Earnings Reports for Bank Of America ($BAC), Microsoft ($MSFT) , Johnson & Johnson ($JNJ) & GE ($GE) Coming Soon

Stocks opened higher and are holding the gains into midday Thursday. The S&P 500 is up 12.46 points to 2164.89 and four points from session highs.

Rallies across most of European equities markets helped to set the table for the morning strength on Wall Street after the Brits again defied expectations and left rates unchanged. Most observers had expected the Bank of England to slash rates by 25 basis points.

The event triggered sharp gains in the British pound. The euro followed suit and, as the dollar weakened, so did investor appetite for gold and Treasury bonds. While the yellow metal dropped $13 to $1330.50, the yield on the benchmark ten-year Treasury, which moves opposite to the price of the ten-year, jumped to two week highs of 1.53%.

Crude oil added 70 cents to $45.45.

On Wall Street, Financials (XLF) are leading the advance as bond yields rise and after JP Morgan (JPM) delivered results that topped expectations. Basic Materials (XLB), Industrials (XLI), and Tech (XLK) are higher as well. Utilities (XLU) are seeing notable weakness.

CBOE Volatility Index (VIX) is below 13 and trading in the option market reflects the bullish underlying tone, with roughly 5.1 million calls and 3.2 million puts traded across the exchanges through the first two hours. Projected volume for Thursday is 17.6 million contracts and 5% greater than the one-month daily average.

SPDR 500 Trust (SPY) Aug 222 calls, SPY Jul 29th 217.5 calls, and SPY Aug 219 calls are the most actives. In fact, nine of the ten most active options through midday Thursday are call options on the SPDR 500 Trust.

The flurry of activity in SPY calls is not entirely surprising given that the S&P 500 is forging new highs this week. At the same time, however, it reflects relatively high levels of bullish sentiment that we have not seen in front of other earnings reporting periods. The normal pattern has been a bit of cautious trading, and sometimes some pre-earnings “jitters” ahead of the actual numbers.

Instead, high levels of call activity and VIX below 13 suggest a growing sense of bullishness, and possibly some complacency, ahead of a barrage of earnings results. While many of the big banks will report Friday morning, the pace of reports really picks up next week and includes earnings from a number of Dow stocks including Bank of America (BAC), Microsoft (MSFT), J&J (JNJ), and GE.

See Tradespoon’s Stock Forecast on Dow Jones Industrial Average ETF (DIA)

Tradespoon’s Stock Forecast on Dow Jones Industrial Average ETF (DIA)

The chart (above) of the Dow Jones Industrial Average ETF shows the gap move in shares to new record highs today. Sometimes called the Diamonds, this fund holds the same names as the Dow Jones Industrials. It has now rallied 8% since June 27th. Suffice it to say, those gains will likely be tested next week as the second quarter profit numbers are released.

And let’s not forget that the latest one-week 3.4% rally in the Dow started with strong payroll numbers Friday morning. Retail sales, inflation, consumer sentiment, and industrial production numbers Friday morning could therefore hold market moving potential ahead of the weekend as well.