Tuesday afternoon saw the Dow erase the majority of a triple-digit decline but the Nasdaq Composite remained under heavy pressure from a regulatory probe into Google and Europe's debt mess.
The Dow began the trading session with triple-digit losses. But the market got a boost after the Conference Board's index of consumer confidence came in better than expected.
"Clearly we're not seeing a complete breakdown, but cautiousness is definitely in the air," said Kenny Landgraf, principal and founder at Kenjol Capital Management.
For the second day in a row, Wall Street battled back from triple-digit decline, but the comeback on Tuesday wasn’t enough to erase a Google-fueled 1% drop on the Nasdaq Composite or prevent the Dow’s first losing month since August.
The rocky month of November ended in fittingly turbulent fashion as Wall Street continues to be rattled by global concerns. The markets were moved by a number of conflicting developments on Tuesday, including a 5% selloff for Google (GOOG) on a European regulatory probe, another plunge for the euro and a five-month high in consumer confidence. Just before the closing bell S&P put Portugal on credit watch negative, bolstering the markets' sovereign debt worries.
“It feels like the market has to have a panic selloff today and just flush to the downside. I’m not sure there’s going to be enough news to hold it up here,” said Nick Kalivas, vice president of financial research at MF Global.
"Whether it is the EU banking crisis, flagging recovery at home, stubbornly high unemployment rates, or the general backdrop of excess liquidity and reckless spending, the headwinds are real," Peter Kenny, managing director at Knight Capital Group, wrote in a note. "Given the overall lack of investor interest at these levels, a continued downdraft in the markets is the likely result."
Results for Major Market Indexes
The Dow Jones Industrial Average (DJIA) has fallen more than 50 points heading into the latter half of the trading session, with the blue chip barometer clinging to psychological support at the 11,000 level.
While Wall Street bulls have found some inspiration in the better-than-expected holiday shopping figures, as well as the strong Chicago purchasing managers' index and consumer confidence figures, the uncertainty swirling around the euro zone's debt crisis has prevented this weary bunch from gaining much of a foothold.
As a result, the Dow is currently poised to close November with a loss of about 1%. From a long-term perspective, October's close above resistance at the DJIA's 50-month moving average looks to be short-lived.
End of the Day
The Dow Jones Industrial Average (DJIA – 11,006.02) finished with a loss of 46.47 points, or 0.42%.
The S&P 500 Index (SPX – 1,180.55) also had a loss, on the day, of 7.21 points, or 0.61%.
The Nasdaq Composite (COMP – 2,498.23) fared the worst of the major indexes, with a loss of 26.99 points, or 1.07%.
The Russell 2000 Index of smaller companies had a loss of 5.91 points, or 0.81%, to settle at 726.04.
The blue chips, which had been down as much as 110 points, were led lower by Procter & Gamble (PG) and Bank of America (BAC), which has been rocked by concerns it may be the target of a WikiLeaks investigation. The index's best performers were United Technologies (UTX) and Caterpillar (CAT).
Dragged down by Google, the Nasdaq Composite slid 1%. Google slumped 4.5% and ended at session lows as the European Commission launched an antitrust probe into allegations the tech giant abused its dominant online search position.
Other tech stocks also dropped as Seagate Technology (STX) slid 3% a day after scrapping plans to be taken private and eBay (EBAY) came under pressure from a series of negative analyst notes, including a downgrade from "overweight" to "neutral" by Piper Jiffray.
Declining stocks beat advancers by a ratio of almost 2 to 1 on the New York Stock Exchange, and by just over 2 to 1 on the Nasdaq.
About 8.72 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, above the year-to-date average of about 8.48 billion.
Notes of Interest….
The Dow Jones Industrial Average (DJIA) was able to eke out a monthly close above the 11,000 level, if only by the slimmest of margins.
By landing in the red, the Dow posted its first losing month since August. The benchmark index lost just over 100 points and fell for the third time of the last four Novembers. Some believe the losses on Wall Street won't last for long.
The Dow finished a second straight session below its 50-day moving average, and ended November on a loss of 1%.
“In all likelihood we think this pullback will be a good buying opportunity,” said Ryan Detrick, equities analyst at Schaeffer’s Investment Research.
• The S&P 500 Index’s (SPX) gave up 7.2 points, or 0.6%, bringing its monthly deficit to 0.2%.
The SPX is now on pace to end the week below its 10-week moving average for the first time since Aug. 27.
• The Nasdaq Composite (COMP) shed about 27 points, or 1.1%, to finish beneath the 2,500 level for the first time since Nov. 23.
The COMP lost 0.4% in November, but remains comfortably perched atop its 10-week moving average.
• Crude futures turned lower today, moving inversely to the U.S. dollar. The greenback caught a boost as traders continued to wring their hands over European sovereign debt, despite the financial lifeline that was thrown to ailing Ireland over the weekend. Commodity players are also keeping a wary eye on China, the world's No. 2 oil consumer, which has taken steps to rein in economic growth in recent weeks. Against this uneasy backdrop, crude oil for January delivery shed $1.62, or 1.9%, to end at $84.11 per barrel. For the month of November, crude added 3.2%.
• Gold futures diverged from crude today, with the malleable metal shrugging off strength in the dollar to power higher. In the face of persistent economic uncertainty, gold seems to be capitalizing on its reputation as a safe-haven asset. By the close, gold for February delivery climbed $18.60, or 1.4%, to settle at $1,386.10 per ounce. On a monthly basis, gold gained 2.1%.
• Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.79% from 2.82% late Monday.
S&P Case-Shiller Home Price Index
Prices of single-family homes in September fell more than twice as fast as expected from the prior month, while prices compared to a year earlier rose more slowly than forecast, according a widely watched index of U.S. home prices released on Tuesday.
The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas declined 0.8% in September from August on a seasonally adjusted basis.
Economists polled by Reuters had expected a decline of 0.3%. S&P, which publishes the indexes, also said home prices in the 20 cities index rose 0.6% from September 2009, slower than the 1.1% expected.
The Chicago purchasing managers index rose to 62.5 in November from 60.6 in October, a stronger-than-anticipated increase. It's the last of the major regional manufacturing gauges before Wednesday's Institute for Supply Management's manufacturing gauge.
U.S. consumer confidence rose in November to its highest level in five months, helped by improving labor market conditions and a jump in the expectations index, according to a private-sector report released Tuesday.
The Conference Board, an industry group, said its index of consumer attitudes increased to 54.1 in November, the strongest since June, from a revised 49.9 in October.
The median of forecasts from analysts polled by Reuters was for a reading of 52.6.
The October reading was revised down from an original 50.2. Some economists had expected gains in the U.S. stock market in September and October to give a boost to consumer confidence. The expectations index rose to 74.2 in November, the best level since May, from 67.5 in October.
The present situation index advanced to 24.0 from 23.5. Consumers' labor market assessment slightly improved. The "jobs plentiful" index increased to 4.0 from 3.5. The "jobs hard to get" index was at 46.5% in November, compared with 46.3% in October.
Americans are more upbeat about future jobs prospects. Those expecting fewer jobs in the months ahead fell to 18.8% from 22.3%, while those expecting more jobs rose to 15.5% from 14.5%.
Wall Street continues to be sensitive to signs that China will need to tighten its monetary policy to prevent its economy from overheating. Reports out of Asia about a potential capital gains tax and a big interest rate hike concerned some traders. China's Shanghai Composite sold off 1.6% and Japan's Nikkei 225 lost nearly 2%.
In currencies: Wall Street remains focused on the global picture as the euro tumbled to a fresh two-month low and was recently off 0.69% to $1.3032. The currency has been slammed by fears that the $115 billion rescue of Ireland won't be enough to stop the crisis from spreading to bigger economies in Portugal or even Spain. Underscoring those concerns, the cost to insure the debts of Spain, Italy, Portugal, Ireland and even Belgium all hit record highs. Spain's Banco Santander (STD) also took another hit.
A weaker euro against the dollar also creates problems for Wall Street because a stronger greenback tends to weigh on commodities and hurt exports.
The dollar was up against the pound and the euro, but it fell against the yen. Investors tend to move toward the dollar as a safe haven during times of economic uncertainty.
European Markets ended mostly flat. Britain's FTSE 100 and the DAX in Germany were unchanged, but France's CAC 40 closed off by 0.8%.
Asian Markets fell. The Shanghai Composite lost 1.6%, the Hang Seng in Hong Kong fell 0.7% and Japan's Nikkei dropped 1.9%.
Company Earnings Reports and News
Barnes & Noble (BKS) slid as much as 11% after posting a loss of 22 cents a share, widely missing estimates for a loss of just 8 cents a share. Sales jumped to $1.91 billion, but trailed the Street's view of $1.98 billion. Same-store sales slumped 3.3% overall, while sales soared 59% online. Barnes & Noble sees a fiscal third-quarter profit of 90 cents to $1.20 and a fiscal 2011 loss of 75 cents to $1.15.
Company News and Movements
• Google (GOOG) is nearing a deal worth as much as $6 billion to acquire local online discounter Groupon, All Things Digital reported. It would mark Google's largest acquisition ever.
• ABB (ABB) unveiled a $3.1 billion deal to acquire U.S. industrial motors maker Baldor Electric (BEZ) for a big premium of 41%. Including $1.1 billion of debt, the total deal is worth $4.2 billion.
• Seagate Technology (STX) slid 3% a day after scrapping plans to be taken private. The hard drive disk maker had reportedly been in talks with TPG Capital over a deal worth about $9 billion. However, Seagate said it will instead buy back $2 billion of its own stock.
• EBay (EBAY) came under pressure from a series of negative analyst notes, including a downgrade from "overweight" to "neutral" by Piper Jiffray, which cited a slowdown in online selling.
• Merck (MRK) tapped Kenneth Frazier as its new CEO starting on January 1. Frazier will replace Richard Clark, who will stay on as chairman. The drug giant had signaled the move when it named Frazier its president.
• Bank of America (BAC) has no indication it is the target of a document leak by WikiLeaks, a source told FOX Business’s Charles Gasparino. The founder of WikiLeaks told Forbes its next document dump could take down a big U.S. bank. WikiLeaks previously said it has several gigabytes of data from a BofA exec’s hard drive.
• General Motors (GM) announced plans to begin exporting the Chevy Volt late 2011 and plans to hire 1,000 workers to help with the production of the electric car. GM didn’t say which countries it plans to export to, but Europe is an attractive option for the auto maker.
Yingli Green Energy Holding Co. Ltd.(YGE)
Yingli Green Energy Holding Co. Ltd. (YGE) this morning announced that it has inked over 1,000 megawatts of solar module sales contracts for 2011 delivery, exceeding its sales target one month ahead of schedule. "We are pleased to announce this business milestone, which we expect will provide more visibility into our 2011 growth and customer demand," said Chairman and CEO Liansheng Miao in a press release.
Nevertheless, the shares of YGE have followed the broader equities market into the red this morning. What's more, it appears a slew of options speculators are betting on little to no upside for the stock in the short-to-intermediate term.
Already today, the equity's out-of-the-money January 11 call has seen more than 9,100 contracts change hands on open interest of fewer than 900, pointing to new positions. However, 99% of the back-month calls traded at the bid price, suggesting they were sold.
By writing the January 11 calls to open, the sellers are rolling the dice that YGE will remain beneath the $11 level throughout the options' lifetime. In this best-case scenario, the calls will expire worthless, and the sellers can pocket the entire net credit received at initiation – which represents the maximum potential profit on the play.
From a broader sentiment standpoint, though, skepticism is par for the course among the short-term options crowd. The security's put/call open interest ratio (SOIR) of 0.87 stands just seven percentage points shy of an annual acme, indicating that near-term traders have been more pessimistically positioned toward YGE just 7% of the time during the past 12 months.
At last check, YGE has backpedaled 2.2% to flirt with the $10.10 level.
Las Vegas Sands Corp. (LVS)
Analysts at UBS weighed in on the casino sector today, upping their price target on Las Vegas Sands Corp. (LVS) to $55 from $52, and reiterating their "neutral" opinion on the stock.
Sentimentally speaking, there could be more price-target boosts in store for LVS, as Thomson Reuters deems the consensus 12-month price target at $50.05 – a discount to the equity's closing price of $50.50 on Monday.
For the most part, though, LVS' bullish bandwagon is pretty crowded. According to Zacks, the security has earned 15 "strong buys" and two "buy" ratings, compared to seven lukewarm "holds" and not a single "sell" recommendation. Meanwhile, short interest depleted by 23.4% during the past month, and now represents less than a sessions' worth of pent-up buying demand.
Elsewhere on the Street, the options crowd has grown more optimistic toward LVS in recent sessions, as evidenced by the security's 10-day call/put volume ratio of 3.03 on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). This ratio registers in the 87th annual percentile, implying that speculators on the exchanges have bought to open LVS calls over puts at an accelerated pace during the past couple of weeks.
As a result, the stock's put/call open interest ratio (SOIR) now rests at 0.64, indicating that calls comfortably outnumber puts among near-term options. What's more, this ratio ranks in the 28th annual percentile, suggesting that short-term options players have been more bullishly positioned toward LVS just 28% of the time during the past year.
In early trading, the shares of LVS have retreated along with the broader equities market, giving up 0.2% to explore the $50.45 region.
The following companies also had some impressive options movements :-
Bristol-Myers Squibb (BMY)
Options players were attracted to Bristol-Myers Squibb Co. (BMY) on Monday, as more than 24,600 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 11,531 contracts, according to data from WhatsTrading.com. In addition, traders were feeling optimistic, as 88% of the volume changed hands on the call side.
Monday's preference for calls runs counter to the dominant sentiment picture on BMY. For example, the International Securities Exchange (ISE)/Chicago Board Options Exchange (CBOE) 10-day put/call volume ratio comes in at 0.86, which is higher than 82% of all those taken during the past year, pointing to a growing skepticism.
What's more, the put/call open interest ratio (SOIR) for BMY comes in at 0.81, which is higher than 83% of all those taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the shares only 17% of the time during the past 12 months.
Wall Street also has some doubts about the security. According to Zacks, the stock has earned 11 "buy" ratings, 12 "holds," and three "strong sells."
Technically speaking, the shares of BMY are up less than 1% on the year. Since hitting staunch resistance at the 28 level, the stock has steadily fallen under resistance at its 10-day and 20-day moving averages. The equity is now approaching former support in the 24-25 region.
Tyson Foods (TSN)
Tyson Foods Inc.(TSN) was the center of some heavy options trading on Monday, as more than 24,700 contracts changed hands. This surge in volume was more than five times the stock's average daily trading volume of 4,738 contracts, according to data from WhatsTrading.com. In addition, traders were feeling skeptical of the shares, as 79% of the volume changed hands on the put side.
The ISE and CBOE have seen an increase in put trading recently. During the past 50 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 92% of all those taken during the past 52 weeks, pointing to a growing skepticism among speculators.
What's more, the SOIR for TSN comes in at 0.94, as put open interest is nearly in parity with call open interest among options slated to expire in less than three months. This ratio of puts to calls is higher than more than half of the readings taken during the past year, reflecting a bearish leaning.
Short sellers are also increasing their bearish bets. During the most recent reporting period, the number of TSN shares sold short edged 0.37% higher to 20.2 million shares. This accumulation of pessimistic positions accounts for 6.77% of the company's total float and is 4.8 times the stock's average daily trading volume. A continuation of this trend could pressure the security lower during the near term.
Technically speaking, the shares of TSN are up more than 31% since the beginning of the year. However, the equity has struggled since putting in a 2010 high near 20 in April. TSN recently pulled back to support at its rising 20-month moving average and is now struggling to hold above support at its 10-week and 20-week moving averages.
Other Options News
• Bullish flow detected in Canadian Solar (CSIQ) , with 3775 calls trading, or 2x the recent average daily call volume in the name.
• Bullish flow detected in Huntsman (HUN) , with 9872 calls trading, or 2x the recent average daily call volume in the name.
• Bearish activity detected in Tessera Technologies (TSRA) , with 3343 puts trading, or 14x the recent average daily put volume in the name.
• Increasing volume is also being seen in EBAY, NCR and FedEx (FDX) .
U.S. markets have been whipsawed by overseas worries about debt-ridden European economies including Ireland, Portugal and Spain. But domestic topics were back in the spotlight for investors Tuesday, with economic data on housing, manufacturing activity and consumer confidence.
"On the upside, the domestic market is much stronger than international markets," said Kenny Landgraf, principal and founder at Kenjol Capital Management. "Europe concerns have really been prolonged. and it seems like new countries keep tacking on more worries."
Stocks cut losses late in the day Monday, ending the session lower but holding above the 11,000 point level on the Dow.
It was a downbeat end to what started out as a strong month. The Dow and Nasdaq shot to two-year highs in early November after the Republican success in the Congressional election and the Federal Reserve's announcement of a second round of economy-boosting asset purchases.
"You do have a bit of a tug of war between those investors who see the environment as positive for equities over the intermediate to long-term (and) traders who are more concerned about the short-term impact of European debt concerns," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
"I think we'll see a rally into year-end," said Ghriskey, who is expecting the S&P 500 to rise to 1,225 by year-end.
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