Stock Market News Update
Thursday, 20th May, 2010

I wrote the following a week ago, “What one hand giveth the other hand taketh away!” I think it has now become “Both hands taketh away!”

Thursday saw futures on the Dow Jones Industrial Average (DJIA) go from bad to worse in the morning, swinging from indications of a loss of 92 points to a plunge of nearly 180 points on the open. The latest figure on weekly U.S. jobless claims added more worries to the embattled investor, after the Labor Department reported a 25,000 jump in weekly claims in the week ended May 15. Economists were looking for a drop of about 7,000. Initial claims are now at a monthly high.

DJIA may 20, 2010

The four-week average of initial claims rose by 3,000 to 453,500. Economists were looking for initial claims to drop to a seasonally adjusted 440,000 from last week's reading of 446,000. The bad news didn’t stop here, nor the plunge of the major indexes, with news from the Conference Board stating that April's leading economic indicators fell 0.1% in April, This marked the first monthly decline since March 2009. Analysts were looking for a gain of 0.2%. Trader’s fears were fuelled again by this data which suggests that the domestic economy might not be in a healthy state.

The bulls succumbed to the pressure and with the ongoing turmoil in the euro zone the markets kept spiraling downwards. Meanwhile, the embattled euro reversed early losses to surge higher in afternoon trading, as rumors swirled that the European Central Bank (ECB) may be on the verge of intervening in currency markets.

The Dow Jones Industrial Average (DJIA – 10,068.01) finished with an enormous loss of 376.36 points, or 3.60%. The S&P 500 Index (SPX – 1,071.59) also had a big loss on the day, of 43.46 points, or 3.9%, whilst the Nasdaq Composite (COMP – 2204.01) fared the worst, losing 94.36 points, or 4.11%.

Notes of Interest….

• The Dow Jones Industrial Average (DJIA) ended on the wrong side of its 200-day moving average for the first time since July 14, 2009. All 30 Dow components finished the day, in the red.

• The S&P 500 Index (SPX) finished beneath support at its own 200-day moving average for the first time in nearly a year.

• The Nasdaq Composite (COMP) found a foothold atop the round-number 2,200 level, which hasn't been breached on a daily closing basis since mid-February.

• Oil futures fell in line with equities today, as traders fled riskier assets. Ongoing concerns about the sovereign debt situation in Europe, as well as an uninspiring supply of U.S. economic data, oil futures were forsaken. Bearish inventory data also applied pressure to oil futures, with supplies at the Cushing, Okla. delivery point for physical crude touching a record-high 37.9 million barrels. By the close, crude oil for June delivery shed $1.86, or 2.7%, to settle at $68.01 per barrel.

• Gold for June delivery wrapped up the day on a loss of $4.50, or 0.4%, at $1,188.60 an ounce.

VIX may 20, 2010

CBOE Volatility Index (VIX) is still gathering momentum, with a gain, by close of the day of 29.64%, or $10.47, to close at $45.79. This has been one of the biggest gains by the “fear factor”, this year.

Unofficial numbers show 16.6 million puts and 12.3 million calls traded across the options exchanges. When the final numbers are tallied, volume today could potentially surpass the record 30.8 million on traded on May 6.

In a sign that macroeconomic concerns are driving today’s fear, 2.5 million puts have traded across all the exchange-traded funds (ETFs) so far, which is 3 times normal and about 51 percent of the total put volume (of 4.9 million, which is also about 3 times the usual.) In addition, the thirty most actively traded options contracts today are all ETF options (SPY, QQQQ, IWM, EEM, XLF)

Company Earnings Reports

There has some positive notes today particularly from the earnings arena. Several companies have presented earnings reports that exceeded the analysts’ expectations. These are:-

• Dollar Tree (DTLR)

• Sears Holdings (SHLD)

• Autodesk (ADSK)

• GameStop (GME)

• Advance Auto Parts (AAP)

MF Global (MF) presented a quarterly report that was a negative surprise to analysts!

Company News and Happenings:

• Mastercard (MA) won a $41.4 million settlement from Heartland Payment Systems.

• Aruba Networks (ARUN) had their shares boosted due to an upgrade from Stifel Nicolaus to “buy” after its third-quarterly report.

• Bank of Ireland (IRE) shares fell by 18.10% after its debt-for-equity swap will be priced at a 25% discount to its April 23 close.

• Hot Topic (HOTT) shares fell by nearly 10% due to a quarterly loss from declining sales.

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