Market Outlook
Friday, May 7th, 2010
Listed below are the reports on the economic front today:-• The government's nonfarm payrolls report and • The unemployment rate for April. Today will be much quieter on the economic front as only a few companies are to report their quarterly earnings. These are:- • CF Industries Holdings Inc. (CF), • Edison International (EIX) and • PG & E Corp. (PCG). After yesterday’s disappointing results, with a week where the bears have taken full control of the markets, we can only hope that the worst is over. Overseas markets are still suffering today, as nearly all the market indexes are in negative territory. Asian markets are reacting to the 3% fall in U.S. stocks from Thursday trading, and have retreated into the red. European markets, early in trading, have plunged to a three month low with investors dumping shares due to the continued concerns over the severe debt crisis in the euro zone. There should be some relief for the bulls, this morning, when trading on the U.S. markets opens as the Dow Jones Industrial Average (DJIA) futures were trading up by 36 points above fair value, while the broader Standard & Poor's 500 (SPX) futures have risen 4.5 point above fair value. The CBOE Market Volatility Index (VIX) climbed above the 40 level yesterday and has not been there since April, 2009. (Refer to Stock Market News Update for Thursday, May 6th, 2010) Also several companies have announced their quarterly reports which seem to be supporting or surprising analysts’ predictions. These are:-
Kraft Foods (KFT) reported first-quarter net income of $1.88 billion, or $1.16 per share, as sales rose 26% to $11.3 billion. Excluding items, Kraft said it earned 49 cents per share. Analysts were looking for earnings of 43 cents per share on sales of $10.98 billion.
Crocs Inc. (CROX) swung to a first-quarter net income of $5.7 million, or 7 cents per share, from a loss of $22.4 million, or 27 cents per share, a year earlier. Revenue rose 24% to $166.9 million. Analysts had forecast a profit of a penny per share on revenue of $160 million. CROX is up more than 6% in electronic trading.
Activision Blizzard Inc. (ATVI) reported first-quarter earnings, excluding the effects of deferred revenues from certain game sales, were $116 million, or 9 cents per share. Revenue jumped 33% to $1.3 billion, or $714 million excluding the deferred sales. Analysts were expecting earnings of 4 cents per share on revenue of $570 million.Other factors which need to be considered are:- • Gold futures are still doing well, as they are still viewed as a safe-haven for nervous investors, and are now up by $5.70 to $1,203 an ounce in London. • Crude futures have improved this morning to add 85 cents to trade at $77.96 per barrel. • The U.S. Dollar Index is doing well this morning, compared to the yen and the British pound, but the euro is getting a lift due to a shift in global sentiment towards Greece. Now we need to take stock and see if there are going to be any more unforeseen mistakes take place to cause an incredible amount of anxiety in the market place. Equity option activity on the Chicago Board Options Exchange (CBOE) saw 2,811,670 call contracts traded on Wednesday, compared to 1,983,110 put contracts. It is interesting to note that the number of contracts has increased with higher volatility. Trading with caution today, particularly with the EU situation still in the forefront, and the concern that overseas markets are in the red, is advised. With so many negative events occurring at the moment, the “fear” factor, the CBOE Market Volatility Index (VIX), will certainly still be prominent.
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