Midday Action: July 25
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July 25, 2008
Lower oil, better-than-expected economic data and a market in stronger position have the bulls snapping up bargains here and there, but not everywhere. As of 10:50 ET the “SPYder” (SPY) and “Cubes” (QQQQ) are up .37% to 1.23% on moderate trade.
Following the market’s most severe schnitzel of the month, Wall & Main are in a buying kind of mood. Prompting the bargain-hunting and more optimistic effort to close out the week, credit concerns backed up by investors collective imaginations have eased. Separately, after stinging investors with housing and claim data, a trifecta of “bte” government reports on durable goods, new homes and shockingly enough, consumer confidence out of Michigan, have enjoyed “prop” status for bulls.
Lower oil prices in Friday’s session are being appreciating as a plus for businesses, consumers and market bulls. Intraday, prices of the US Oil Fund (USO) are off 1.65 at 99.80 and hitting fresh one and one-half month lows as TS Dolly fades, the US Dollar ratchets higher against the Euro and visions of slackening demand for a troubled economy take a backseat with traders.
A much lighter plate of mostly decent earnings reports, albeit sporting mixed reactions, might also be aiding bull’s recovery efforts. Transport stocks Burlington (BNI) and YRC Worldwide (YRCW) reported better-than-expected results and reaffirmed guidance, but each is finding shares lower on profit-taking. Similarly, home furnishings, spirits and pleasure provider Fortune Brands (FO) is off fractionally after beating estimates and gapping modestly higher. Currently, with shares off .40 near 57.85, investors appear intent to sharpen up their “short game” in front of the weekend.
One earnings beat that’s done an all-around good job by investors is Arch Coal (ACI). Shares of ACI are up 9% near 55.50 after beating by 14 cents on profits of 78 cents per share. Additionally, sales jumped 31% and above Street views. Management has likely helped as well. The company reaffirmed FY08 guidance that matches estimates of 2.67 and said favorable coal trends continue to set the stage for a long-term up-cycle for the commodity.
In the option market, one spot finding some unusual call-related activity is graphic chip manufacturer NVIDIA (NVDA). The company rattled more than a few shareholders early this month after slashing its Q2 guidance 17% below Street views, as well needing to take a $150 - $200M charge related to defective chips. Three weeks and a bit of lateral digestive work under its belt; heavy action in the September 12.50 OTM calls and to a lesser extent, the August 12.50 calls, suggest some bargain-hunters abound. No specific catalysts are apparent after a quick check, but in days past and during slightly-less troubled times, shares of NVDA have enjoyed rumor mill status.
And finally, now half way through the Noon Balloon and prices in the majors are under a bit of pressure, but mostly where they were at the top of the report. During that period, headlines of WaMu (WM) sliding for a third straight session on liquidity concerns, have filtered into my e-mail. Hmm, “FYI”, which isn’t a stock ticker, seems more important to consider in conjunction with this story. The “slide” in this case is WM dropping a non-eventful 9 cents at 3.94. Sure, the company still rightfully holds market heft, but if that’s as good as it gets on a Friday afternoon; it might be time to swing something else other than stocks.
Disclosure: An intraday and perhaps longer-term swing in NVDA before a 1:00 PDT tee-time is currently held. Have a good weekend.
Chris Tyler
Staff Writer & Options Strategist
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