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Market Recap: Dow Surges 485 Points on Revived Bailout Hopes

Despite a whopping daily point gain, the Dow ended the month down 6 percent

by Elizabeth Harrow (eharrow@sir-inc.com) 9/30/2008 4:27 PM

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Following a stomach-churning sell-off on Wall Street, stocks had nowhere to go this morning but up. Although the government's proposed bailout package failed to win the approval of the House on Monday, investors are hoping that yesterday's dramatic drop in stocks will serve as a wake-up call to reluctant legislators. Congress wasn't in session today, in observance of Rosh Hashanah, but hopes are high on Wall Street that a revised version of the rescue plan will win approval from House holdouts as soon as Thursday. While the Dow advanced ever deeper into triple-digit gain territory as the day wore on, signs of distress are still apparent in the credit market -- the benchmark Libor rose overnight to a record high of 6.88%, pointing to an increasingly tight lending environment. However, traders shrugged off this bit of unpleasantness, along with a slew of troublesome economic reports, to send stocks soaring.

The Dow Jones Industrial Average (DJIA � 10,850.66) closed not far from its highs of the session, up 485 points, or 4.7%, for the day. Of the Dow's 30 components, only Caterpillar (CAT) slipped into the red. Meanwhile, J.P. Morgan Chase (JPM), Chevron (CVX), and Bank of America (BAC) paced the advancing issues. Despite the blue-chip barometer's impressive rebound rally, the Dow shed 6% during September.

The S&P 500 Index (SPX � 1,164.74) surged today to a gain of 58 points, or 5.3%, though it also fell to a monthly loss of 9.2%. The SPX managed to maintain a foothold atop its critical 160-month trendline. Finally, the Nasdaq Composite (COMP � 2,082.3) surged back atop the 2,000 level with a daily gain of 99 points, or 5%. For the month, the COMP swallowed the steepest loss of the 3 indices, down 12% for September.

Turning to equities in focus, Sovereign Bancorp (SOV) was swarmed by massive put volume amid yesterday's plunge ... Wells Fargo (WFC) was buoyed by an upgrade to "neutral" ... Deere & Co. (DE) unveiled its plans for a new joint venture ... the CBOE Market Volatility Index (VIX) pulled back from Monday's multi-year high ... Biogen Idec (BIIB) was hit with unusual option volume following a ratings update from Standard & Poor's ... and today's Quote of the Day comes from this MarketWatch article, which examines some of the more unsavory links between Washington and Wall Street as the bailout package lingers in limbo:

"On average, representatives that voted for the Wall Street bailout package received more campaign contributions from financial firms, by a 2-to-1 margin, than members who voted against the bailout."

But these weren't the only headlines hitting the Street today. Click on the links below for our Daily Market Blog coverage of:

And, in case you missed it, Andrea Kramer examined the surprising similarities between trading options and boxing in this week's edition of Advanced Option Strategies. Click here to watch the video.

For today's activity in crude oil, gold futures, options, and more, turn to page 2.

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Options Stew: A Taste of the Week's Spiciest Plays

(11/20/2009 10:45:27 AM)

Welcome to our new video series, Options Stew, where we take a look back at what's been cookin' in the option pits this week. Join us as we sample just a few of the unusual option plays from the past week, with our "recipe" broken down into three unique segments:

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Schaeffer's Media Outtake: Thoughts on Hedging, Volatility

(11/19/2009 4:15:00 PM)

"Standard & Poor's, the world's leading index provider, announced today the launch of the S&P 500 Dynamic VEQTOR Index which dynamically allocates between equity, volatility and cash to provide broad equity market exposure with an implied volatility hedge. 'Implied equity volatility typically has a strong negative correlation to equity market returns, and is considered a useful tool to hedge against the potential downside risk of the broad equity market,' says Liz Taxin, Director of Strategy Indices for S&P Indices. The S&P 500 Dynamic VEQTOR Index is comprised of three components: Equity, as represented by the S&P 500; Volatility, as represented by the S&P 500 Short-Term VIX Futures Index; and Cash, as represented by the Overnight LIBOR rate. The Index allocates between equity and volatility based on the combination of realized and implied volatility trend decision variables, and these allocations are evaluated on a daily basis."
(PR newswire � 11/18/09)

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Put Trading Swells on J. Crew Group Ahead of Earnings

(11/18/2009 11:05:48 AM)

Retailers continue to line up for the earnings confessional, and one particular high-flyer is slated to release its quarterly report next week. J. Crew Group Inc. (JCG: sentiment, chart, options) is known for its preppy fashions, including jeans, khakis, and other basic (but often pricey) items sold to young professionals. J. Crew sells through its catalogs, Web sites, and some 300 retail and outlet stores in the U.S. under the J. Crew, crewcuts (for kids), and Madewell banners. Madewell, launched in 2006, is a women's-only collection of hip, casual clothes.

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Drilling Down on Rowan Companies' Rally Prospects

(11/18/2009 10:00:00 AM)

Rowan Companies Inc. (RDC: sentiment, chart, options) performs contract drilling of oil and gas wells. Its fleet consists of 22 jack-up rigs and 32 land-drilling rigs. The company operates primarily in the Middle East, Texas, the Gulf of Mexico, and the North Sea.

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Drug Delay Prompts Put Trading on ISIS Pharmaceuticals, Inc. (ISIS)

(11/17/2009 1:50:13 PM)

Bearish option bettors have virtually blitzed ISIS Pharmaceuticals, Inc. (ISIS: sentiment, chart, options) today, with intraday put volume skyrocketing to nearly 38 times the norm. The pharmaceutical firm this morning confessed that it's delaying plans to seek approval for experimental drug mipomersen by nearly a year, from mid-2010 to mid-2011.

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Pre-Earnings Option Activity Accelerates on Sears Holdings Corporation

(11/16/2009 1:55:56 PM)

Sears Holdings Corporation (SHLD: sentiment, chart, options) has been a hot topic on both sides of the options aisle today, as investors race to place their bets ahead of the retailer's looming turn on the earnings stage. According to Thomson Reuters, the firm is expected to report its third-quarter figures before the opening bell on Thursday, Nov. 19.

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Options Traders Bulk Up on Puts on Software Vendor

(11/13/2009 12:34:23 PM)

Options players are placing some heavy bets that salesforce.com inc. (CRM: sentiment, chart, options) is going to suffer a disappointing earnings report next week, as traders load up on puts. The International Securities Exchange (ISE) has reported 2.7 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 93.8% of all those taken during the past year. In other words, puts are significantly more popular than calls among traders.

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Hopes Are Riding High for GameStop's Earnings

(11/13/2009 11:35:33 AM)

The video game sector is struggling. U.S. video game sales dropped by 18% in October compared to the same period last year, according to the latest data from NPD Group. Meanwhile, analysts had forecast a more modest decline of 11%.

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Options Stew: A Taste of the Week's Spiciest Plays

(11/13/2009 10:55:42 AM)

Betting on a Short-Term Bounce for First Solar, Inc. (FSLR)

(11/12/2009 3:15:41 PM)

Call traders have been fond of First Solar, Inc. (FSLR: sentiment, chart, options) today, despite the solar concern's retreat into the red. In afternoon trading, the security has already seen roughly 18,000 calls cross the tape � nearly tripling its average intraday volume of fewer than 6,250 contracts.

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Market Recap: Dow Surges 485 Points on Revived Bailout Hopes

Despite a whopping daily point gain, the Dow ended the month down 6 percent

by Elizabeth Harrow (eharrow@sir-inc.com) 9/30/2008 4:27 PM

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