Stocks are set to open slightly higher after a surge on Tuesday. Yesterday, the Dow Jones Industrial Average ($INDU) added 92 points and the Nasdaq Composite Index ($COMPQ) gained 25, or 1.5%. One hour before the start of trading Wednesday, index futures were pointing to a 22-point gain in the Dow and a 5-point advance in the Nasdaq. Stock index futures strengthened following upbeat news on the economic front, but the gains were limited due to somewhat disappointing earnings reports from Walmart Stores (WMT) and Applied Materials (AMAT).
Walmart Stores released its latest earnings results before the start of trading Wednesday. The world’s largest retailer said net income increased 21% to $2.44 billion from $2.02 billion a year ago. Earnings increased 14.7% to $2.28 billion, or 52 cents a share, which met analyst expectations. However, second quarter sales were a bit lighter than expected. Sales rose to $62.6 billion from $56.3 billion a year ago, but that was shy of analyst estimates of $63.4 billion. WMT was trading at $58.05 immediately following the report, and down from yesterday’s close of $58.80.
Shares of Applied Material were also sliding after the semiconductor capital equipment maker said it suffered a loss of 2 cents a share in the fiscal third quarter, compared to a 7-cent profit a year ago. Sales fell 25%. In addition, the company warned the earnings in the current quarter would be below analyst estimates. Applied Materials said it expects to earn 4 to 5 cents a share on sales of $1.09 billion, compared to estimates of $1.20 billion and 6 cents a share.
On the economic front, the news was a bit more upbeat. Retail sales were better than expected. According to figures released early Wednesday, retail sales rose 1.4% in July, which was better than economist estimates for a 1.0% gain. Excluding autos, retail sales rose .8%. On that basis, they were expected to increase by .5%. Meanwhile, data out early Wednesday showed import prices rising .5% and that news should confirm that the Federal Reserve has effectively put the nail in the coffin of deflation. Later today, investors will get the latest numbers on business inventories, which are expected to decline by .1% in the latest month. Tomorrow is also a busy day on the economic front with key data on jobless claims and the Producer Price Index [PPI].
Technically, stocks are approaching an important resistance area. The S&P 500 Index ($SPX) finished the day yesterday near 990 and right at its 50-day moving average [MA]. In addition, the S&P 500 also has resistance near the 1,000 area. Meanwhile, the CBOE Volatility Index ($VIX), which has in the past predicted market tops when it dropped below 20, fell 1.21 points to 20.21 yesterday. Therefore, any further market strength is likely to push the SPX towards resistance near 1,000 and send the VIX below the key 20 level that has signaled market tops in the past.
Frederic Ruffy Senior Writer & Index Strategist Optionetics.com ~ Your Options Education Site
Market Data 
Markets 
AI
