Monday saw the U.S. stocks gain steam to close the session sharply higher, extending last week's rally, on upbeat earnings from Citigroup and improvement in the housing sector.
The recent foreclosure-related fears plaguing the financial industry were somewhat deflated today, thanks to a stronger-than-anticipated earnings report from Citigroup (C). More specifically, the banking behemoth's third-quarter figures came in above the Street's predictions, which – along with news of fewer loan defaults during the quarter – breathed new life into the battered banking sector.
Elsewhere, a dose of encouraging data on the housing front also put wind in the bulls' sails; the National Association of Home Builders housing market index pleasantly surprised economists by edging higher for the first time in four months in October.
Against this backdrop, stocks accelerated their upward momentum as the session progressed, with the Dow Jones Industrial Average (DJIA) tacking on nearly 81 points by the close.
It was a strong start to a week that will bring an avalanche of corporate results. Seven of the 30 companies that make up the Dow will release their third-quarter results, in addition to several big banks and tech companies.
So far, third-quarter results have generally come in above expectations. Of the S&P 500 companies that have posted results, 83% have topped analyst estimates, according to Thomson Reuters. But it's still early in the reporting period.
"The news today was a microcosm of what has been driving this market higher: better-than-expected earnings and merger-and-acquisition news," opined Schaeffer’s Senior Technical Strategist, Ryan Detrick. "Plus, say what you want about the economy, but we continue to see more positives than negatives – and as long as sentiment remains skeptical, the stage is set for continued gains."
Results for Major Market Indexes
The Dow Jones Industrial Average (DJIA – 11,143.69) finished with an good gain of 80.91 points, or 0.73%.
The S&P 500 Index (SPX – 1,184.71) also had a good gain, on the day, of 8.52 points, or 0.72%.
The Nasdaq Composite (COMP – 2,480.66), ended the day with a gain of 11.89 points, or 0.48%.
The Russell 2000 Index of smaller companies had a good gain of 6.40 points, or 0.91%, to settle at 709.56.
The burst of buying was led by the financial sector as banks like Wells Fargo (WFC) recovered some of last week's steep losses. The group benefited from Citigroup's (C) stronger-than-expected results and from signs that worries about the foreclosure crisis may have been overblown.
“It looks to be a little more manageable than some of our worst-case scenarios,” said Art Hogan, chief market strategist at Jefferies & Co.
Most of 30 stocks that make up the Dow made headway, led by financial giants Bank of America (BAC) and JPMorgan Chase (JPM) . The index's worst performers were Intel (INTC) and Home Depot (HD) .
The Nasdaq Composite struggled to replicate the broader markets' gains but still managed to close higher for the seventh time in the last eight days. The latest gains come as the tech sector looks forward to third-quarter results from tech giants Apple (AAPL) and IBM (IBM) that were due out after the close.
The financial sector was the main catalyst for Monday's bullishness, closing 2.2% higher in the wake of Citigroup's successful kickoff to this week's earnings deluge. Citi soared 5% after beating the Street with a third-quarter profit of $2.2 billion, or 7 cents a share. Analysts had been projecting EPS of 6 cents. The bank’s results were driven by a steep decline in total credit-loss provisions.
The financial-sector rally picked up steam after Bank of America said it expects less than 30,000 foreclosure sale delays after amending documents in 102,000 foreclosure actions. The news boosted other big banks like Wells Fargo and PNC Financial (PNC) .
Also on the earnings front, Halliburton's (HAL) stock slumped 5% on its worse-than-expected profits, while Hasbro (HAS) jumped 4% to 52-week highs on its earnings beat.
About 7.66 billion shares traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq -- below the year's average so far of about 8.77 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 2 to 1. The ratio was about the same on the Nasdaq.
“It’s been a slow gradual build all day long” as investors awaited more key earnings after the close, said Paul Nolte, managing director at Dearborn Partners.
Notes of Interest
• The Dow Jones Industrial Average (DJIA): finished with a gain of 80.9 points, or 0.7%, to settle atop the 11,100 level for the first time since early May.
• The S&P 500 Index’s (SPX) extended its rally throughout the session to end on a gain of 8.5 points, or 0.7%. As such, the broad-market barometer notched its first daily finish north of the 1,180 level since May 3.
• The Nasdaq Composite (COMP), the tech-rich index, struggled to surmount breakeven during the first half of the session, but eventually followed its peers into the black, tacking on 11.9 points, or 0.5%, by the closing bell.
• Crude futures notched their heftiest single-session gain in two weeks today, as prolonged strikes in France continued to disrupt refinery production. Earlier in the session, black gold struggled in the wake of disappointing data on industrial production, but bounced back with a vengeance to follow the broader equities market into the black. By the close, crude oil for November delivery advanced $1.83, or 2.3%, to settle at $83.08 per barrel.
• Gold futures: eked out a slim gain today, helped by an intraday retreat by the U.S. dollar. However, many investors were content to loiter on the sidelines as they await the details of the Federal Reserve's monetary stimulus program. Against this backdrop, December-dated gold futures finished a volatile session with a gain of 10 cents at $1,372.10 an ounce. Earlier in the session, the malleable metal traded as low as $1,353.20 an ounce.
• Bonds: The price rose on the benchmark 10-year U.S. Treasury, pushing the yield down to 2.49%.
U.S. Industrial Production
U.S. industrial production unexpectedly fell in September, while capacity utilization eased slightly, according to a report Monday that supported expectations of further monetary easing next month.
Production fell 0.2% after increasing 0.2% in August, the Federal Reserve said. Economists had expected September's industrial production to rise 0.2%.
Manufacturing fell 0.2 percent last month and declined by a similar margin excluding motor vehicles and parts, the Fed said. Mining output rose 0.7% last month, while utilities dropped 1.9%. Capacity utilization, a measure of slack in the economy, edged down to 74.7%, 4.2 percentage points above the year-ago level but still 5.9 points below the 1972-to-2009 average.
NAHB Housing Market Index
Home-builder sentiment rose for the first time in five months as builders are starting to see "some flickers of interest" among potential buyers, according to a survey on Monday that continued to show weakness in the housing market.
The National Association of Home Builders/Wells Fargo Housing Market Index rose more than expected to 16 from last month's 13. Economists polled by Reuters expected a rise to 14.
A reading above 50 indicates that more builders view sales conditions as good than poor. The index has not been above 50 since April 2006.
In currencies: The dollar was flat against the British pound and euro, but it fell versus the Japanese yen.
European Markets ended slightly higher. Britain's FTSE 100 added 0.7%, Germany's DAX gained 0.5% and the CAC 40 in France increased 0.2%.
Asian Markets, finished in negative territory. The Hang Seng in Hong Kong tumbled 1.2%. The Shanghai Composite fell 0.5%, and the Nikkei in Japan ended a shade lower.
Company Earnings Reports
Citigroup Inc (C)
Citigroup Inc (C) reported a third consecutive quarterly profit on Monday, slightly beating expectations, as losses slowed and the bank set aside less money to cover bad loans.
But Citigroup had trouble generating new business during the quarter as low trading volumes cut into its securities and banking operations. Revenue rose slightly from a year earlier but were the lowest of any quarter this year at $20.7 billion.
"Earnings are OK and revenues are light, but the key will be their comments on foreclosures," said Michael Holland of Holland & Co in New York.
The bank's shares were up 1.8 percent at $4.02 in premarket trading after closing at $3.95 on Friday.
The third-largest U.S. bank by assets posted a third-quarter profit of $2.2 billion, or 7 cents per share, compared with a year-earlier loss to shareholders of $3.2 billion, or 27 cents per share.
Analysts on average had expected a profit of 6 cents a share, according to Thomson Reuters.
On an ongoing basis, excluding an $800 million pre-tax loss on the sale of its student lending operations, Citigroup earned $2.6 billion, or 8 cents per share.
Citigroup, which is still 12 percent, owned by the U.S. government, has recovered from the worst of the losses that forced it to take three bailouts in 2008 and 2009. But like its rivals, it has struggled to make new loans this year.
International Business Machines Corp (IBM)
IBM reported a higher-than-expected profit and raised its outlook for the full year, helped by sales of new hardware products, but its shares retreated on sluggish sales of technology services.
International Business Machines Corp (IBM) said its quarterly net profit rose to $3.6 billion, or $2.82 a share, compared to $3.2 billion, or $2.40 a share, a year earlier. Analysts on average had expected earnings per share of $2.75, according to Thomson Reuters.
It raised its full-year earnings outlook to "at least $11.40 per share" for the full year, up from its previous forecast of "at least $11.25."
"This was a very strong performance overall with earnings above estimates and good revenue as well," said Edward Jones analyst Andy Miedler.
"For them to continue to again raise guidance for 2010 and continue to perform well overall means they're a company to invest in."
Over the past decade, IBM has shifted its focus to profitable software and IT services and away from low-margin computer hardware.
IBM's third-quarter net margin rose 1.1 points to 14.8 percent, and its increasing profitability has been a key attraction for investors.
But the biggest growth in the quarter was in IBM's traditional hardware business. Its "System z" mainframe revenue rose 15 percent, leading a 3 percent gain in overall revenue to $24.3 billion.
Numbers from its services business, by contrast, were disappointing. IBM said it signed $11 billion worth of services contracts in the quarter, down 7 percent, and outsourcing signings of $5.7 billion, down 15 percent.
Services signings are seen as a key benchmark for future revenue growth. The company noted, however, that it added that it won a major deal right after the quarter closed, and Edward Jones' Miedler said the services business was volatile.
"IT services are very large in nature and difficult to predict quarter to quarter," he said, adding that he saw room for the shares to rise further despite their recent gains.
IBM shares fell 2.8 percent to $138.80 after-hours. They closed at $142.83 after touching a historic high of $143.03.
Apple Inc. (AAPL)
Apple Inc CEO Steve Jobs went on the offensive on Monday after a rare disappointment in sales by the iPad maker sent its shares tumbling, but even his biting words failed to reverse market sentiment.
Jobs, who has not addressed investors on an earnings call for some time, lashed out at competitors Google Inc and Research in Motion and dismissed the upcoming range of smaller tablets made by Apple's rivals.
"The current crop of 7-inch tablets are going to be DOA, dead on arrival," Jobs told analysts on the conference call. "Their manufacturers will learn the painful lesson that their tablets are too small and increase the size next year."
Supply and production bottlenecks kept iPads, which have a 9.7-inch touch screen, from store shelves and buyers waiting weeks sometimes for their gadget. Although the 4.19 million iPads sold in the fiscal fourth quarter fell short of Wall Street's target of around 5 million, analysts said sales should ramp up in the holiday quarter as Apple resolves supply hitches.
Gross margins fell short of target as iPads, whose profit margin is lower than for iPhones, made up a larger proportion of Apple's sales. Investors had expected more from a company that had smashed Wall Street's targets in each of the past eight quarters.
Gross margins in the fiscal fourth quarter came to 36.9 percent, below Wall Street's average forecast of 38.2 percent.
There was no disappointment in iPhone sales, however. Apple sold 14.1 million of the smartphones, a gain of 91 percent and better than Wall Street had expected. The company said demand is still outstripping supply.
Mac sales surged 27 percent to 3.9 million, at the high end of analysts' estimates.
Some analysts agreed with Jobs -- who said the iPad lacked credible rivals -- and foresaw sales of the iPad, which came on the market only in April, jumpstarting in 2011 as the gadget gets rolled out to more countries and to more mass-market retail outlets like Wal-Mart Stores.
"iPads were low, but I also think they had a lot of production problems getting that off the ground. So I don't think that really is a good demand indicator for iPad," said analyst Jane Snorek of First American Funds.
Some analysts had projected shipments of closer to or even more than 5 million for the tablet computer, but others had warned that supply constraints had held back sales.
Apple on Monday reported a net profit of $4.31 billion, or $4.64 a share, in the fiscal fourth quarter ended September 25, up from $2.53 billion, or $2.77 cents a share, in the year-ago period.
That was better than the average analyst estimate of $4.08 a share, according to Thomson Reuters.
Revenue surged 67 percent to $20.3 billion, ahead of Wall Street's target of $18.9 billion.
Zions Bancorp (ZION)
Zions Bancorp (ZION), a Western U.S. banking chain, posted a narrower-than-expected quarterly loss, as it set aside much less money to cover bad loans, and said it expects to return to profitability "late this year or very early next year."
"What you have got are a declining loss rate in a declining pile of problem loans," Chief Financial Officer Doyle Arnold said on a post-earnings call.
During the third quarter, net charge-offs to loans fell 14 basis points sequentially to 2.50 percent.
"We expect charge-offs to generally decline over the next several quarters, although it will be somewhat lumpy," the CFO said.
For the quarter ended Sept. 30, the S&P 500 index .SPX component lost $80.5 million, or 47 cents a share. This was the company's eighth straight quarterly loss.
Analysts on average were looking for a loss of 50 cents a share, according to Thomson Reuters.
In the same period last year, it lost $181.9 million, or $1.43 a share.
Provision for loan losses fell to less than a third to $184.7 million, compared with $565.9 million last year.
"Asset quality metrics improved across all major fronts and we generally expect continued improvement into the fourth quarter and beyond," Chief Executive Harris Simmons said in a statement.
Loan balances declined at a slower pace of 1.2 percent at Sept. 30, compared with 2.5 percent in the second quarter.
Zions, which took $1.4 billion of federal bailout money, said it increased its Tier 1 capital by adding about $110 million to its tangible common equity through stock and warrants sale.
Shares of Salt Lake City-based Zions were up 5 cents at $21.40 in trading after the bell. They closed at $21.35 Monday on Nasdaq.
The stock's mean price target is $24.39, according to Starmine data, which indicates analysts expect the stock to rise 14 percent in the next 12 months. Most of these analysts have a "hold" rating on the stock.
VMware Inc (VMW)
VMware Inc (VMW) released earnings on Monday that disappointed investors as cash flow missed some investors' expectations, even though the results were otherwise positive. Its shares fell 7.3 percent.
The company posted cash flow from operations of $197 million, far below what most investors were expecting, said Pat Walravens, an analyst with JMP Securities. He had forecast cash flow from operations of $311 million.
"We don't know what happened. We'll have to wait for the earnings conference call to find out," Walravens said.
VMware's results otherwise looked positive and the virtualization software maker's revenue forecast beat Wall Street projections.
The company said it expects fourth-quarter revenue of $790 million to $810 million, ahead of the $774 million average forecast of analysts, according to Thomson Reuters.
"Third-quarter results were driven by strong demand across products and regions, led by the U.S. federal sector," Chief Financial Officer Mark Peek said in a press release.
VMware reported third-quarter profit, excluding items, of 39 cents per share, above the average analyst forecast of 35 cents. Revenue climbed 46 percent from a year earlier to $714 million, beating the average analyst forecast of $698 million.
VMware's sales are growing faster than those of many other technology companies because its server virtualization products are used to build virtual data centers and cloud computing systems, two of the fastest-growing areas in technology.
Shares of VMware, which is majority-owned by data storage equipment maker EMC Corp (EMC), fell 7.3 percent to $72.61 in extended trade after closing at $78.35 on the New York Stock Exchange.
McMoRan Exploration Co (MMR)
McMoRan Exploration Co (MMR) backed its full-year production view but cut its spending forecast and posted a wider-than-expected quarterly loss as production fell 32 percent.
Shares of the oil and natural gas producer, which have risen 120 percent in the last one year, fell almost 12 percent to $16.23 Monday morning on the New York Stock Exchange.
For the year, McMoRan backed its average daily production forecast of about 160 million cubic feet of natural gas equivalent per day (mmcfed), including 140 mmcfed in the fourth quarter of 2010.
Capital expenditures are expected to about $220 million for the year, including $140 million in exploration and $80 million in development spending, the company said in a statement. Its earlier spending plan was for $240 million.
In a conference call with analysts, McMoRan Co-Chairman Richard Adkerson said the company expected to spend $110 million in plugging depleted wells this year.
Third-quarter production averaged 146 mmcfed, compared with 215 mmcfe/d a year ago.
"McMoRan Exploration may have narrowed its third-quarter net loss, but production continues to decline because of earlier unscheduled downtime," Morningstar analyst Catharina Milostan wrote in a note to clients.
In the second quarter, the company had attributed lower production and lower outlook to downtime due to maintenance work.
Student Loan Corp (STU)
Student Loan Corp (STU) swung to a third-quarter loss on a $562.2 million impairment charge as it marked down the fair value of certain loans to be sold to Sallie Mae (SLM) and Citibank.
For July-September quarter, the student lender reported a net loss of $539.6 million, or $26.98 a share, compared with a net income of $54.8 million, or $2.74 a share, a year ago.
Excluding the impact of the impairment charge, Student Loan would have posted net income of $22.6 million for the quarter.
Citigroup Inc's (C) Citibank, which owns 80 percent of Student Loan, said in September it was selling its stake in the company to Discover Financial Services (DFS). Net interest income for the quarter rose 31 percent to $96.9 million from the prior year.
However, net interest margin fell 11 basis points to 0.90 percent, Student Loan said in a statement.
Student Loan said its board decided not to declare a dividend on account of its expected sale to Discover and asset purchase deals with Sallie Mae and Citibank.
The Stamford, Connecticut-based company's shares, which have gained 42 percent since the deal with Discover was announced, closed at $29.95 Friday on the New York Stock Exchange.
PetMed Express Inc's (PETS)
PetMed Express Inc's (PETS) second quarterly results missed wall-street expectations, hurt by higher advertising costs and as customers cut usage of the pharmacy's product categories, sending its shares down 11 percent in trading before the bell.
For the July-September quarter, the company which retails pet medications and health products online, earned $5 million, or 22 cents a share, compared with $6.3 million, or 28 cents a share, a year ago.
Sales of the company, which ships its products directly to customers, declined 2 percent to $61.2 million.
Analysts on an average were expecting the company to earn 26 cents a share, on a revenue of $63 million, according to Thomson Reuters.
Advertising expenses in the quarter rose 10 percent to $8.6 million from last year.
PetMed typically buys remnant television advertising space, the ones left over after major advertisers book primary slots.
However, the remnant space is becoming highly competitive and expensive as the media companies have reduced the space and increased prices.
Shares of the the Pompano Beach, Florida-based company, which closed at $15.96 Friday on Nasdaq, were trading down 11 percent at $14.15 in trading before the bell.
They have lost 4 percent since it announced first quarter results in July.
Zoom Technologies Inc (ZOOM)
Chinese mobile phone maker Zoom Technologies Inc (ZOOM) said it expects better third-quarter results aided by higher sales of one of its brands, sending its shares up 25 percent in pre-market trading.
Zoom, which sells these phones to major Chinese carriers such as China Mobile (0941.HK), China Unicom (0762.HK) and China Telecom (0728.HK), now expects net income of $3.3-$3.5 million, for the July-September quarter versus its previous outlook of $2.7-$3.3 million.
The company expects revenue of $68-$71 million for the three-month period, as sales of its Leimone brand of phones touched $14 million in revenue.
"We continue to gain market share with our branded phones and remain confident that the strength in our overall EMS (Electronic Manufacturing Service) business will bring further revenue growth in the remainder of 2010," Zoom said in a statement.
Zoom's Leimone unit has a higher profit margin than its other businesses, which include contract manufacturing for OEMs such as Samsung Electronics (005930.KS) and Palm Inc, and accounted for 10 percent of total sales in the first half of the year.
Zoom shares, which have lost almost 28 percent of their value after the company reported a weak second quarter in August, rose 18 percent to $4.80 in early trade Monday on Nasdaq.
Company News and Movements
Stock That Are High-Flying
• Northeast Utilities (NU) inked a $4.2 billion all-stock deal to acquire Nstar (NST) in an effort to create one of the largest U.S. utilities.
Shares of Northeast Utilities fell 0.9%, and shares of NStar fell 0.6%.
• News Corp.’s (NWSA) Fox programming was pulled from Cablevision (CVS) over the weekend, leaving roughly 3 million households without access to NFL and post-season baseball games. The two companies have been unable to reach a deal on subscription fees. News Corp. is the parent of FOX Business.
• H&R Block’s (HRB) stock tumbled 12% to 52-week lows after the tax preparer said it has sued HSBC (HBC) for allegedly breaching a contract. H&R Block said HSBC failed to conduct preparatory actions that would have let it offer refund anticipation loans.
• Medical device company St. Jude Medical (STJ) agreed to buy AGA Medical Holdings (AGAM) for $20.80 per share in a cash-and-stock transaction valued at a total of $1.3 billion.
Shares of St. Jude Medical ended 1.8% higher, while shares of AGA Medical Holdings skyrocketed 40.7%.
• BP (BP) said it is selling its businesses in Venezuela and Vietnam to Russian oil producer TNK-BP for $1.8 billion. The stock closed up 2.1%.
Citigroup Inc. (C)
Citigroup Inc. (C) captured the attention of traders this morning after the company announced that its third-quarter profit came in above the Street's consensus estimate.
The firm posted a profit of $2.17 billion, up sharply from $101 million a year earlier. Including preferred dividends, per-share earnings were 7 cents, compared with a prior-year loss of 27 cents. Revenue dropped 10% to $20.74 billion. Analysts had most recently forecast earnings of 6 cents on $21 billion in revenue.
Total credit-loss provisions were $5.92 billion, down from $9.1 billion a year earlier and $6.67 billion in the prior quarter. Citicorp, the company's core banking operations, saw profit climb 43% on the year, while revenue rose 6.7%.
"Achieving our third straight quarter of positive operating earnings is continued evidence that we are successfully executing our strategy and we believe we have put in place all the elements for continued profitability," said Chief Executive Vikram Pandit.
Heading into the earnings report, options players saw an increase in call trading. The International Securities Exchange (ISE) reported 5.4 calls 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 77% of all those taken during the past year.
What's more, the ISE and Chicago Board Options Exchange (CBOE) report that 6.8 calls have been purchased to open for every one put purchased to open during the past 50 trading sessions. This ratio of calls to puts is higher than 92% of all those taken during the past 12 months, pointing to a rising optimism.
Meanwhile, the put/call open interest ratio (SOIR) for C comes in at 0.45, as call open interest doubles put open interest among options slated to expire in less than three months. This ratio is also lower than all other readings taken during the past 12 months. In other words, short-term options players have not been more optimistically aligned toward the shares at any other time during the past 12 months.
Short sellers have also unwound their bearish bets toward the stock. During the past month, the number of C shares sold short dropped by 12% to 401 million. This accumulation of bearish bets accounts for only 1.7% of the company's total float. A continued unwinding of these pessimistic positions is unlikely to give the stock much of a boost higher.
Meanwhile, analysts are somewhat split in their outlook for C. According to Zacks, the stock has earned 10 "strong buys," seven "holds," and two "sells." There is still ample room for potential upgrades following today's positive earnings report.
Technically speaking, the shares of C are up more than 19% since the beginning of the year. The stock has been grinding steadily higher since its low in March 2009, creating a series of higher lows. A continuation of this trend higher could pressure the last of the bears into jumping on the stock's bandwagon.
Quicksilver Resources (KWK)
The shares of oil and natural gas explorer Quicksilver Resources (KWK) are up more than 17% this morning after the company received a letter from an investor group, which stated the group was interested in "exploring strategic alternatives" for Quicksilver, including a take-private transaction. The investor group consists of members of the Darden family. including Chairman Thomas Darden and CEO Glenn Darden. In a filing with the U.S Securities and Exchange Commission, Glenn Darden reported a 26.6% stake in the company as of Oct. 15.
The group requested an amendment to Quicksilver's rights plan to enable discussions regarding a potential transaction. Included in the letter to the board of Quicksilver was a "possible take private transaction of the company by Darden Family Interests."
"We have all been made aware that another significant stockholder, SPO Partners & Co. has expressed an interest in receiving nonpublic information and engaging in discussions with us regarding strategic alternatives for the company," said the group in the letter.
Technically speaking, the stock is trading more than 17% higher this morning, eating away at its year-to-date loss of nearly 16%. The security is now trading above former resistance in the 14-14.50 region.
Options players have recently shown a preference for calls on the stock. The International Securities Exchange (ISE) has seen 117 calls purchased to open for every one put purchased to open during the past 10 trading sessions.
What's more, the put/call open interest ratio for KWK comes in at 0.39, which is lower than 72% of all those taken during the past 52 weeks. In other words, short-term options players have been more optimistically aligned toward the shares of KWK only 28% of the time during the past 52 weeks.
Short sellers are potentially feeling the squeeze today, as more than 9 million KWK shares have been sold short. This accumulation of bearish bets accounts for nearly 7% of the company's float. An unwinding of these positions could fuel a rally in the shares.
Rayonier (RYN) presented the Street with some positive news this morning when it announced that that its board of directors voted to increase the company's regular quarterly cash dividend by $.04 per common share, or 8%, from $.50 per share to $.54, effective for the fourth-quarter distribution. The fourth quarter dividend is payable Dec. 31, 2010, to shareholders of record on Dec. 10, 2010.
"Increasing the dividend demonstrates the strength of Rayonier's balanced business mix and ability to generate cash, as well as our confidence in growing future cash flows," said Lee M. Thomas, chairman and CEO.
Looking ahead, the company is slated to report earnings on Oct. 26. Analysts are expecting a profit of 58 cents per share compared to the company's year-ago profit of 40 cents per share. Historically, the firm has had mixed results in the earnings spotlight. The company has missed the consensus estimate twice and beaten twice during the past four quarters.
Heading into the earnings report, options players are relatively pessimistic toward the shares. The put/call open interest ratio for RYN comes in at 0.46, which is higher than 80% of all those taken during the past 52 weeks. In other words, short-term options players have been more pessimistically aligned toward the shares only 20% of the time during the past 52 weeks.
Short sellers are also bulking up on their bearish bets. During the past month, the number of RYN shares sold short increased by 8.7% to 2 million. This accumulation of bearish bets is three times the stock's average daily trading volume and accounts for 2.5% of the company's total float.
The following companies also had some impressive options movements :-
Apple Inc. (AAPL)
Apple Inc. (AAPL) is in the headlines this morning. The iPhone icon will announce earnings after the close today, while AT&T Inc. (T) announced on Friday that it will market Apple's iPad directly to businesses, hoping to tap the growing corporate appetite for tablet computers and wireless applications. The company will offer iPad Wi-Fi and 3G models directly to businesses with a discounted wireless data pricing plan. The plan is similar to promotions AT&T offers to companies that purchase Research In Motion Ltd.'s (RIMM) BlackBerry or Apple's iPhone for employees.
Options players jumped on the shares of AAPL on Friday, as more than 754,700 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 336,315 contracts, according to data from WhatsTrading.com. In addition, options players were feeling optimistic, as 70% of the volume changed hands on the call side.
Call trading has been brisk on the shares of AAPL recently. The International Securities Exchange (ISE) has reported 1.9 calls 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 81% of all those taken during the past 12 months, pointing to an increased interest in calls.
Meanwhile, the put/call open interest ratio (SOIR) for AAPL comes in at 0.89, which is near the middle of its annual range, showing a degree of complacency among near-term options players. There is still ample room for optimism to grow toward the shares before it reaches extreme levels.
Elsewhere, we find that Wall Street is thoroughly smitten. According to Zacks, the stock has earned 54 "strong buy" ratings, six "buys," and just two "holds."
From a technical perspective, the shares of AAPL are up an astounding 49% since the beginning of the year and are hovering at all-time high levels. The stock has rallied steadily along the support of its 10-week and 20-week moving averages since March 2009.
Seagate Technology (STX)
A buyout of hard-drive maker Seagate Technology (STX) may be in the offing, with private equity firms Kohlberg Kravis Roberts & Co. and Bain Capital potentially interested in the company, according to Dow Jones Newswires. STX said on Thursday it is in talks to be taken private by an undisclosed buyer; sources said that buyer is TPG Capital LP. Following the news, the company's shares surged 22%, to $15.51, on Friday.
STX was also the center of some brisk options trading on Friday, as more than 302,900 contracts changed hands. This surge in volume was more than 12 times the stock's average daily trading volume of 24,298 contracts, according to data from WhatsTrading.com. What's more, approximately 75% of the volume changed hands on the call side.
On the other hand, the ISE has seen a slight preference for puts recently. The 10-day put/call volume ratio comes in at 0.53, which is higher than 61% of all those taken during the past 12 months, pointing to an increased skepticism.
Furthermore, the SOIR for STX comes in at 0.96, as put open interest nearly equals call open interest among options slated to expire in less than three months. This ratio of puts to calls is higher than 88% of all those taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the shares only 12% of the time during the past 52 weeks.
Short interest is also on the rise toward the shares. During the past month, the number of STX shares sold short increased by 30% to 15 million. This accumulation of bearish bets accounts for 3.3% of the company's total float.
Elsewhere, we find that Wall Street is still undecided about the shares. According to Zacks, the stock has earned 11 "buy" ratings, 10 "holds," and two "sells." There is ample room for potential upgrades from this group if the stock can continue its recent uptrend.
Technically speaking, the shares of STX are down 14% since the beginning of the year, but were showing signs of a turnaround even before Friday's gap higher. Since finding a bottom at the 10 level in late August, the equity rallied along the support of its 10-day and 20-day moving averages.
Yahoo! Inc. (YHOO)
Options players jumped on the shares of Yahoo! Inc. (YHOO) on Friday, as more than 241,700 contracts crossed the tape. This jump in volume was nearly four times the stock's average daily trading volume of 63,025 contracts, according to data from WhatsTrading.com. Furthermore, approximately 75% of the volume changed hands on the call side.
Traders could be attracted to the stock's options ahead of the company's earnings report, which is due tomorrow. YHOO is expected to post a profit of 15 cents per share, an improvement over the 13 cents per share earned during the same period a year ago. Historically, the firm has matched or surpassed the consensus estimate in each of the past four quarters.
Overall, options players have shown a preference for calls toward the Internet giant. The ISE has reported 4.6 calls 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 66.7% of all those taken during the past 52 weeks.
Meanwhile, the SOIR for YHOO comes in at 0.55, 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 96% of all those taken during the past year. In other words, short-term options players have been more optimistically aligned toward the shares only 4% of the time during the past 52 weeks.
On the other hand, Wall Street has yet to jump completely on the stock's bandwagon. According to Zacks, the stock has earned 15 "buy" ratings, 17 "holds," and two "strong sells." Any upgrades from this pessimistic pack could add some buying pressure to the shares.
From a technical perspective, the shares of YHOO are down 3% since the start of 2010. The stock has recently rallied along the support of its 10-day and 20-day moving averages and is now sitting above longer-term resistance at its 10-week and 20-week trendlines.
**Bullish flow detected in Terex (TEX), with 5001 calls trading, or 4x the recent average daily call volume in the name.
**Bearish activity detected in Mylan (MYL), with 9778 puts trading, or 6x the recent average daily put volume in the name.
**Bullish flow detected in Frontier Oil (FTO), with 7389 calls trading, or 15x the recent average daily call volume in the name.
**Increasing volume is also being seen in Wells Fargo (WFC), Morgan Stanley (MS), and McMoran (MMR).
U.S. stocks advanced on Monday as stronger-than-expected profit from Citigroup helped financial shares shake off worries that the foreclosure mess could threaten the stability of the housing market.
Apple Inc (AAPL), which hit an all-time high during the regular session, disappointed investors after reporting gross margins and iPad shipments. Its shares skidded 5 percent in after-hours trading while stock index futures fell, suggesting a weak market opening on Tuesday.
Shares in IBM also fell after the closing bell, losing 3.5 percent to $137.84. The stock had reached a 52-week high during the regular session. International Business Machines Corp (IBM.N) reported a higher-than-expected profit and raised its outlook for the full year, but the shares fell on sluggish sales of technology services.
"Both stocks have kind of gone parabolic into the earnings," said Nick Kalivas, an analyst at MF Global in Chicago. "My fear is we're going to get a buy the rumor, sell the fact trade."
In regular trading, Citigroup (C) gained 5.6 percent to $4.17 after it reported its third consecutive quarterly profit. Last week JPMorgan Chase and Co's (JPM) profits beat estimates. The KBW Bank index .BKX rose 3 percent, recovering some of the losses banks had in the last few days.
Citigroup said it is looking at the home loans it bundled into bonds and sold to investors. So far, it has not found any problems. The largest U.S. bank, Bank of America (BAC), reports earnings on Tuesday. Bank of America's shares rose 3 percent to $12.40.
This is a busy week for investors, with 113 stocks in the Standard and Poor's 500 Index reporting earnings.
Before the close on Monday, around 10 percent of S&P 500 companies had reported earnings, with 84 percent of those beating expectations, according to data compiled by Thomson Reuters.
The stock market is up more than 3 percent this month, which is leading some investors to conclude that traders are buying on any sign of good news. "It seems like these days that every little bit of good information, no matter how materially irrelevant, is something that the market latches on to," said Peter Zuger, the manager of the Touchstone Mid-Cap Value fund.
Traders are anticipating that the Federal Reserve will soon initiate a program to buy more bonds, which would drive interest rates down and make stocks more attractive.
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