Sentiment
Stocks bounced back from two days of losses and moved broadly higher Tuesday. End-of-quarter window dressing is possibly helping stocks find a bid. In addition, the stage was set for early gains on Wall Street after bank stocks led European markets higher Tuesday. UK's FTSE rallied 4.3 percent and France's CAC 40 Index gained 3.4 percent ahead of the highly anticipated meeting of G-20 finance ministers and central bankers Thursday in London.
In the US, stocks opened higher and the major averages found some upside momentum despite another round of bleak economic numbers. A report released pre-market showed average home prices falling 19 percent in January, which followed an 18.6 percent decline the month before. Another report released 15 minutes into the trading session showed further contraction in the manufacturing sector. The Chicago Purchasing Manager's Index [PMI] fell to 31.4 in March, down from 34.2 in February and well below economist estimates of 34.3. Finally, an index of consumer confidence showed little improvement this month, edging up to 26 from 25.3 in February. Economists were expecting an increase to 28.
Yet, after a 2-day 403-point drop, the Dow Jones Industrial Average showed some resilience and is up 170 points late Tuesday. GM (GM) is down 20 percent and the only Dow stock in negative territory. The financials, Alcoa (AA), and Microsoft (MSFT) are leading the industrial average to higher ground. In the options market, trading is on the light side. Approximately 5.2 million calls and 4.2 million puts traded so far. The CBOE Volatility Index (.VIX) is down 2.82 to 32.72 heading into the final forty-five minutes to trade.
Bullish Flow
Apple Computer (AAPL) April 80/95 and May 90/100 put spreads both trade 10000X today, after a strategist bought the April spread and sold May, according to an exchange-floor contact. Shares are up 88 cents to $105.37 and the activity is possibly rolling forward of a successful April put spread accumulated over recent months. For example, on Jan 22, the April 80/95 put spread was sold for 3000X for $7 when AAPL was near $89.00. It appears that spread is now being bought back at about a $6 profit.
Suntech Power (STP) is up $1.50 to $12.45 and calls are active, as some of the solar names see relative strength Tuesday. 13,000 calls and 1,400 puts traded. JASO, YGE, TSL, LDK, SOLF, and SOL also seeing gains. CSIQ is leading the way after Piper upgraded the stock to Neutral from Sell saying, among other things, $30 bln in Green stimilus from China is under way and a positive catalyst for CSIQ.
Cliffs Natural Resources (CLF) is up $1.40 to $17.91 and calls are heavily traded as unsubstantiated takeover chatter makes the rounds Tuesday. 19,000 contacts traded, compared to 2,200 puts. Speculative buying is being seen in April 17.5, 20, and 22.5 call options.
Bearish Flow
Worthington (WOR) puts are active and implied volatility is elevated ahead of earnings (tomorrow, before market). Shares are down 20 cents to $8.69 and April 7.5 puts are the most actives, with more than 5000 traded. The top trades are two blocks of 2,050 contracts ask-side for 35 and 40 cents. Implied volatility is up to 95.7 from about 88 the day before.
Ford Motor (F) is down 6 cents to $2.70 and April puts at the $2 strike are active ahead of monthly auto and truck sales numbers due out tomorrow. More than 9000 contracts traded so far. Recent trades include a multi-exchange sweep of 5000 contracts at the offer for a dime.
Implied Volatility Movers
Acorda Therapeutics (ACOR) implied volatility is elevated, as shares take a hit Tuesday. ACOR is down $4.60 to $20.30 after the company received a refuse to file letter from the FDA related to its NDA for Fampridine-SR. The FDA raised some "format issues" and requested that some data in the application be reformatted. The stock sank and implied volatility rose to 85, from about 75 the day before.
Implied volatility is also elevated in General Motors (GM), Black and Decker (BDK), and Worthington (WOR). Implied volatility is easing in Citi (C), Wells Fargo (WFC), and BofA (BAC).
