Wednesday saw the bulls put a stop to Wall Street’s four-day gloom-and-doom, as bargain-hunters scooped up beaten-down stocks after the latest gloomy reports on the slowing economy triggered an early triple-digit selloff that briefly pushed the Dow below 10000.
Bright and early this morning, the stage was set for another sell-off. Fresh on the heels of Tuesday's gruesome existing-home sales plunge, traders learned today that new home sales plummeted to an all-time low in July. Sales for the month sank 12.4% to a seasonally adjusted snail's pace of 276,000, falling well short of economists' expectations. And as if that weren't enough negative news for one morning, U.S. durable goods orders improved by a slimmer-than-forecast 0.3% in July.
Stocks spiraled lower right out of the gate as traders panned this latest round of downbeat data... but a strange thing happened between lunchtime and the closing bell. After four straight days of losses, stocks finally dipped low enough to lure in some bargain hunters. By the time 3 p.m. rolled around, the major market indexes were cautiously exploring positive ground -- and the bulls proved their mettle by keeping stocks afloat right through the close.
“The recovery is still in an incline, but not as steep as we had hoped,” stated NYSE trader Ben Willis of Sunrise Securities. “We’ve been down for four straight days…I fully anticipated (the bounce). The housing numbers shouldn’t have been a surprise.”
Results for Major Market Indexes
The Dow Jones Industrial Average (DJIA – 10,060.06) finished with a small gain of 19.61 points, or 0.20%.
The S&P 500 Index (SPX – 1,055.33) had a small gain also, on the day, of 3.46 points, or 0.33%.
The Nasdaq Composite (COMP – 2,141.54) fared the better of the three major indexes, with a gain of 17.78 points, or 0.84%.
The Russell 2000 Index of smaller companies had a very good gain of 9.28 points, or 1.56%, to settle at 604.87.
Most of the Dow's 30 components made headway by the closing bell, led by Pfizer (PFE) and Home Depot (HD) . The index's worst performers were United Technologies (UTX) and Caterpillar (CAT) .
The turnaround on Wall Street was led by the consumer discretionary sector, which jumped 1% on the day. Despite the dreary economic headlines, stocks like Sears (SHLD) and Starbucks (SBUX) closed solidly higher.
Despite the worse-than-expected sales figures, shares of home builders like DR Horton (DHI) and Hovnanian (HOV) rallied. The housing group was boosted by luxury home builder Toll Brothers (TOL) , which posted its first quarterly profit since 2007.
Lennar Corp., (LEN) KB Home (KBH) and Toll Brothers (TOL) all gained more than 3%.
"[It's] a sign that they had priced in the bad news, and this has allowed the rest of the market to come back," said Peter Boockvar, chief market strategist with Miller Taback & Co.
But the same news that lifted homebuilding stocks battered the financial sector, with big names like Wells Fargo (WFC) and Citigroup (C) edging lower.
"[Banks] have given back the entire year of gains because they are holding mortgage-related debt," said Boockvar. "House prices have taken a leg down because of this data, and if a person pays less for a home, this hurts a bank's balance sheet."
Financials also cut losses after the KBW bank index .BKX briefly hit 42.70, its lowest level so far in 2010. The index finished down 0.4 percent at 43.41; it has lost 6 percent in the last week.
The Nasdaq fared better than the other two main indexes, boosted by Apple Inc (AAPL), which gained 1.2 percent to $242.89. Apple said it will hold a news event at the start of September, raising expectations it will unveil revamped iPod digital media players.
About 8.14 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's estimated daily average of 9.65 billion.
Advancing stocks outnumbered declining ones on the NYSE by 1,832 to 1,167, while on the Nasdaq, advancers beat decliners 1,676 to 977.
Notes of Interest….
• The Dow Jones Industrial Average’s (DJIA) strengthened its grip on the key 10,000 level, ending the day on a slim gain of 19.6 points, or 0.2%.
• The S&P 500 Index’s (SPX) eleventh-hour momentum fizzled out in the 1,060 neighborhood, near the site of Tuesday's bearish gap. The S&P's 14-day moving average fell below its 50-day moving average, and with both on the downside it suggested a negative short-term trend. The S&P could test July's intraday lows around 1,010 and see the index facing resistance at 1,060.
• The Nasdaq Composite’s (COMP), the tech-rich index, is still trading well below its 10-day moving average.
• Crude futures celebrated the end of a five-day losing streak, with black gold muscling its way modestly higher by the close. Oil took a dive in early trading after a government report showed weekly increases to crude and gasoline supplies, but it seems that traders have already priced in their concerns about bloated inventories. Like stocks, oil futures seemed to benefit from being short-term oversold; the contract touched an intraday nadir of $70.76 this morning, which was its lowest price since June 8. However, a late-day buying push propelled crude oil for October delivery to a daily gain of 89 cents, or 1.2%, at $72.52 per barrel.
• Gold futures tagged an eight-week peak today. The disappointing reports on housing and durable goods orders sparked continued interest in gold as a relative safe haven -- especially in light of early weakness in the stock market. Gold for December delivery tacked on a respectable $7.90, or 0.6%, to finish at $1,241.30 per ounce, marking its highest close since June 30.
• Bonds: The yield on the 10-year note rose to 2.54%, bouncing off a 19-month low of 2.49% on Tuesday.
Durable Goods Orders
New orders for long-lasting U.S. manufactured goods rose far less than expected in July and, excluding transportation equipment, posted their largest decline in 1-1/2 years, according to a gov ernment report on Wednesday that pointed to a slowdown in manufacturing.
The Commerce Department said durable goods orders rose 0.3 percent after a revised 0.1 percent fall in June. Excluding transportation, orders dropped 3.8 percent -- the biggest fall since January 2009 -- after rising 0.2 percent in June.
Analysts polled by Reuters had forecast orders increasing 2.8 percent last month from June's previously reported 1.2 percent fall. Orders excluding transportation had been forecast to increase 0.5 percent from a previously reported 0.9 percent fall.
New Home Sales
New U.S. single-family home sales unexpectedly fell in July to set their slowest pace on record while prices were the lowest in more than 6-1/2 years, government data showed on Wednesday.
The Commerce Department said sales dropped 12.4 percent to a 276,000 unit annual rate, the lowest since the series started in 1963, from a downwardly revised 315,000 units in June.
Analysts polled by Reuters had forecast new home sales unchanged at a 330,000 unit pace last month.
"What we are seeing is the downside of government intervention. It had fanned expectations of a market bottom when in fact, it created a false bottom," said Tom Porcelli, a senior economist at RBC Capital Markets in New York.
"We expect home sales to stay at this remarkably low range with remarkably high unemployment. There is also little demand for lending."
U.S. stock indexes initially fell on the report before recovering losses. U.S. Treasury debt prices added to gains, while U.S. dollar erased gains against the yen.
The housing market has wobbled following the end of a popular home tax credit in April, which had boosted sales and construction. The sector was at the center of the longest and deepest recession since Great Depression and its continued weakness is holding back the broader economic recovery.
Data on Tuesday showed sales of previously owned homes dropped in July to their slowest pace in 15 years. While the end of the tax credit is distorting the housing data, a 9.5 percent unemployment rate is also worsening the situation.
The weak sales pace last month resulted in the supply of new homes available for sale spiking to 9.1 months' worth from 8.0 months' worth in June.
The number of new homes on the market was unchanged at 210,000 units. The median sale price for a new home fell last month from June to $204,000, the lowest since December 2003.
Separately, demand for home loans was moderate last week despite very low mortgage rates.
Mortgage purchase and refinancing applications rose by less than 1.0 percent in the first week of August, even as 30-year loan rates fell to 4.57 percent -- the lowest in 20 years -- the Mortgage Bankers Association said.
Late Tuesday, Standard & Poor slashed Ireland's sovereign debt rating to double-A-minus due to the massive cost of bailing out the nation's banks.
In currencies: The dollar fell against the euro and the British pound, but firmed versus the Japanese yen.
Japanese shares fell again after the yen hit a new 15-year high against the dollar and a nine-year high against the euro. The high yen hurts profitability at major Japanese exporters. Japan's Nikkei stock average fell 1.7 percent.
European Markets slumped. The CAC 40 in France sank 1%, Britain's FTSE 100 lost 0.9%, while the DAX in Germany ended 0.6% lower.
Asian Markets: ended lower. Japan's benchmark Nikkei index dropped 1.7%, hitting a 16-month low. The Hang Seng in Hong Kong shed 0.1%, and the Shanghai Composite sank more than 2%.
Company Earnings Reports
Toll Brothers Inc (TOL)
Toll Brothers (TOL) posted its first quarterly profit since 2007 and surprised analysts by saying it broke even on a non-GAAP basis. Wall Street had been bracing for a loss of 14 cents a share. Revenue slid 2% to $454.2 million, beating estimates for a decline to $393.43 million. Deliveries rose 1% to 803 units, while net signed contracts dropped by 11% to $400.1 million.
American Eagle Outfitters (AEO)
American Eagle’s (AEO) net income tumbled 66% last quarter, but the retailer’s non-GAAP EPS of 13 cents matched Wall Street’s view. Sales slid 0.7% to $651.5 million, coming in just shy of expectations for $646.6 million. American Eagle said it sees third-quarter profits of 23 cents to 26 cents, compared with estimates for 26 cents.
Raven Industries Inc (RAVN)
Industrial manufacturer Raven Industries Inc (RAVN) posted better-than-expected quarterly results, helped by demand for its plastic sheeting products, sending its shares up as much as 8 percent.
Sales at the engineered films segment, which makes rugged reinforced plastic sheets for the construction, energy and agriculture markets and accounts for a third of the total revenue, grew 74 percent to $26.1 million.
For the second quarter ended July 31, Raven Industries reported net income of $8.4 million, or 46 cents a share, compared with $6.2 million, or 34 cents a share, a year earlier.
Sales at the company, which competes with Spartech Corporation (SEH.N), rose about 29 percent to $73.2 million in the quarter. Analysts on average were expecting earnings of 39 cents a share on revenue of $65.2 million, according to Thomson Reuters.
Shares of the Sioux Falls, South Dakota-based company touched a high of $33.87 in early trade Wednesday, but pared some gains and were up 5 percent at $33.00 on Nasdaq.
They have almost doubled since hitting a lifetime low of $15.37 in March 2009.
OSI Systems Inc (OSIS)
Electronic components maker OSI Systems Inc (OSIS) posted better-than-expected quarterly results, helped by strong demand for its security scanners and medical monitoring devices from security and healthcare industries. Revenue at the security gro up, which makes inspection equipment used in airport screening and accounts for about half of the company's revenue, surged 29 percent, driven by the U.S. government's renewed focus on aviation security.
For the April-June quarter, the company's net income surged to its highest in three years to $8.0 million, or 42 cents a share. In the same period last year, it earned $4.3 million, or 24 cents a share.
Excluding restructuring and other nonrecurring charges, the company earned 47 cents a share.
Revenue rose 19 percent to $165.3 million. Revenue at the healthcare segment, which makes patient monitoring, diagnostic cardiology, and anesthesia systems, increased 15 percent.
Analysts on average had expected earnings of 43 cents a share, before special items, on revenue of $162.3 million, according to Thomson Reuters.
Shares of the Hawthorne, California-based company were up 4 percent at $28.15 Wednesday morning on Nasdaq after touching a high of 28.73. They have fallen 17 percent since touching a year-high of $32.58 in January.
Shares of nearest rival American Science and Engineering (ASEI), which makes explosive detection snanners, have lost 15 percent in the same period.
Coldwater Creek (CWTR)
Coldwater Creek (CWTR) swung to an unexpected profit of 2 cents a share, solidly topping estimates for a loss of 4 cents a share. The women’s apparel retailer said its revenue jumped 14% to $253.5 million, compared with forecasts from analysts for $233.77 million. Coldwater Creek also backed its 2010 EPS guidance of 8 cents to 12 cents that would exceed the Street’s view.
TiVo Inc, (TIVO)
TiVo Inc, (TIVO) the digital video recorder maker, reported a wider quarterly loss on Wednesday as revenue fell in the company's service and technology businesses.
Alviso, California-based company posted a second-quarter net loss of $15.3 million, or 13 cents a share, compared with a loss of $2.7 million, or 3 cents a share, a year earlier.
Revenue fell 10.4 percent to $51.6 million in the quarter ended on July 31 from $57.6 million a year earlier.
TiVo pioneered digital TV recording software but has posted six straight quarters of losses as cable companies have crowded its market with cheaper recording boxes.
Shares of TiVo closed up 1.5 percent at $8.47 on Nasdaq. The stock is down about 20 percent this year.
JDS Uniphase's (JDSU)
JDS Uniphase's (JDSU) shares lost 3.6% after the company said it expects to make revenue of $410 million to $425 million for its fiscal first quarter, excluding one-time items. The mid-point of the range is slightly above the $415.4 million expected by analysts polled by Thomson Reuters -- a potential disappointment for investors looking for a faster growth.
For its fourth quarter, JDS Uniphase said it made $1.5 million, or a penny a share, on revenue of $390.9 million. Excluding one-time items, JDS earned 15 cents a share, on $398.1 million. Analysts surveyed by FactSet Research had forecast JDS to earn 13 cents a share on $395 million in sales. Guess (GES)
Guess (GES) shares fell 7.8% in moderate volume after the jeans maker reported a profit of $66.8 million, or 72 cents a share, on revenue of $577.1 million. During the year-ago quarter, Guess earned 64 cents a share on revenue of $522.4 million.
The jeans maker was forecast to earn 68 cents a share on $574 million in sales for its second fiscal quarter.
Jo-Ann Stores Inc. (JAS)
Shares of Jo-Ann Stores Inc. (JAS) were flat after climbing almost 5% in after-hours trading. The fabric and craft retailer reported a second-quarter profit of $5.4 million, or 20 cents a share, on $439.3 million in sales.
During last year's second quarter, Jo-Ann reported a loss of 13 cents a share on $419.4 million in revenue. Analysts had forecast Jo-Ann to break even on a per-share basis and report sales of $439.3 million for its second quarter.
Jo-Ann also said it expects to earn between $3.20 and $3.35 a share for its 2011 fiscal year. Analysts were looking for $3.13 a share, according to FactSet Research.
Company News and Movements:
• 3Par (PAR) said it has entered into talks with Hewlett-Packard (HPQ) in the wake of H-P’s $1.6 billion takeover offer that trumped Dell’s (DELL) bid. 3Par said it believes H-P’s offer will likely lead to a superior bid and that if it endorses the H-P package, it will give Dell three days to match.
Apple Inc. (AAPL)
Apple Inc. (AAPL) is reportedly in talks with the likes of News Corp. (NWS) and Walt Disney (DIS) to feature network TV shows on iTunes, according to sources cited by Reuters. Under the terms of the rumored negotiations, iTunes users would be able to rent TV shows for 99 cents each for a 48-hour period through AAPL's iTunes store. None of the parties involved, however, were willing to comment on the speculation.
Separately, research firm iSuppli reported this morning that AAPL's iPad tablet computer will likely dominate the tablet market through 2012, thanks to the company's enormous leg up in terms of content and applications. Analyst Rhoda Alexander of iSuppli stated that "the growing suite of iPad-specific applications" is one of many "serious obstacles" facing AAPL's would-be tablet rivals.
AAPL is down 0.7% ahead of the open, giving away a portion of its year-to-date rally of 13.8%. The stock dropped below recently key support at $240 amid Tuesday's sell-off, which could spell technical trouble for the shares going forward.
Short-term options players already seem well-prepared for additional downside from AAPL. Among the equity's weekly options expiring this Friday, the 240 strike is home to peak put open interest of 6,808 contracts; meanwhile, in the September series, there are more than 71,100 out-of-the-money puts open at the 230 and 220 strikes.
Delta Air Lines, Inc. (DAL)
Delta Air Lines, Inc. (DAL) said this morning it plans to buy back up to $300 million of debt in the form of pass-through certificates and notes. Initially, Delta is looking to repurchase three series of pass-through certificates from Northwest Airlines, of which there are $340.2 million outstanding. The offer price for these notes ranges between a 6% discount and 5% premium to face value.
Beyond the debt it inherited from Northwest, Delta's also planning a Dutch auction for holders of a 2007 series of pass-through certificates and 11.75% senior second-lien notes set to mature in 2015. The airline says its newly announced plans are "part of its ongoing efforts to reduce the company's debt levels."
The news hasn't been sufficient to prop up DAL shares, which are down 0.9% in pre-market trading. The stock breached the psychologically significant $10 level amid Tuesday's downturn, and is now set to test support at its 20-month moving average.
However, front-month put players are likely cheering the stock's recent weakness. DAL's September 12 strike is home to peak put open interest of 13,342 contracts, all of which are comfortably in the money.
Intuitive Surgical, Inc. (ISRG)
Intuitive Surgical, Inc. (ISRG) garnered an upbeat analyst recommendation this morning, as Wells Fargo raised its rating on the equity to "outperform" from "market perform." Most brokerage firms maintain a less enthusiastic opinion of ISRG, with Zacks tallying eight "hold" ratings, compared to just three "buy" or better recommendations.
ISRG is up 1.4% on the heels of this bullish endorsement, with the stock attempting to bounce back from its year-to-date drop of 11.3%. The shares have tumbled dramatically since peaking near $394 in mid-April, and are now staring up at potentially staunch resistance from the $300 region.
Accordingly, options players have adopted a downbeat bias toward the maker of surgical robots. ISRG's 10-day International Securities Exchange (ISE) put/call volume ratio of 1.15 rests in the 93rd annual percentile, suggesting that traders on this exchange have purchased bearish bets over bullish at a faster pace only 7% of the time during the past year.
The shares of Corning (GLW) have edged nearly 1% higher this morning despite overall weakness in the broad market. The stock is enjoying an upgrade from Oppenheimer to "outperform" on belief that shares are undervalued and poised for recovery. The brokerage firm stated that LCD supply chain issues could last another one to three months, but noted prior inventory corrections indicate that the time to buy GLW could be now, "when fear of downward revisions is peaking and when potential upside scenarios lie forgotten in the weeds." Upside scenarios include Gorilla Glass product, an accelerated TV replacement cycle and solar, the firm said.
Options players are betting against a rally in the shares. The International Securities Exchange has reported 1.5 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 89% of all those taken during the past 12 months, indicating a growing optimism.
Meanwhile, the put/call open interest ratio for (GLW) comes in at 0.64, which is higher than 76% of all those taken during the past 12 months. In other words, short-term options players have been more pessimistically aligned toward the shares only 24% of the time during the past 12 months.
On the other hand, Wall Street is smitten with the shares of GLW. Zacks reports that 14 of the 18 analysts following GLW rate it a "buy" or better. Any downgrades from this group could spell trouble for the shares should they fail to perform to the heightened expectations of analysts.
American Eagle Outfitters (AEO)
American Eagle Outfitters (AEO) announced before the open this morning that its fiscal second-quarter earnings tumbled 66% on wider losses related to its failed Martin + Osa chain.
For the quarter, AEO banked a profit of $9.7 million, or 5 cents per share, down from $28.6 million, or 14 cents per share, a year earlier. The latest period included losses of 8 cents per share related to the closing of Martin + Osa, which was targeted toward older consumers. Total sales rose 0.8% to $652 million, amid 9% growth online and a 1% drop in same-store sales. Gross margin fell to 36.8% from 39.3%.
Further pressuring profit was a 25% jump in overhead costs.
Inventory was up 1% on a cost-per-square-foot basis from a year earlier.
The retailer reported that same-store sales are up about 1% this month, in line with company views for the back-to-school selling season. For the current quarter, the company expects earnings of 23 cents to 26 cents per share, while analysts recently projected 26 cents per share.
Technically speaking, the shares of AEO are down more than 26% since the beginning of the year. After creating a double top in the 20 region earlier this year, the stock has declined under pressure from its 10-week and 20-week moving averages.
Meanwhile, options players remain confident that the stock is poised to rebound. The International Securities Exchange (ISE) reports that nearly 59 calls were purchased to open for every one put purchased to open during the past 10 trading sessions. This ratio of calls to puts is higher than 94% of all those taken during the past year, indicating that traders have rarely scooped up calls at a faster pace than puts during the past 12 months.
What's more, the ISE and Chicago Board Options Exchange (CBOE) report that AEO's 50-day call/put volume ratio comes in at 8.91, which is higher than 78% of all those taken during the past 12 months.
On the other hand, not everyone is quite so optimistic toward the shares. According to Zacks, the stock has earned 11 "buy" ratings, 11 "holds," and two "sells."
The following companies had some impressive options movement :-
Casey's General Stores (CASY)
Options players jumped on Casey's General Stores Inc. (CASY) on Tuesday, as more than 27,700 contracts crossed the tape. This surge in volume was more than nine times the stock's average daily trading volume of 2,922 contracts, according to data from WhatsTrading.com. Overall, roughly 50.5% of the volume changed hands on the call side.
Meanwhile, the put/call open interest ratio (SOIR) for CASY comes in at 1.17, as put open interest outnumbers call open interest among options slated to expire in less than three months. This ratio of puts to calls is higher than 90% of the readings taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the shares only 10% of the time during the past 12 months.
Short sellers are also betting against the security. While the number of CASY shares sold short, decreased by 5% during the past month, more than 3.8 million shares remain sold short. This accumulation of bearish bets accounts for more than 7% of the company's total float. An unwinding of these pessimistic positions could add significant buying pressure to the shares.
Technically speaking, the shares of CASY are up more than 17% since the beginning of the year. The stock has stair-stepped higher along its 10-week and 20-week moving averages since putting in a low in the 18 region in March 2009.
Starbucks Corporation (SBUX)
Starbucks Corporation (SBUX) has been trending slowly -- but steadily -- downward for the past few weeks, breaking beneath its formerly supportive 10-week, 20-week, and 50-week moving averages in the process. The coffee company is now docked at $23.05.
Unsurprisingly, puts were the options of choice on Tuesday, with 6,146 of these bearish bets changing hands -- triple SBUX's expected single-session put volume of just 1,732 contracts.
The October 24 put was the day's most active strike, with an even 1,000 contracts crossing the tape. Roughly 83% of these puts changed hands at the ask price, and open interest increased by roughly 300 contracts overnight, indicating that fresh positions were added at this strike. With SBUX trading right around $23, these puts are already in the money.
Meanwhile, in the front-month series, 759 contracts traded on the September 23 put -- the bulk of which crossed the tape at the ask price, suggesting they were likely bought. Open interest jumped by roughly 300 contracts overnight, confirming buy-to-open activity at this at-the-money strike.
For the record, peak put open interest for the September series can be found at the 25 strike. Given SBUX's recent slump, these puts are now comfortably in the money.
Nokia Corp. (NOK) and Intel (INTC) on Tuesday announced that their venture to create a new cellphone software, seen as crucial for Nokia to re-assert itself as the leading producer of high-end handsets, had made a solid start. Nokia controls 40% of the smartphone market with its Symbian software, but has lost its leading position among the most expensive models to the new rivals. Nokia hopes the new MeeGo software, which is being developed with chipmaker Intel, will help it in its battle against Apple's (AAPL) iPhone and Google's (GOOG) Android at the top end of the cellphone market.
The companies unveiled the first version of the software to developers over the summer. Nokia's chief technology officer said there would be more to come, but did not say when the market might see the final product.
Nokia was the center of some heavy options trading on Tuesday, as more than 25,400 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 11,100 contracts, according to data from WhatsTrading.com. In addition, traders were feeling optimistic, as 81% of the volume changed hands on the call side.
What's more, the SOIR for NOK comes in at 0.53, as call open interest nearly doubles put open interest among options slated to expire in less than three months. This ratio of puts to calls is lower than 72% of all those taken during the past 12 months. In other words, short-term options players have been more optimistically aligned toward the shares only 28% of the time during the past 12 months.
On the other hand, Wall Street has some serious doubts about the security. According to Zacks, the stock has earned five "strong buys," 21 "holds," and five "sells." Considering the stock's lackluster technical performance, there is still ample room for potential downgrades that could weigh on the equity.
Technically speaking, the shares of NOK are down more than 31% since the beginning of the year. The equity has been in a steep decline since reaching a peak around 42 in November 2007, guided lower by resistance at its 10-week and 20-week moving averages. NOK is now testing support in the 8 region.
Walt Disney (DIS)
Apple is moving closer to an agreement with The Walt Disney Co. (DIS) to offer 99-cent rentals of ABC television shows through the iTunes store, according to reports in The Wall Street Journal. Apple is reportedly pushing for agreements with several media companies for content -- which would give customers a 48-hour window to view an iTunes version of a show -- before the new television season starts in September, according to people briefed on Apple's proposal. Apple has been pitching the rental service to CBS Corp., NBC Universal, News Corp., and Viacom Inc., the sources said.
Options trading was heavy on DIS on Tuesday, as more than 26,600 contracts changed hands. This surge in volume was more than double the stock's average daily trading volume of 12,304 contracts, according to data from WhatsTrading.com. What's more, 64% of the volume changed hands on the call side.
On the other hand, options players have shown a preference for puts on the International Securities Exchange (ISE). During the past 10 trading sessions, 1.5 puts have been purchased to open for every one call purchased to open. This ratio of puts to calls is higher than 78% of all those taken during the past 12 months, pointing to a rising skepticism.
In addition, the SOIR for DIS comes in at 1.02, as put open interest outnumbers call open interest among options slated to expire in less than three months. This ratio is higher than 76% of all those taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the shares only 24% of the time during the past 52 weeks.
Wall Street also has its doubts about the shares. According to Zacks, the stock has earned 13 "buy" ratings, 13 "holds," and two "strong sells."
From a technical perspective, the shares of DIS are flat on the year. The equity staged an impressive rally along its 10-week and 20-week moving averages from April 2009 through April 2010. However, the stock has since entered into a choppy sideways channel between resistance at the 36 level and support in the 31 region.
• Bullish flow detected in A Power Energy Generation Systems (APWR), with 5083 calls trading, or 8x the recent average daily call volume in the name.
• Bullish flow detected in VistaPrint (VPRT), with 8868 calls trading, or 4x the recent average daily call volume in the name.
• Bullish flow detected in OmniVision Technologies (OVTI), with 15073 calls trading, or 4x the recent average daily call volume in the name.
• Increasing volume is also being seen in Micron Technology (MU), Interactive Brokers (IBKR), and Cadence Design Systems (CDNS).
On Tuesday, stocks sank after a 27% plunge in existing home sales fueled worries about an economic slowdown, sending the Dow 134 points lower on the day.
Last week, the Dow and S&P ended down for a second straight week as disappointing economic reports slammed investor confidence.
"It's been a brutal few weeks," said Phil Orlando, chief equity market strategist at Federated Investors. "Stocks are extraordinarily cheap and oversold at this point, but the question is, are they sufficiently cheap to discount the economic weakness?"
The early selloff left the Dow below the closely-10000 level, and came amid mounting evidence that the U.S. economic recovery is slowing. The benchmark index on Tuesday tumbled 134 points to its lowest level since July 7 after a new report revealed existing home sales took a record plunge last month to the weakest pace in 15 months.
“Obviously it’s a little dark out there in the sense of the recovery We have a broader base of issues outside of housing in that consumers and business are not spending enough to sustain the recovery,” said Frank Davis, director of sales and trading at LEK Securities.
The back-and-forth trading pattern has been typical of the volatility seen on the market in recent weeks, which has been exacerbated by very low trading volumes as investors take summer vacations.
"We rally, we sell off. We rally, we sell off," said Sandy Mehta, principal and chief investment officer of Value Investment Principals. "It's just the nature of the market right now."
"We'll have to figure how much is priced in with the carnage we've already done to the three major indexes," said Art Hogan, chief market strategist at Jefferies & Co.
Technical factors played more of a role than economic fundamentals as data showed a deteriorating pace of recovery. "Overall, this is still a very careful market," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. "Until we see a package of decidedly positive data, this market is going to be vulnerable."
Given the markets' poor performance over the past week, some traders weren't surprised to see the bounce back.
“Now that we’ve got that (data) behind us, we’ve gotten a little bit of a bid back in the market as we get some bargain-hunting” at favorable technical levels, said Paul Nolte, managing director at Dearborn Partners.
Warren Buffet, George Soros and Carl Icahn are buying stocks and that's a bullish sign, according to James Altucher, Wealth Adviser contributor, who says there's plenty to learn from their picks.
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