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MORNING WATCH, June 17


By Frederic Ruffy, Optionetics.com
6/17/2004 6:00:00 AM


Early indications point to a softer open on Wall Street Thursday morning. Roughly forty-five minutes before the opening bell, stock index futures hinted at modest losses for the Dow Jones Industrial Average ($INDU), the Nasdaq Composite Index ($COMPQ), and the S&P 500 Index ($SPX). Investors are reacting to the latest round of earnings and economic news, and are now awaiting a series of other reports due out later today.



Economic news is in focus early Thursday after a monthly report on producer prices rose more than expected. One hour before the start of trading, the Labor Department reported that its Producer Price Index [PPI] surged .8% during the month of May, and at its fastest rate since March 2003. Excluding food and energy, the so-called core PPI rose .3%. Economists were expecting the report to show gains of .6% and .2%.

Separately, the Labor Department said weekly jobless claims fell by 15,000 to 336,000 in the latest period. Economists were looking for a drop to only 340,000. The four- week moving average of claims, which is a less volatile measure, dipped to 343,250 from 346,000. Taken together the higher than expected PPI and the strong jobs numbers put a bit of pressure on stock index futures early Thursday, as it also means that the Federal Reserve will begin to raise interest rates to cool the economy and curb inflationary pressures.

In today's other economic news, the Conference Board releases its leading economic indicators index at 10:00 a.m. ET. Economists expect the report to show a .4% increase in the most recent period. The final bit of data for the week is due out 12:00 p.m. when the Philadelphia Federal Reserve releases its index of business activity. The numbers are expected to show an increase to 25.0 in June from 23.8 in May

In stock news, Ford Motor (F) may trade higher after the automaker raised it quarterly and full year earnings forecast. However, Jabil Circuit (JBL) is expected to trade lower after the company posted solid earnings results for the third quarter, but warned that results might fall short of expectations in the fourth.

Shares of Adobe Systems (ADBE) are expected to trade actively ahead of its earnings report. The software maker releases results after the close of trading today. Red Hat (RHAT), Solectron (SLR), and Carnival (CCL) also release quarterly reports on Thursday.

Meanwhile, trading volumes in the options market will increase during the next two days as the market moves into the “quadruple witch” expiration—which is a quarterly expiration when futures, futures options, stock options, and single stock futures expire. Today will be the last day to trade many index options contracts. Tomorrow will be the last opportunity to trade any remaining contracts. Therefore, trading volumes will increase as traders use the next two days to close out or roll forward any positions that involve June 2004 futures or options contracts.




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