Midday Action: August 8
August 8, 2008
Bulls continue to snap up Thursday’s worries as further relief-at-the-pump takes center stage. As of 10:50 ET the “SPYder” (SPY) and “Cubes” (QQQQ) are each up a not-so-rough 1.15% on mixed levels of investor confidence.
Wall & Main are cheering another precipitous decline in commodity prices spearheaded by Black Gold sinking to fresh three month-plus lows. Intraday, the USO Oil Fund (USO) is off 2.50 points near 94 per share. Confirmation of Thursday’s technical breakout in the US Dollar from a multi-month trading range, secondary reports of a still-burning Turkish pipeline and (I suppose) oil bulls taking a Turkish bath; are the primary catalysts behind Friday’s most delightful of developments.
As for the US Greenback, word on The Street has the spirited action being triggered by cautious comments from the ECB regarding the global economy. The report has eased or shifted focus from a stateside slowdown and caused investors to rearrange currency relationships and equity portfolios to reflect a more universal concern over waning growth prospects.
Elsewhere, mixed reports are taking a backseat to the fore-mentioned market drivers. However, following Thursday’s consumer (WMT, TGT) and financial-driven (AIG) price anxieties, bulls desiring a bit more on their TGIF menu have at least one appetizer to nosh on. A mixed report on productivity and labor costs found investors reacting favorably this morning.
Production data registered a somewhat disappointing three-tenths of a percent below views at 2.2% and below the Q1’s 2.4%. However, analysts cite the result as not being a genuine surprise and mostly in-line with a sluggish economy. On the other hand, much weaker unit labor costs did give investors reason to celebrate as the 1.3% increase is well-below the prior two quarters 2.5% and 4.5% jumps respectively.
Outside the broader averages, individual disappointments are being treated mostly with kid’s gloves. Merrill (MER) is off fractionally after following in Citi’s (C) footsteps by announcing $12B in auction-rate securities that it will absorb from its “misguided” customer base. Shares of UBS (UBS) are off an equally ding-free amount after announcing a similar $20B agreement to quiet investors.
One financial anchor finding its shares sinking is Fannie Mae (FNM). Much like yesterday’s Freddie report and investor backlash, a larger-than-expected shortfall of $2.3B and a near 90% slashing of its dividend to a nickel per share, has yet to find any “Buy the News” reversals. Intraday, shares of FNM are off .85 at 9.10.
As investors go giddy over a jumping dollar and swooning commodity prices, a further rotation out of related industries (X, MOS, MEE, FSLR, AEM, DBA, UNG, OIH) has found areas like “Old Tech” being a large beneficiary. One component stock of the NASDAQ100 finding fresh high ground and worthy of many growth stock strategists eyeballs and perhaps trading accounts is Adobe (ADBE).
Shares of the business / consumer software maker are up 1.80 near 45. The stock is clearing a cup-shaped base and fractionally above what many call its “proper buy point” of 44.76 and sports very decent stats per the likes of IBD. Friday’s enthusiastic bid appears to have no direct catalysts in the news department; other than leading the sector’s (SWH) decent display of relative strength of late.
Checking the option board in Adobe and nothing unusual really stands out. Premiums are mostly priced around theoretical fair value using both short and longer-term gauges of underlying share movement. Implieds, in of themselves, appear mostly wedged neatly within a two year trading range as well. Hence and in consideration of the market’s nascent bull rally and Adobes overall promising fundamental and technical picture, while I wouldn’t go so far as to say, “Buy, Buy, Buy!”; the interpretation is naked call buying looks promising enough to discuss with one’s broker or wife.
Chris Tyler
Staff Writer & Options Strategist
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