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Midday Market Update: Dow Jumps 4 Percent on Strength in Financials

Positive comments from financial giant boost stocks

by Jocelynn Drake (jdrake@sir-inc.com) 3/10/2009 11:30 AM

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Stocks have bounced back sharply today following some positive comments from Federal Reserve Board Chairman Ben Bernanke and Citigroup CEO Vikram Pandit. The Dow Jones Industrial Average soared to a triple-digit gain out of the gate and is holding strong.

Bernanke kicked things off this morning when he stressed that major financial institutions would not be allowed to fail given the fragile state of financial markets and the global economy. In a speech in Washington, Bernanke repeated that until the banking system recovers, a sustainable economic recovery will "remain out of reach." "In particular, the continued viability of systemically important financial institutions is vital to this effort," Bernanke said in a speech to the Council of Foreign Relations. In addition, Bernanke laid out his thinking on a fresh approach to the regulation of financial markets.

In other news, Citigroup (C: sentiment, chart, options) was profitable during the first 2 months of 2009, and its capital position is "strong," according to CEO Vikram Pandit. In a memo distributed around the company, Pandit said the bank is enjoying the best quarter-to-date performance since the third quarter of 2007. The preferred exchange it announced nearly 2 weeks ago is expected to make Citi the strongest capitalized large U.S. bank as measured by tangible common equity and Tier 1 ratios, Pandit added. The positive comments have helped lift the shares of C more than 27% today. Other banking issues have followed suit, with Bank of America (BAC) up more than 24.8% and JPMorgan Chase (JPM) gaining nearly 16%.

In other news hitting the Street today, chain-store sales for the week ended March 7 fell 0.9% from the year-earlier period, according to a survey released by the International Council of Shopping Centers and Goldman Sachs. On a week-over-week basis, sales rose 0.2%.

In earnings news, the Kroger Co. (KR: sentiment, chart, options) announced that its fourth-quarter earnings rose to $349 million, or 53 cents per share, while total sales rolled in at $17.3 billion. Analysts had predicted a profit of 51 cents per share and sales of $18.3 billion.

Dick's Sporting Goods (DKS: sentiment, chart, options) posted a quarterly loss of $104 million, or 93 cents per share. On an adjusted basis, Dick's earned 55 cents per share, excluding an impairment charge related to the integration of Golf Galaxy and Chick's Sporting Goods. Sales in the quarter fell 0.4% to $1.2 billion. The consensus estimate was for a profit of 54 cents and sales of $1.2 billion.

Elsewhere, United Technologies (UTX: sentiment, chart, options) warned that it plans to slash 11,600 jobs globally and spend an extra $600 million for restructuring, bringing the total restructuring costs for the year to $750 million. The company said that more cuts may be needed in 2009, depending on production needs. Earnings guidance has been revised to a range of $4.00 to $4.50 per share.

Finally, Wal-Mart Stores (WMT: sentiment, chart, options) was smacked with a downgrade from "buy" to "hold" at Citigroup, with the broker saying a bill before the House of Representatives would greatly simplify the process of union formation, limit the ability of employers to caution employees against unionization, and impose several restrictions on the bargaining process.

At last check, the Dow Jones Industrial Average (DJIA -- 6,810.45) is up 263.4 points, or 4.02%. The Dow has pulled back slightly from its intraday high of 6,823.03, which marked a gain of 275.98 points. The Dow is currently struggling with overhead resistance at its declining 10-day moving average. All 30 of its components are in the black, with JPMorgan Chase, Chevron, and 3M Company enjoying some of the heaviest gains.

The S&P 500 Index (SPX -- 706.34) has jumped nearly 30 points, or 4.4% higher today, while the tech-laden Nasdaq Composite (COMP -- 1,329.56) has increased 60.9 points, or 4.8%.

The rally in stocks has chased investors from gold, as the yellow metal is currently down 1.5% at $904.20 an ounce. Gold has already dipped below the $900-an-ounce level in trading today. Meanwhile, the price of crude oil has tacked on 1.9% to trade at $47.63 per barrel.

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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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Midday Market Update: Dow Jumps 4 Percent on Strength in Financials

Positive comments from financial giant boost stocks

by Jocelynn Drake (jdrake@sir-inc.com) 3/10/2009 11:30 AM

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