The fear of missing out is replaced by the more panicked variety as Friday the 13th ushers in scary reports from around the globe. As of 11:45 ET the SP-500 (SPY) is off 0.80% as bears reclaim a bit of lost ground above 1370 and the 50SMA.
On the heels of back-to-back sessions of strong bargain-hunting off even more muscular, fearfully overdone lows and investor woes, bulls are correcting some of that behavior. In the spotlight, Friday’s market pressure is headed by Thursday’s trader gossip of a soft landing for China turning into more convinced speculations of a hard one in-the-making.
Rumors flying around global trading desks yesterday of a very specific and surprise 9.0% increase for Q1 Chinese GDP data have proven misplaced with a result of 8.1%. The gain falls short of consensus views of 8.4%, last quarter’s 8.9% growth rate and marks a three year low for the country’s economic output.
In a close second and weighing in on investors, Debt PIIGS constituent Spain is seeing its yields turn higher after a brief respite Thursday and back up to increasingly agitated levels near 5.93% for the country’s 10-Yr bond, while its Spanish CDS hit a record high of 492 basis points. Overnight, it was announced net borrowing from the ECB by the country’s banks spiked to 228.0B euros during March from 152.0B in February.
Stateside and on the officially-sanctioned economic front, Michigan consumer sentiment data for April fell shy of forecasts. Preliminary results showed a modest dip to 75.7 from March’s 76.2 versus rather flat estimates of 76.1. Separately, total CPI data for March rose by an in-line 0.3%.
Elsewhere, a trio of corporate confessionals from heavyweights Google (GOOG), JPMorgan (JPM) and Wells Fargo (WFC) managed to please on paper with bottom-line beats, but are failing to meet the approval of today’s shareholders.
For its part, internet search giant Google is faring the worst with a loss of 3.25%. The company managed a profit beat of $0.44 on in-line revenue growth of 24.5%. In tow though and apparently causing a bit of a backlash is the company’s plan to split shares with a new class of non-voting stock as to keep the voting power of founders Larry Page and Sergey Brin intact.
On the option side, earnings expectations as determined by Google’s Weeklys straddle / IV pricing have proven richly-priced with its implied stock reaction estimate of roughly 6% to 8% depending on the method used.
In the end or at least intraday with a couple hours officially left on the clock; a mostly flat to only slightly under pressure open followed by better, but still “not-goog-enough” downside trending of 3.25% in shares has last night’s 650 straddle shedding a full one-half of its $40.00 value as it now trades as a deep put worth about $20.00 per contract.
Separately, shares of WFC and JPM are off 2.0% and 2.75% respectively. By the numbers, Wells Fargo’s three cent profit beat, better-than-forecast 5.0% sales and JP’s $0.16 bottom-line topper and 5.9% top line surprise are apparently not living up to trader expectations.
Technically speaking, the action is a bit more of a surprise as both WFC and JPM also maintain attractive-looking weekly bases known to entice and cajole bulls into action. “BOO-yah! I suppose, as it is Friday the 13th.”
In those other and often intertwined markets of influence, the iShares Bull ETF (AAPL) is off 2.25%. Technically, AAPL is finally showing a small bit of respect for gravity as the stock breaks its 10SMA in a decisive way for the first time in five months.
A leading 2.50% gain for silver (SLV) established during Thursday’s expectant China-based commodity boom is being forcefully retracted with a loss of 2.80%. A market that’s said to be always right is apparently recalibrating to that affect after digesting last night’s GDP miss and tied at-the-hip threat on demand for base industrial metals.
Finally and in those sometimes accurate heat-seeking option markets, after a neutralized two day move down into its 10SMA, the CBOE Volatility Index ($VIX) is up by an uninterested, non-theta collecting and “risk off” 10% to 18.65%. With levels more or less around their historical mean and 6% above the short-term mean-reverting average; we’ll take that as a sign it’s better to be safe than sorry on a kind of spooked Friday and great six month run for market bulls.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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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.
