Morning Watch: June 24
June 24, 2009
Investors are readying a bid for Wednesday's Opening Bell courtesy of Oracle, a built-in bargain-hunting platform, strong economic data and a high-profile counter to the World Bank. As of 9:15 ET the "SPYder" (SPY) is up by about 1.00% and the SP-500 cash set to clear the closely-watched 900 level.
Shares of enterprise software giant and NASDAQ heavyweight Oracle (ORCL) are finding interest from bulls following its better-than-expected corporate results. Last night the company posted a two cent profit beat with earnings of $0.46 per share. Sales fell by 5.2% year-over-year but did manage to trump consensus views of $6.47B with actual revenues of $6.86B.
Oracle is also easing some concerns over business spending. The company boosted its Q1 earnings range to $0.31 - $0.33 and above Street estimates currently pegged at $0.30 per share. Additionally and likely inspiring a pre-market "add on" of shareholder value of about 4.50% near 20.65, management's praise for its strong top and bottom-line execution, beefed up gross margins of 51% and $7.7B of generated free cash flow during 2009 certainly doesn't hurt.
Technically, shares of Oracle are in a classic position of leading per the charting tea leaves and looking at the world optimistically through the eyes of a growth stock strategist. Since August 2008, ORCL has been forging a slightly 40% deep cup / "W" pattern on its weekly chart. More recent, the last two plus weeks find shares putting together a handle with a "proper buy point" of 21.30.
On the option side and for bulls, conditions look a bit less terrific for naked call buyers. Today's early indication in shares is a decent start for those strategists and their positioned positive delta counts. However and countering some of those gains, previously bid premiums linked to the uncertainty surrounding the earnings event can be anticipated to find the implied pricing opening 10 to perhaps 12 absolute volatility points lower and near 30% IV.
The pre-market received an additional boost this morning following a much stronger-than-anticipated durable goods report. Results for May usurped estimates by 0.09% with an actual increase of 1.8%. Further, axing out the volatile transportation factor and an increase of 1.1% trumped expectations calling for a decline of 0.05%.
Another slight boon for bulls still in a tourniquet is a fresh and countering report to Monday's grave warning from the World Bank. The Paris-based Organization for Economic Cooperation and Development or "OECD" stated the US economy should bottom out in 2009. However, the group fully expects any recovery will be weak as still fragile markets exist and a rebound on the back of the consumer is unlikely due to the continued hardships of the labor and housing markets.
Separately, later this morning at 10:00 ET, new home sales data will be released. Tuesday's mixed but firming results from the more substantial existing homes report didn't do much to elicit either a "jump or dump" from investors. Analysts expect results to show 360,000 annualized units versus last month's reading of 352,000.
Later this afternoon traders will be digesting the Fed's "Rate Decision", likely courtesy of CNBC, as well as an important 5-Year treasury auction. With regards to the FOMC, the headline non-shocker is the fed funds rate is all but set in stone in remaining at 0.25%. The real potential driver for bulls and bears will be the attached policy statement.
All eyes will be paying attention to any new or improved upon policy tools / quantitative easing programs being implemented by the Fed and whether they're still committed to maintaining low rates in order to revive the economy. Most analysts by and large expect the statement to confirm Wall Street's wish list as core inflation has begun to moderate and "legitimate threats to recovery are still in evidence" according to Morgan Stanley's chief economist Richard Berner.
Chris Tyler
Senior Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
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