Schaeffer's Midday Options Update Features Circuit City Stores, Honeywell International, Wal-Mart Stores, Seagate Technology, Pegasus Communications.

Business Editors

CINCINNATI--(BUSINESS WIRE)--June 3, 2004

Today's Schaeffer's Midday Options Update Features Circuit City Stores (NYSE:CC), Honeywell International (NYSE:HON), Wal-Mart Stores (NYSE:WMT), Seagate Technology (NYSE:STX), Pegasus Communications (NASDAQ:PGTV). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/addinfo.

Schaeffer's Midday Options Update

Sagging corporate news was balanced by the deluge of economic data released today. One key note that appears to have investors squirming today is the lower-than-expected increase in crude production from OPEC. Cartel members agreed to immediately hike their production by two million barrels per day, agreeing to add another 500,000 barrels in August. Analysts were expecting an immediate increase of 2.5 million barrels per Saudi Arabia's recommendation over the past couple of days. The July crude futures contract is inching its way higher today, and was last up 19 cents to $40.15.

Below is a quick run down of today's economic reports for those who may have gotten lost in the flurry:

-- Initial claims for the past week fell by 6,000 to 339,000,

slightly above the 335,000 expected by economists. The more

reliable four-week average rose by 4,250 to 341,000.

-- Non-farm productivity increased 3.8 percent in the first

quarter, revised from the earlier estimate of 3.5 percent. The

revision was in line with expectations of economists. Unit

labor costs, however, were revised to a 1.7-percent gain. Over

the past four quarters, productivity has increased by 5.5

percent, the matching the fastest gains in 31 years.

-- Factory orders fell a sharper-than-expected 1.7 percent in

April. Economists were anticipating a 1.4-percent decline.

Additionally, March's factory orders were revised to

5.0-percent gain from the initially reported 4.3-percent gain.

April's durable goods orders were revised downward to a

3.2-percent decline from last week's estimated 2.9-percent

drop.

-- Finally, the Institute of Supply Management non-manufacturing

index fell to 65.2 percent from a record 68.4 in April,

indicative of a slowing rate of expansion. The pullback was

slightly larger than economists had expected.

Moving into the corporate world, Dow component Honeywell International (NYSE: HON) agreed to acquire the remaining 70 percent of Genesis Cable Systems that it doesn't already own. The terms of the deal were not disclosed, and it is still subject to regulatory and shareholder approvals.

Elsewhere within the Dow, Wal-Mart Stores (NYSE: WMT) reported same-store sales that rose 5.9 percent over the previous quarter. Total sales increased 13 percent to $21.43 billion. The retailing giant said that it expects June same-store sales to come in at the low end of its forecasted range of four to six percent due primarily to calendar shifts.

For a more in depth look at the recent wave of retail data check out today's Details on Retails - May Blooms: http://www.schaeffersresearch.com/wire?ID=10296

Rounding out today's corporate news coverage, Seagate Technology (NYSE: STX) said it would take a fourth-quarter charge of $50 million due to the termination of almost 2,900 jobs as part of a cost-cutting plan. Meanwhile, Pegasus Communications (NASDAQ: PGTV) plunged nearly 17 percent after it receiving a notice "purporting" to terminate its exclusive right to distribute DirecTV's satellite television service in rural areas. PGTV officials referred to the notice as "strong arm tactics," stating that it intended to "vigorously protect our rights."

At 1:15 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10274.8) is up 0.11 percent and the S&P 500 Index (SPX - 1124.29) is lower by 0.06 percent. The Nasdaq Composite (COMP - 1980.7) is down 0.42 percent. At 1:16 p.m. in the options pits, 1,090,318 calls and 1,003,565 puts traded for a composite put/call ratio across all five exchanges of 0.92. The CBOE put/call ratio for equity options weighed in at 1.13.

Circuit City Stores (NYSE: CC) continues to be a favorite among options speculators. With the firm scheduled to release sales data tomorrow and earnings on June 15, investors continue to pile into bullish call options. In today's trading, the security's June 12.50 call has seen volume of 5,132 contracts, with open interest at this peak front-month call option resting at 30,333. Indicative of this elevated level of optimism from the options crowd, CC's Schaeffer's put/call open interest ratio sits at 0.17, as calls more than quadruple puts in the front three months of options. What's more, this ratio sits below 90 percent of all readings taken over the past year.

Not all investors agree with this bullish stance, however. Short sellers increased their positions by a hefty 15 percent over the past month. Short interest for CC now stands at its highest level in the past 1.5 years at more than 14 million shares. This collection of bearish bets would take nearly five days to cover at the stock's average daily trading volume and could spark a short-covering rally should either of CC's upcoming reports impress investors. Wall Street is also dour on the equity's future. According to Zacks, 19 (or 82 percent) of the 23 analysts covering the shares rate them a "hold" or worse. As with the short-interest crowd, positive sales data or a better-than-expected earnings report could prod a few brokerage upgrades that would add lift to CC's position.

The overwhelming levels of pessimism toward CC are rather unusual given the stock's technical performance. The security has nearly doubled in value over the past year, rising along the steadfast support of its 10-month moving average. Additionally, CC has shaken off recent technical weakness to once again regain the support of its 10-week and 20-week moving averages. Finally, the shares have even managed to best the broader market, as represented by the SPX, on a relative-strength basis since the beginning of the year. One note of concern exists, as the shares have rallied into long-term overhead resistance in the 12.50 area. Since this is also the site of potential options-related resistance in the form of more than 35,000 open call positions, CC could have some trouble overcoming this level. However, call activity above this strike is light, so a solid breach of resistance here could signal a significant move to the upside.

As mentioned above, CC is slated to slip into the earnings confessional on June 15, with the Street expecting a loss of nine cents per share from the firm. Since the company's earnings performance has been relatively bleak (CC has missed the consensus estimate by an average of 14 percent over the past four periods), an upside surprise here could well send the shares soaring into a series of new yearly highs.

Click the following link to see the Weekly Chart of CC since April 2003 with 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=10297.

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About Schaeffer's Investment Research (www.SchaeffersResearch.com)

Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com, is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method.