Even though the Federal Reserve concluded last week that the weak U.S. economy still requires the currently massive amount of stimulus, Wall Street appears to have once again come to terms with the policies that have helped push the market more than 60% off its March lows. Heading into the open, U.S. stock futures on the Dow Jones Industrial Average (DJIA) have soared some 85 points to trade at 10,063, or about 80 points above fair value. Traders may be left to their own devices for much of the week, as the economic calendar is devoid of reports until about Thursday. Meanwhile, corporate earnings continue to flow, with Freddie Mac (FRE), Dish Network Corp. (DISH), and Berkshire Hathaway (BRK) releasing their quarterly reports. In currencies and commodities, the U.S. Dollar Index is trading sharply lower, shedding 0.96% to trade at 75.08 in pre-market activity. Meanwhile, the December gold futures contract is up $12.70 at $1,108.40 an ounce. Finally, crude oil for December delivery is up $1.05 at $78.49 per barrel in electronic trading. In earnings news, Freddie Mac (FRE) reported that its third-quarter net loss narrowed to $5.01 billion from a loss of $25.3 billion in the same quarter a year earlier. After payment of a $1.3 billion dividend on its senior preferred stock to the Treasury Department, the company's net loss attributable to common stockholders was $6.3 billion, or $1.94 per share. Revenue totaled $3.38 billion. "We believe that factors like high unemployment, excess inventory and rising foreclosures will continue to impede a full recovery for some time and put further downward pressure on house prices. We expect to request additional funds from Treasury as this prolonged deterioration of market conditions continues to negatively impact our financial results," Chief Executive Charles Haldeman said in a statement.
Elsewhere, Dish Network Corp. (DISH) said that third-quarter net income declined to $81 million, from $92 million, a year ago. Revenue slipped 1.5% to 2.89 billion. The firm said that it gained around 241,000 net subscribers during the quarter, ending with approximately 13.851 million subscribers.
Berkshire Hathaway (BRK) said late Friday that third-quarter net income more than doubled as the company benefited from a rebound in the value of its large equity investments and derivatives exposures. Third-quarter net income came in at $3.24 billion, or $2,087 per Class A equivalent share, versus $1.06 billion, or $682 per Class A equivalent share, a year earlier. Operating earnings, were $2.06 billion, or $1,325 per Class A equivalent share, in the latest period.
Finally, health care providers such as Wellpoint Inc. (WLP), Humana Inc. (HUM), Aetna Inc. (AET), and Cigna Corp. (CI) could be in focus this morning after the House of Representatives passed broad health care legislation late on Saturday. The bill, which now heads to the Senate for approval, would establish a government-run health insurance option to compete with private insurers.
Earnings Preview
The earnings calendar remains packed this week, with Rockwell Automation (ROK), Tesoro Corp. (TSO), Arena Pharmaceuticals Inc. (ARNA), Electronic Arts Inc. (ERTS), Force Protection Inc. (FRPT), GT Solar International Inc. (SOLR), MBIA Inc. (MBI), priceline.com inc. (PCLN), and Silver Wheaton Corp. (SLW) releasing their quarterly reports today. Keep your browser at SchaeffersResearch.com throughout the day for more.
Economic Calendar
The economic calendar is devoid of reports until Thursday, giving Wall Street a much-needed break following the flood of the prior two weeks. On Thursday, weekly initial jobless claims, weekly U.S. petroleum supplies, and the October Treasury budget are on the docket. We end the week on Friday with October's import/export prices, September's trade balance, and the preliminary University of Michigan consumer index for November.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,210,942 call contracts traded on Friday, compared to 740,868 put contracts. The resultant single-session put/call ratio arrived at 0.61, while the 21-day moving average held at 0.61.
**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 strong this morning, as all 10 of the foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 1.14%. In Asia, markets closed mostly higher Monday. AXA Asia Pacific Holdings jumped 32.6% after the company rejected an $11.04 billion Australian dollar cash and equity takeover proposal from AMP, despite the deal having the backing of its French parent, AXA SA. Commonwealth Bank of Australia jumped 4.5% after it reported a first-quarter cash profit of A$1.4 billion. Orica, the world's largest explosives maker, added 5.6% after posting a modest rise in fiscal year earnings and providing a positive outlook for the current year. Hong Kong stocks extended gains and Shanghai shares rebounded from early losses after Moody's Investors Service raised China's sovereign ratings outlook to positive from stable, saying credit fundamentals are likely to continue to improve as the country emerges from the global recession. Moody's also lifted the outlook on Hong Kong government bond ratings to positive from stable. Shares of major Chinese banks extended gains after the ratings agency also lifted their credit outlook to positive from stable.
Turning to Europe, shares climbed on Monday, with miners strengthening after a meeting of the world's top finance ministers, and as investors also welcomed earnings and deal moves in the insurance sector. Miners led the advance in Europe, as a weaker dollar boosted metal futures, with shares of Rio Tinto up 3.6% and BHP Billiton shares up 3%. At the G20 meeting over the weekend, finance ministers and central bankers from the world's 20 most powerful economies agreed to keep massive stimulus measures in place until the global economic recovery strengthens. Insurance firms were also performing well in Europe with German insurance giant Allianz shares up 4.7%. It reported a third-quarter net profit of 1.32 billion euros, beating market expectations thanks to strong performances in its life insurance and asset-management operations. Reinsurer Hannover Re climbed 2.5% after it was upgraded to "neutral" from "underweight" at JPMorgan, with the broker saying that its bear case argument of increasing retentions has played out.
The U.S. Dollar Index (DX/Y) remained virtually flat on Friday, adding about 0.06% to trade at 75.79. Meanwhile, the dollar edged lower against the yen and traded nearly flat against the euro, after a surprise jump in the U.S. jobless rate to 10.2% confirmed views that the Federal Reserve will remain accommodative with monetary policy. Against this backdrop, the euro slipped to $1.48, while the dollar dropped to 89.88 yen.
The futures contract on the 30-year bond (US/1 – 118'14) added 7/32 on Friday. Treasurys crept higher on the session, as short-term securities banked a weekly gain in the wake of a weaker-than-expected government jobs report. The addition of a larger-than-anticipated rise in the unemployment rate send traders back to the relative safe haven of the bond market. However, longer-dated Treasurys pared some of the gains as traders pondered a record $81 billion in notes and bonds to be sold next week.
Commodity Corner
Crude futures were punished by Friday's unemployment report, as traders once again found themselves fretting over the persistently weak jobs market. With an increasing number of U.S. consumers out of work, commodity players quickly priced in their expectations for lackluster fuel demand. By the close, crude oil for December delivery shed $2.19, or 2.75%, to finish at $77.43 per barrel.
On the other hand, the downbeat jobs data helped propel gold futures to yet another fresh record high on Friday. The most active December gold contract added $6.40 to finish at $1,095.70 per ounce, after earlier tagging a session high of $1,101.90 per ounce -- an all-time peak for a most active contract. On a weekly basis, gold futures added nearly 6%.
Unusual Put and Call Activity:
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