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MORNING WATCH, June 24
By Frederic Ruffy, Optionetics.com
6/24/2004 6:00:00 AM

http://www.optionetics.com/articles/article_full.asp?idNo=10607

Stocks are seen opening mixed or modestly lower following two days of gains. AT&T (T) will drag on the Dow Jones Industrial Average ($INDU) after the company issued an earnings warning for 2004. Weaker-than-expected data is also seen weighing on investor sentiment. Consequently, after rising more than 100 points Tuesday and Wednesday, index futures on the Dow were off ten points early Thursday. Futures on the Nasdaq ($COMPQ) were little changed.

Shares of AT&T were recently down $1.13 to $15.28 after the phone company warned that profits and sales in 2004 will be below expectations due to weak pricing and declining orders. AT&T said late Wednesday that profits this year will total $1 to $1.4 billion, well below earlier estimates of $2.5 billion. Revenues are now expected to reach $30.5 billion, and shy of expectations of as much as $32 billion.

Software stocks may see some strength after Banc of America Securities upgraded Microsoft (MSFT) from “neutral” to “buy”. However, shares of Micron Technology (MU) may weigh on the semiconductor sector after the chipmaker said sales in the quarter ended June 3 totaled $1.12 billion, and below analyst estimates of $1.15 billion.

Shares of Career Education (CECO) are set to resume their recent decline. The stock has been falling on news that the Securities and Exchange Commission [SEC] has launched a formal investigation into the company amid allegations of inflated enrollment numbers and improperly recognized revenue figures. The stock fell $2.11 to $42.00 a share early Thursday.

In economic news, the latest weekly jobless claims numbers were in-line with economist estimates. One hour before the start of trading, the Labor Department said that jobless claims rose by 13,000 to 349,000. At the same time, however, a report on durable goods showed a large unexpected drop. According to statistics from the Commerce Department, durable goods fell 1.6% in May. Excluding transportation, orders dropped .7%. Economists were looking for a gain of 1.3%. The news of a surprise drop in durable goods during the month of May seemed to trigger a modest drop in stock index futures before the opening bell early Thursday. In other economic news, new home sales figures released at 10:00 a.m. ET.

As stocks rose yesterday, traders in the options market seemed to turn a bit more bullish. The Dow rallied 84 points and the Nasdaq rose above the 2,000 level on Wednesday. At the same time, 2.77 million calls traded across the six options exchanges, compared to 1.94 million puts. The total put-to-call ratio eased down to .71, compared to a ten-day average of .74. In addition, the CBOE Volatility Index ($VIX) slipped .33 to finish the day below 14 for the first time in more than seven years.


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