As we noted last night in a Market Byte, General Magic (GMGC - 6-1/16) was experiencing some very unusual activity in both the stock and option volume. GMGC is a provider of voice-enabled services and technology. Yesterday, GMGC traded a massive 37,000 contracts on the February 5 call and 20,000 contracts on the February 5 put. Once the translations were tallied, these can be determined to be liquidations of some of the 93,000 contracts that stood at these two strikes heading into yesterday's trading. The stock is again trading heavy volume of about five million, albeit down substantially from the massive volume of 18 million shares Tuesday. The stock is up 15 percent today with no news to account for the activity. The company was unable to explain the sudden interest in the shares.
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The S&P Chemicals Index (CEX - 507.59) is putting on quite a show today, as investors migrate from technology stocks toward calmer waters. The CEX is higher by 4.6 percent. DuPont (DD - 71-3/16) is the most heavily weighted stock in the index accounting for a whopping 37 percent. Not surprisingly, the CEX would have little chance of sustaining such a rally without DD getting on board. This is the case today with DD higher by 4.7 percent. The entire group seems to be benefiting from the expectation of upside earnings surprises in the chemical group, as noted on the Dow Jones NewsWire.
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Today, a number of U.S. retailers reported their same-store sales numbers for December. All told, sales for the holiday-charged month rose 6.6 percent, making 1999 the most profitable holiday shopping season in seven years. Most specialty and broadline retailers announced sales figures that topped analysts' estimates. Two notable exceptions are AnnTaylor Stores (ANN - 23-3/4) and J.C. Penney (JCP - 20-3/8), which each announced same-store sales growth of less than one percent. ANN has taken a harsh tumble on this news, while JCP is trading fractionally higher. The S&P Retail Index (RLX - 958.0) has risen slightly but remains below its 10-day and 20-day moving averages. <
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Investors aren't playing around when it comes to Toys 'R' Us (TOY - 11-7/8). This morning, the retailer received a brokerage downgrade after the company reported that holiday same-store sales fell by two percent versus the year-ago period. In response, the shares are off over 11 percent today. Furthermore, the stock is now down over 37 percent from its late November high. The put/call ratio on the shares foreshadowed the impending doom. In early October, the put/call ratio was over 1.0, indicating a healthy degree of pessimism toward TOY. However, throughout the Christmas shopping season, it appears that speculators were shopping for TOY calls, betting on a strong holiday season for the toy retailer. This pushed the put/call ratio down to the 0.4 to 0.5 range. This explosion in optimism proved to be a good indication that expectations were too high for TOY. As a result, the stock was vulnerable to a downside disappointment as sales data was reported.
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Gateway (GTW - 59-9/16) is reacting surprisingly well to the news of its negative earnings pre-announcement when compared to other recent shortfalls, the most notable of which was BMC Software (BMCS - 47-3/16), which lost about 28 points, or one-third of its market capitalization, on the day of its confession. The percentage shortfall was similar in the two cases. However, GTW is lower by 2-3/4 from its NYSE close for a 4.4-percent loss. Compaq Computer (CPQ - 28-9/16) is fractionally lower, while IBM (IBM - 118-1/4) is unchanged from their respective NYSE closes. The PHLX Box Maker Index (BMX - 358.97) is lower by 2.1 percent on the day after finding resistance at its short-term moving averages in the last two trading days.<
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