An unwanted earnings package from FedEx helps keep bulls grounded in Wednesday’s session. As of 11:45 ET the SP-500 (SPY) is up narrowly by 0.05% and just above key 1400 in a still sketchy start to September.
Reduced and below-views guidance from air and freight giant FedEx (FDX) for its upcoming first quarter is weighing in on bulls in the broader market. The economic bellwether announced it now expects earnings of $1.37 - $1.43 versus Street estimates of $1.55 per share and a prior forecast of $1.45 - $1.60 citing general weakness in the global economy constraining revenue growth at FedEx Express.
In light of today’s warning, Wells Fargo cut shares of FDX to “Market Perform” from “Outperform.” Intrday, FDX is off 1.55%, while peers UPS (UPS) and Atlas Air (AAWW) are each off by roughly 2%.
Reports from across both ponds have been mixed Wednesday. A pledge for unlimited, sterilized buying of bonds by the ECB found a few wallets in the premarket, though Germany’s Christian Democratic Party head Michael Fuchs warned excessive buying could prove inflationary. On the other hand and more agreeable, he also noted Greece could be assisted by the Eurozone if “she does her homework.”
On the officially-sanctioned front, PMI data showed an in-line reading for Germany, but France’s Services PMI resulted in a miss and move into contraction territory to 49.2, while the broader Eurozone Services PMI came up light as well with a reading of 47.2 compared to estimates of 47.5.
China’s HSBC Services PMI missed estimates of 53.1 and fell to a one year low of 52.0. Further, the country’s finance minister is curbing his enthusiasm regarding China’s export strength, while Oz’s Q2 GDP fell shy of a forecasted 0.7% increase with a result of 0.6% due in part to weaker demand for commodities from China.
Stateside, revised productivity data showed a much stronger-than-expected increase of 2.2% compared to a prior reading of 1.6% and estimates of 1.8%. Unit labor costs also proved decent for Corporate America as first quarter data was downwardly-revised to an increase of 1.5% versus a prior reading of 1.7%, though one-tenth of a percent above consensus views of 1.4%.
In those intertwined markets of influence, the EUR/USD is snapping back by 0.55% and reclaiming the bulk of Tuesday’s pullback from fresh closing highs within its uptrend channel. Eurozone ETFs Spain (EWP), Italy (EWI) and Germany (EWG) are showing modest mixed results. However, the Global X FTSE Greece 20 ETF (GREK) is surging by more than 5% as it breaks out of its 2.5 month lateral consolidation.
The 20-Yr (TLT) and US Dollar (UUP) are quiet and under minor pressure. Technically, TLT is establishing a second session of inside candle testing of its 50SMA for support, while the UUP sets up in a more bearish three day consolidation pattern below its key longer-term 200SMA.
The US Oil Fund (USO) is off by a narrow 0.15%. Technically, shares remain caught below key daily and weekly chart moving average resistance and prior price support near a 50% retracement from its March highs to June Lows.
And the VIX ($VIX) is off nearly 4% at 17.25% and a mostly unsurprising more confident price break in investor sentiment. Tuesday’s highs of nearly 19% put the euphemistically called Fear Gauge in a testing position of one-month highs while setting a 10SMA differential of 14% within one point of its 200SMA and the well-watched 20% level.
Elsewhere and on the corporate front, after striking fresh lows Tuesday, shares of Facebook (FB) are bouncing higher by 5.5% on a pair of pleasing catalysts. Analysts at Jeffries initiated shares with a “Buy” rating and price target of $30. The social networking giant also announced today that CEO Mark Zuckerberg has not adopted a Rule 10b5-1 Plan and has informed the proper channels he has no intention to sell any of his 444 million Class B stake in Facebook in the next 12 months.
In earnings news, fiber play Finisar (FNSR) is up 1.85% and reversing early weakness to move narrowly back through its 50SMA despite falling missing top and bottom-line views and issuing below views guidance. Shares took a substantial technical hit last week of nearly 9.5% on the heels of Ciena’s (CIEN) earnings fallout.
And shares of Dollar General (DG) are worth less than a buck of increased shareholder value to bulls shying away from a test of 50SMA this morning. Intraday, DG is up 0.65 or 1.30% and reversing its opening highs after besting profit views by $0.05, reaffirming its FY13 sales guidance and beefing up its buyback program by $500 million.
Finally and in those sometimes accurate heat-seeking option markets, “Is Coke it?” Based on today’s spread print in Coke’s (KO) January 37.5 call and 33.75 put on 31,400 contracts it’s tough to say. With larger open interest topping today's activity the position could be closing down an existing risk reversal or collar or represent a fresh bullish or bearish stake. The one thing we can say the Coke spread ‘isn’t’ and with fairly strong confidence, is a strangle. That observation appears true due to flat implied readings which otherwise would be expected to have moved given the strategy's large vega component.
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.
