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Futures point to slightly lower open despite positive earnings report from Hewlett-Packard (HPQ). Data on producer prices was also released this morning, showing a record decline due to the sharp drop in energy prices. Same-store sales results continue to show weakness with retailers cutting forecasts with Home Depot (HD) the latest retailer to report. Overall, the bulls are looking for the major market indices to stay above support, although a retest could be in store before a rally occurs.

Corporate America has been cutting its forecast for earnings and this has provided a reason for traders to sell. However, HPQ has bucked this trend, providing a positive outlook. HP stated that it sees fourth quarter revenues at $33.6 billion with earnings of $1.03 per share. This is above analyst estimates for revenues of $33.1 billion and earnings of $1.00 per share. The company also raised its guidance for its fiscal first quarter and the full year in 2009. HP has done a good job of cutting costs and its bottom line is benefiting from its share repurchase plan. Whatever the reason, traders are impressed with the stock rising more than 15 percent in pre-market trading.

Shares of Yahoo (YHOO) are also seeing gains this morning after CEO Jerry Yang announced he would step down. This news has many shareholders thinking Microsoft (MSFT) will possibly step up to the plate and make another swing at buying YHOO. YHOO shares are up nearly 12 percent to a price just below $12.

HD shares are also higher this morning with the home-improvement retailer besting earnings estimates by 7-cents a share. However, like most retailers, HD lowered its outlook. Nonetheless, the stock is rising, making up for losses on Monday following a disappointing report from Lowe’s (LOW). HD shares are trading near $20.60 in pre-market action with the 52-week range from $17.05 to $31.08.

In economic news, the ICSC-Goldman same-store sales report remained weak with year on year results showing a decline of 0.1 percent. The Redbook report was even weaker with year on year declines coming in at 0.9 percent. The fact is that lower gasoline prices are being offset by job losses and concerns about the economy going forward.

At least the slowdown in the economy has erased concerns about inflation. In fact, the producer price index [PPI] fell 2.8 percent in October when estimates were for a decline of 1.7 percent. However, the core rate, which excludes food and energy prices, rose 0.4 percent, 3-tenths more than expected. Overall, the year on year gain in producer prices came in at 5.1 percent, down from an 8.7 percent growth rate in September.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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