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MORNING WATCH, June 22
By Frederic Ruffy, Optionetics.com
6/22/2004 6:00:00 AM

http://www.optionetics.com/articles/article_full.asp?idNo=10592

Stocks are expected to trade mixed early Tuesday, as optimism about corporate earnings is offset by worry over next week’s Federal Reserve meeting. Approximately one hour before the opening bell, stock index futures showed a modest loss for the Dow Jones Industrial Average ($INDU) and a small gain for the Nasdaq Composite Index ($COMPQ).

Tech stocks may rise following upbeat earnings news from Priceline (PCLN) and PalmOne (PLMO). Shares of PalmOne rose sharply in after hours trading Monday after the company raised its first quarter earnings forecast. The company said it now expects to earn 17 cents a share, compared to previous estimates for a breakeven quarter. Meanwhile, Priceline is expected to move higher after the company said that higher bookings of airline tickets and hotel rooms would boost second quarter earnings to 32 cents a share, which was two cents better than previous estimates.

Shares of Seibel Systems (SEBL) may gain after Oracle’s (ORCL) Chief Executive Larry Ellison suggested that he may be interested in acquiring it and other software makers ahead of Oracle's hostile takeover of Peoplesoft (PSFT). Oracle’s Chief Executive made the comments in a videotaped testimony presented during part of the Justice Department’s ongoing efforts to block the PeopleSoft takeover.

Brokerage stocks are in focus today ahead of earnings reports from Goldman Sachs (GS) and Morgan Stanley Dean Witter (MWD). Goldman, the third largest US broker, is expected to report profits of $1.95 a share in the latest quarter. Meanwhile, analysts expect Morgan Stanley, which is the second biggest broker, to report earnings of $1.10 a share. Both firms are slated to report results Tuesday morning.

The economic calendar is empty today and tomorrow, but investors may remain skittish ahead of economic reports later in the week and ahead of the next meeting from the Federal Reserve. The Open Market Committee [FOMC] meets on June 29 and is expected to announce a rate increase on June 30th. Therefore, investors are watching the economic numbers this week in order to determine the extent of the forthcoming rate hikes.

However, no data is scheduled until Thursday, when weekly jobless claims, new home sales, and durable goods numbers are released. The latest Gross Domestic Product [GDP], consumer sentiment, and existing home sales numbers have the potential of moving the markets on Friday.

In the options market, sentiment turned mixed yesterday. The Dow fell 45 points on the day and the CBOE Volatility Index ($VIX) edged up .27 points. However, while the Nasdaq slipped 12.4 points, the Nasdaq Volatility Index ($VXN) edged down .29 to 19.73 and to new all-time lows. Meanwhile, the CBOE put-to-call ratio, which measures the relative levels of put and call activity on the Chicago Board Options Exchange, eased to .83, compared to a ten-day average of .89.



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