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Stocks Bounce Back from Lows on Emergency Fed Rate Cut

Dow Jones Industrial Average (DJIA) rebounds from 400-point loss on unexpected interest-rate cut

by Jocelynn Drake (jdrake@sir-inc.com) 1/22/2008 11:56 AM

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The major market indices have staged an impressive rally back from their lows of the morning following an emergency rate cut of 75 basis points by the Fed. The Fed funds rate now stands at 3.5%. The surprise rate cut comes after heavy selling weighed down overseas trading for 2 straight session as foreign markets became convinced that the U.S. economy was headed for a recession.

The Dow Jones Industrial Average (DJIA) has bounced back from its morning low of 11,634.8, a loss of 464 points, or 3.8% from the previous session's close. The Dow is currently down roughly 150 points and remains below key support at the 12,000 level. Of its 30 components, only 5 are currently in positive territory, while IBM, Altria Group, and Exxon Mobil currently lead the downward slide.

The S&P 500 Index (SPX) dropped more than 50 points at its lowest level this morning, but is currently sitting on a loss of only 23 points, or 1.7%. The index has also reclaimed the 1,300 level in late-morning trading. Meanwhile, the Nasdaq Composite (COMP) has shed nearly 57 points, or 2.4% this morning, but has rebounded from a fresh annual low of 2,221.2.

Examining the market stat, the New York Stock Exchange has reported 1,159 advancers versus 1,962 decliners, for an advance/decline ratio of 0.59. Volume on the exchange has already topped 1 billion as 9 new highs have been reached compared to 855 new lows. Meanwhile, the Nasdaq has reported 981 advancers against 1,928 decliners for a ratio of 0.51. Volume on the Nasdaq has reached 701 million, with only 4 new highs against 887 new lows.

Around the market this morning, March crude oil futures were trading down 2.4% early today following the rate cut. The contract tagged an intraday low of $85.42 per barrel and is currently at $88.10, down $2.47. Elsewhere, gold futures bounced back from their steep losses, as the dollar fell sharply after the Federal Reserve slashed rates. February gold has jumped $13.30, or 1.5%, to $895 an ounce after tagging an intraday low of $849.50.

In other news, we find shares of Apple (AAPL) have dropped more than 3% this morning, pulled lower by the broad-market sell-off and potential concerns surrounding the company's upcoming earnings report. The firm is slated to post quarterly results after the close today, with analysts predicting a profit of $1.62 per share on $9.47 billion in revenue. Apple is also expected to post iPod sales of as much as 25 million units in the quarter ended December 31.

In other earnings news, Johnson & Johnson (JNJ) announced a 9.5% rise in fourth-quarter profit, boosted by favorable foreign-exchange rates, a tax gain and increased sales of consumer-health-care products. However, sales of its drug-coated stents and anti-anemia drugs continued to decline, due partly to safety concerns and increased competition. The company reported earnings of $2.37 billion, or 82 cents per share. Excluding items, earnings were 88 cents per share, beating the Street by 2 pennies. Total sales increased nearly 17% to $15.96 billion, as worldwide pharmaceutical sales rose 7.5% in the quarter. Worldwide consumer sales jumped 48.5% and medical device sales grew 11.3%. At last check, the shares were down 1.5%.

To read more of our analysis on the market's biggest stories, please visit our Schaeffer's Daily Market Blog section throughout the trading day.

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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

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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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Stocks Bounce Back from Lows on Emergency Fed Rate Cut

Dow Jones Industrial Average (DJIA) rebounds from 400-point loss on unexpected interest-rate cut

by Jocelynn Drake (jdrake@sir-inc.com) 1/22/2008 11:56 AM

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