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MORNING WATCH, July 9
By Frederic Ruffy, Optionetics.com
7/9/2004 6:00:00 AM

http://www.optionetics.com/articles/article_full.asp?idNo=10691

Stocks may rebound on Friday following an upbeat earnings report from the world’s largest company by market value. So far this week, the Dow Jones Industrial Average ($INDU) has fallen 110 points and the Nasdaq Composite Index ($COMPQ) has suffered a 72-point, or 3.5% loss. However, one hour before the opening bell, stock index futures on the Dow rose 25-points and futures on the Nasdaq gained a little less than ten points.

General Electric (GE) may help to lift the Dow Jones Industrial Average after the company posted better than expected earnings early Friday. The Dow component, and largest company be market value, said earnings in the most recent quarter totaled 38 cents a share, which was one penny better than estimates. General Electric also said that it now expects earnings per share growth of 10 to 15% during the year 2005.

Among other stocks to watch, Yellow Corp. (YELL) may gain after the transportation company said earnings for the quarter ended in June would top estimates. Newmont Mining (NEM) is set to fall after the gold mining company warned that an error would force a restatement of 2002, 2003, and the first quarter 2004 results. Storage Technology (STK) may also open lower after the maker of storage devices said that second quarter profits may be below expectations.

The economic calendar is light today. A report on wholesale trade is due out at 10:00 a.m. ET. The report is expected to show a gain of .5% increase, following a .1% gain during the month of May. Crude oil prices are rising above $40.00 a barrel after the government warned that terrorists may be planning a large scale attack on US soil. Gold also rose, and is now trading above $407.00 a troy ounce.

In the options market, the market decline this week has triggered a bit of defensive activity. For one, the CBOE Volatility Index ($VIX) is reading 16.20, up from 15.20 a week ago. Meanwhile, trading was active yesterday, with 2.1 million puts traded across the six US options exchanges, and 2.2 million calls. The total put-to-call ratio subsequently finished the day reading .90. The ten-day average of this ratio has now edged higher during five of the past six trading sessions and is at a three-week high of .79.

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