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MORNING WATCH, Jan. 23
By Frederic Ruffy, Optionetics.com
1/23/2004 6:00:00 AM
http://www.optionetics.com/articles/article_full.asp?idNo=9778

Early indications pointed to a quiet start to trading Friday morning. One hour before the opening bell, S&P Index futures were up only fractionally. Investors are trying to make sense of the latest earnings results from Microsoft (MSFT). Shares of the software giant initially fell following the report, but were slightly higher shortly before the opening bell. However, with no important economic or earnings news scheduled for the trading day, the market is expected to move relatively quietly ahead of a multitude of data due out early next week.
Shares of Microsoft are expected to trade actively Friday morning after the software giant reported strong quarterly results. The stock initially fell following the report, which showed lower quarterly earnings due to large stock compensation costs. In addition, earnings fell short of the whisper number, or unofficial estimates. Nevertheless, MSFT was showing signs of strength before the opening bell Friday as investors appear to be looking beyond the results from the latest quarter and at the company’s upbeat forward looking comments. Microsoft said that stronger-than-expected personal computer demand would help boost future earnings.
In other stock news, oil service stocks may be active following the latest earnings report from Schlumberger (SLB) and strength in energy prices Friday morning. Schlumberger reported earnings after the bell Thursday and said its profits rose to $177 million, or 30 cents a share, compared to a $2.86 billion, or $4.92, loss in the fourth quarter of last year. The stock traded modestly lower on the news. However, the oil service sector may see strength Friday due to rising energy prices. Crude oil was up 15 cents and back above the $35.00 a barrel level. Natural gas rose 3% and above $6.00 per BTU.
Shares of Oracle (ORCL) and Peoplesoft (PSFT) are expected to trade actively on news that the US Justice Department is interviewing Oracle executives regarding the proposed merger of the two companies. Bank stocks may trade higher following another merger in the sector. Regions Financial (RF) is merging with rival Union Planters (UPC) in a $6 billion stock deal
No economic reports are scheduled for Friday and the earnings calendar is light, but a massive amount of data is due out early next week. During the next few trading days, not only do the profit reports resume in full force, but investors will get a barrage of economic data including reports on new home sales, retail sales, and consumer confidence. In addition, the Federal Reserve Open Market Committee [FOMC] meeting begins Tuesday and concludes Wednesday afternoon.
Therefore, with the possibility of more earnings surprises, an economic calendar chock full of data, and the Federal Reserve back in the spotlight, market volatility may notch up a bit during the next week or so; and the CBOE Volatility Index ($VIX) might also finally move up from its seven-year lows.

Frederic Ruffy
Senior Writer
Optionetics.com ~ Your Options Education Site