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MORNING WATCH, May 28
By Frederic Ruffy, Optionetics.com
5/28/2004 6:15:00 AM

http://www.optionetics.com/articles/article_full.asp?idNo=10467

Stock index futures may face a bit of profit taking Friday morning. The S&P 500 Index ($SPX) has risen during eight of the past nine trading sessions and added 3.4% during that time. Early Friday, indications pointed to a weaker open, however. With no major news events to help guide trading, some investors may be sidelined ahead of reports on manufacturing and consumer sentiment due out later today. In addition, some investors may take some money off of the table on this last trading day during the month of May and ahead of the three-day Memorial Day holiday weekend.

Economic data is in focus Friday morning. A government report out one hour before the bell showed US consumer spending rising during the month of April. According to the Commerce Department, spending increased by .3%, after rising at a revised .5% rate in March. Personal incomes rose .6%. The numbers were in-line to expectations.

In addition, the personal spending report also pointed to slowing inflation. To be specific, the price index of the report rose just .1% in April, which follows a .3% increase in March. Overall, investors appeared to react favorably to the news because stock index futures began climbing after the numbers were released.

Reports on manufacturing and consumer confidence will also impact trading today. At roughly 9:45 a.m. ET, the University of Michigan is expected to say its consumer sentiment index remained unchanged at 94.2 during the month of May. Fifteen minutes later, the National Association of Purchasing Manager’s is expected to report that its Chicago Index edged down to 61 from 63.9 the month before.

Oil prices, which have been a source of conversation among market watchers due to the recent rise to all-time highs, are little changed today. Crude was up 11 cents to $39.55 a barrel, but remains well below the peak levels of $41.85 set last week. Prices may continue to fall in anticipation that the Organization of Petroleum Exporting Countries [OPEC] will decide to raise output at its June 3 meeting in Beirut.

In stock news, semiconductor companies are in focus after Novellus (NVLS) raised its second quarter earnings and sales forecast. According to the chipmaker, profits will be in the 25 to 27 cent range on sales of $335 million. Previously, Novellus said results would be near 20 cents a share on sales of $325 million. The stock rose $1.32 to $32.70 on the news.

Today is also the last trading day of the month. The markets are closed on Friday in observance of Memorial Day. In all, despite concerns about rising oil prices, Iraq, and interest rates, trading has been relatively quiet during the month of May 2004. So far, the S&P 500 Index has risen 12 times, fallen on seven occasions, and added only 14 points. The average daily point move has been just six points. Therefore, the market is not making much movement from one day to the next and this pattern helps explain why the CBOE Volatility Index ($VIX) has dipped back down to only 15.3%.





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