Midday Action: November 17
November 17, 2009
A slightly less popular carry trade and strong gains from Monday provide incentive for profit-taking in Tuesday's first half. As of 10:55 ET the SP-500 (SPY) is off a mild 0.45% and putting in a "good enough" test of 1100 for government workers and maybe traders.
In corporate confessionals, market heavyweight Home Depot (HD) is under a bit of pressure best chalked up to ambitious profit-taking or forward-looking discounting of a less pleasant nature. The home improvement chain and Dow component beat on both its top and bottom [$0.41 vs. $0.36 est.] lines and boosted guidance. Nonetheless, shares are off a fairly stiff 4.15% at 26.50 and breaking the institutional 50-day moving average.
In once hot market arenas, "solar fabricator" Canadian Solar (CSIQ) is following in the sizzling footsteps of alt energy shops Yingli Energy (YGE) and JA Solar (JASO) which reported last week. The company posted earnings of $0.69 per share, topping Street views by a full $0.15. Revenues also came in slightly stronger than expected with sales of $213M versus estimates of $211M but still off from year-ago levels by 15.6%.
At the same time, management did provide an overall bullish outlook of strong growth in its newer markets such as Canada, Japan and China and sees good demand from existing hotspots like Germany, Italy, US and Czech Republic. Intraday, CSIQ is pulling back from fresh intermediate highs of 21.05 to 20 and up 1.50% on the session.
In other less pleasant confessionals, alternative energy peer and apparent "accounting fabricator" Sunpower (SPWRA) is under pressure after an internal review identified unsubstantiated accounting entries from its Philippine manufacturing facilities.
The disclosure from the Cypress Semiconductor (CY) spin-off focuses on cost of goods sold errors and turns a recent ten cent earnings beat into an earnings miss of approximately three to four cents per share. Intraday and likely weighing in CSIQ's earlier stock flare up, SPWRA is fizzling by nearly 19% at 22.10.
Elsewhere and in the very much intertwined US Dollar, some strength for the float behind the risk-averse carry trade has a few bulls dumping relative strength leadership of late in closely-linked commodity-based assets, picks and shovels and currencies.
Remarks during Bernanke's testimony that the Fed is committed to low rates but still watching the Greenback may be providing some incentive in Tuesday's slight unwinding of the bull still very much at large. Leading the pressure, global engineering / construction services firm Jacobs Engineering (JEC) is derailed by about 13.50% to 39.40 intraday.
Jacobs saw its Q4 profits fall by a wider-than-expected 31% with an earnings miss of five cents in producing actual results of $0.63 versus views of $0.68 per share. Revenues for the period missed narrowly with sales of $2.60B compared to estimates of $2.64B, but a message of the company seeing its markets "driven by a difficult economic environment and low business confidence" looks to be a major driver behind today's bulldozing.
On the officially-sanctioned economic front and not making an impression with investors one way or the other, producer prices for October came in weaker than expected. PPI data showed an increase of 0.3% and two-tenths below estimates, while the core reading fell by an unexpected 0.6% versus forecasts of an increase of 0.1%. Separately, industrial production came in shy of Street views by three-tenths with an increase of 0.1%.
Finally, in that sometimes accurate heat-seeking option action, shares of "cloud computing" software provider Salesforce.com (CRM) are off about 2.75% at 65 in front of tonight's earnings release. Front month volatility is jumping into the low 100s, as small vega values attempt to factor in real world dollar-priced protection.
Most active on the session are the at-the-money November 65 and 70 calls. Versus shares near 65, the former is changing hands at $2.65 and needs roughly 8.50% to produce a double by expiration and the latter roughly 11%. The observation of this trader is that to keep the computing of risk versus reward grounded and not clouded-spreading the bet with a vertical, at a minimum, makes more sense with fewer cents spent.
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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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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