Sector Investing

[ReturntoSender]

MORNING WATCH, Apr. 7
By Frederic Ruffy, Optionetics.com
4/7/2005 6:30 AM EST

http://optionetics.com/articles/article_full.asp?idNo=12204

Stocks are set to open flat to modestly lower Thursday morning after a report showed weekly jobless claims falling less than expected during the latest period and after Wal-mart (WMT) said quarterly earnings would come in at the low end of expectations. Approximately forty-five minutes before the start of trading in New York, stock index futures on both the Dow Jones Industrial Average ($INDU) and the Nasdaq ($COMPQ) were moving modestly lower.

Shares of Wal-mart are set to trade lower after the world’s largest retailer warned that first quarter earnings might fall short of analyst forecasts. Wal-mart said that cold wet weather in various parts of the country have hurt sales of seasonal items such as lawn and garden products. The company now expects earnings at the low end of the 56 to 58 cents a share range. Analysts were looking for 57 cents.

Rising crude oil prices also weighed on sentiment. Prices rose on concern about rising demand moving into the busy summer driving season. Crude oil was recently up 80 cents to $56.60 a barrel.

In economic news, jobless claims fell by 16,000 in the week ended April 2, statistics from the Labor Department showed Thursday morning. Economists were looking for the report to show a decline to 330,000. Therefore, the report was not far from expectations. Stock index futures showed little reaction to the news. Two more pieces of economic data are due out this week. At 10:00 a.m. ET, a report on wholesale inventories is expected to show a .7% increase in February. Data on consumer credit is released this afternoon. No economic data is scheduled for Friday.



Alcoa (AA) unofficially kicked off the first quarter earnings-reporting season Wednesday afternoon with a solid report. The first Dow stock to report profits in the latest period said that profits were boosted by strong industrial demand and higher metals prices. Earnings per share came in at 40 cents, and a penny better than expected. Dell Computer (DELL) is set to open higher after the world’s largest computer maker reaffirmed first quarter earnings guidance at its two-day analyst meeting that began yesterday.

Overall, with no major economic news moving the markets, trading has been quiet this week and the trend appears set to continue on Thursday. The Dow has risen during the past three trading sessions, but the average daily move has been less than thirty points. Meanwhile, the low volatility has helped push the Dow Jones Volatility Index ($VXD) down from Monday’s high of 14.00 to its current levels of 12.18. Therefore, after a bit more volatility towards the end of the first quarter, it appears that the market has reverted back to the low volatility trend, which makes short-term trading much more difficult or challenging.



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