
Overseas Trading
Overseas trading is mixed this morning, as only three of the 10 foreign indexes that we track are trading in positive territory. The cumulative average return on the collective stands at a loss of 0.29%. Most Asian markets pulled back Thursday after authorities in South Korea and New Zealand voiced their preference for an accommodative policy stance, citing concerns about economic uncertainties. Chinese stocks outperformed amid expectations of continued improvement in that economy. Sentiment in the Japanese stock market was soured after Wall Street stocks ended off their highs. Sanyo Electric plunged 20.4% to 172 yen after the Nikkei reported that Sumitomo Mitsui Financial Group and Daiwa Securities Group have decided to sell their stake in the company to Panasonic Corp. for 131 yen, a sharp discount to Sanyo's Wednesday closing price of 216 yen. Nissan Motor Co. shares gained 0.3% on better-than-expected second-quarter results, which were released after the market closed Wednesday. Meanwhile, banks were mostly higher after Goldman Sachs said bank stocks had likely priced in concerns that they may have to raise funds to shore up their capital.
Turning to Europe, stocks edged lower, with the Bank of England and the European Central Bank due to announce rate decisions on another busy day for corporate earnings. Miners were lower on Thursday in line with some weakness for metal futures, with BHP Billiton down 2.2% and Kazakhmys down 1%. Vedanta Resources lost 2.9%; its first-half net income fell 46% to $188.2 million. Companies under pressure after updating investors included Unilever, down 3%. It posted a drop in third-quarter net to 1.05 billion euros, after asset sales flattered the year earlier's 1.64 billion euros profit. Insurance shares also suffered after disappointing results. Zurich Financial lost 4.2%, Munich Re shares fell 1.1%, and Old Mutual slid 2.5%. Petroplus shares fell 5.1% in Swiss trading. It posted a wider-than-expected third-quarter net loss of $259.4 million, although this was narrower than the year-ago $445.6 million loss.
The U.S. Dollar Index (DX/Y) dropped 0.98% to 75.64 on Wednesday. The dollar declined sharply versus its major counterparts after the Federal Reserve left interest rates unchanged and made only slight changes to the accompanying statement on monetary policy. Meanwhile, the central bank said it would buy $175 billion of agency debt, down from prior plans to purchase $200 billion, as there was a limited availability of the securities. Against this backdrop, the euro rose to $1.49, while the dollar rose to 90.90 yen.
The futures contract on the 30-year bond (US/1 – 118'03) fell 31/32 on Wednesday. Treasurys declined in the wake of the Fed's decision to keep interest rates low, pushing yields on longer-dated debt higher for a third consecutive day. However, short-term yields reversed early weakness and regained some composure as the decision reduced concerns that the central bank would raise rates earlier than previously expected.
Commodity Corner
Crude futures kept pace with the uptrending equities market on Wednesday, with traders reacting to an unexpected drop in U.S. inventories. The Energy Information Administration (EIA) reported that crude supplies fell by 4 million barrels during the past week, defying analysts' expectations for an increase. Black gold was also boosted by the Fed's economic optimism, as well as weakness in the U.S. dollar following the group's latest decision on monetary policy. While the greenback gave up ground to the euro, crude oil for December delivery added 80 cents, or 1%, to settle at $80.40 per barrel.
Meanwhile, Wednesday's decision on U.S. monetary policy was unequivocally bullish for gold. Gold for December delivery officially closed on a gain of $2.40 at $1,087.30 per ounce, but the most active contract tagged a fresh all-time high of $1,097.80 per ounce in electronic trading after traders learned of the Fed's decision. The after-hours peak extended the malleable metal's winning streak, blowing past the record high of $1,096.50 the contract set just hours earlier, in the regular session of trading.
Unusual Put and Call Activity:
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