CBOE Volatility Index (.VIX) is up .66 to 25.85 and heading to session highs after the Chicago PMI unexpectedly drops to 46.1 in August, down from 50.0 month before and well below economist estimates of 52.0.

Stocks are set to open higher after a report on economic growth showed the economy contracting less than previously estimated in the second quarter. Forty-five minutes before the start of trading in New York, stock index futures indicate that the Dow Jones Industrial Average might add 40 or 50 points at the open.

The US economy contracted at a .7 percent annual rate in the second quarter, according to the latest report on Gross Domestic Product [GDP]. The decline was less than the 1 percent previously reported and also better than the 1.2 percent economists had expected.

However, a separate report from ADP showed the US economy losing 254,000 private sector jobs in September, which was more than the 200,000 economists had expected. August numbers were revised to -277,000, from an initial reading of 298,000.

Stock index futures edged higher, as the GDP report seemed to overshadow the jobs data. Bonds are under water. The benchmark ten-year Treasury is down 4/32nd and now yields 3.305 percent.

The dollar fell .39 to 89.73 on the yen. The euro gained .0025 to 1.4606 on the buck.

A report on manufacturing comes into focus at 9:45 eastern time. The Chicago Purchasing Manager’s Index is expected to improve to 52.00 in August, up from 50 the month before.

End-of-quarter “window dressing” is also a factor today, as portfolio managers square the books and make their portfolios look good for their customers and potential investors.

Some of the energy, metal and mining stocks might see early strength after crude oil gained 77 cents to $67.48 a barrel and gold added $8.40 to $1,002.50 an ounce. Weekly oil inventory numbers are due out at 10:30 eastern time.

Among the individual stocks to watch Tuesday, Nike (NKE) is up almost 6 percent after reporting quarterly earnings of $1.04 per share, which beat Street estimates by a nickel. The stock was also upgraded to Buy at Goldman.

CIT is under pressure after the Wall Street Journal reported that the company might seek a restructuring that would wipe out common shares. Jabil Ciruit (JBL) gained 8 percent after reporting quarterly earnings of 16 cents per share, double analyst estimates. Novartis (NVS) is up after Citi analysts upgraded the stock to Buy.

iShares Japan Fund (EWJ) is down 19 cents to $9.91 and a lot of the options volume surfaced early when one investor sold the Jan10 $8 straddle for an average of $2.075, 27500X. It was tied to a block of shares at $9.95, probably a block of 2.16 million that traded at 11:06. This likely closes out a position opened in late April when the same straddle traded 20000X on the 27th and 28th, also tied to shares.

Two similar spreads in Las Vegas Sands (LVS) and MGM in recent trade. LVS is down 2 cents to $17.72 and a strategist sold the Oct – Nov $20 put spread for 85 cents, 5000X, which appears to be a roll out of the Oct 20s. MGM is down 18 cents to $12.52 and the Oct – Nov 15 put spread is sold for 45 cents, 10000X, which also appears to be a roll. So, in both cases, it appears that the strategist is left holding short ITM puts, possibly betting that LVS will move beyond $20 and MGM above $15 by the Nov expiration.

*Scanning all single-stocks subject to 2500 contracts minimum call or put volume

Moody’s (MCO) is up $2.27 to $21.05 and attempting recover after an 8-day 27.6 percent swoon. Options trading remains brisk, with another 27K puts and 21K calls changed hands today. Some players are likely selling puts to close positions as the stock bounces. Looks like calls are being sold. For example, 4,291 Oct 19 calls traded and 79% hitting bid-side. Implied vols (average) easing back to 76, from about 79.1; but still higher than the readings below 50 in mid-September before the WSJ ran a story saying an ex-Moody’s analyst claimed that the credit rating agency is still using inflated ratings.

TCF Financial (TCB) shares are off 4% to $13.30 and big 10,000 contract purchase of the Nov. $12.50 puts at the 95c ask. Prior open interest was just 50 contracts so this should translate into new position (and is probably a roll out of the October 12.5 puts, which also traded 10000X.) Yesterday TCF was received a downgrade after it announced the purchase of a Financial National Capital, a unit of Fidelity National (FNF), for $50 million and assumption of assumption of debt.

Nokia (NOK) is down 40 cents to $14.84 after the threat of Vodaphone’s announced iPhone in Europe raised concerns about competitive pressures for Nokia. Recent options trades include a sweep of 10K Oct 15 calls at the offer for 65 cents. 13.65K now traded, with 86 percent hitting ask-side. Meanwhile, puts are active as well. Shortly after the calls were swept, two sweeps (of 7,453 contacts traded and 3,420) Oct 15 puts traded ask-side for 85 and 90 cents. 18K puts and 18K calls now traded on Nokia, or about 4X the expected for midday.

*Scanning all single-stocks subject to 2500 contracts minimum call or put volume