Stocks are holding modest gains in slow trading Tuesday. The major averages opened steady following a day of gains in overseas markets and after analyst upgrades of Dow components Alcoa (AA) and Intel (INTC) helped lift the market the day before. Investors seemed to shrug off a GDP report, which showed economic growth at a weaker-than-expected 2.2 percent annual rate in the third quarter. Economists were looking for an increase of 2.8 percent.
The early gains were extended, and the S&P 500 moved to 52-week highs, after a report on existing home sales topped economist projections. The data, released thirty minutes into trading, showed improvement to an annual rate of 6.54 million in November, up from 6.10 million in October and better than the 6.25 million economists had predicted.
Yet, after notching new 52-week highs, the major average struggled in light volume and slow trading Tuesday afternoon. With 45 minutes left to trade, the S&P 500 is up just 3 points. The CBOE Volatility Index (.VIX) is down .83 to 19.66 and set to close at new 16 month lows. Trading in the options market is slowing as well, with approximately 3 million puts and 5.2 million calls traded so far (a ratio of .57, compared to a 22-day average of .72.)
Lennar (LEN), a homebuilder, is up 41 cents to $13.27 on the heels of today's better-than-expected existing home sales numbers. Options volume is running 2X the average daily, led by sellers of Jan 2010 calls at the 13 line. Some might have been buy-writes, as blocks that hit bid-side for 65 cents midday coincided with blocks of shares around $13.10.
US Steel (X) is up 48 cents to $52.83 and the Jan 55 - Apr 60 call spread is bought at $1.24, 4250X. Looks like a roll of long calls from Jan to April. 12,440 Jan 55s and 9,290 Apr 60 calls now traded.
MannKind (MNKD) has come under pressure on increasing volume– down $1.37 to $8.13. Options action is picking up as well. In fact, the bearish flow started before the sell-off, with one investor apparently buying the May 7.5 puts - May 10 call risk-reversal at $1.15 in morning trading and a little later, another buying 2000 Feb 5 - 7.5 put spreads at $1.15.
Implied Volatility Movers
CBOE Volatility Index (.VIX) dips below 20. VIX is down .60 to 19.89 and hit session lows shortly after a report on existing home sales showed improvement to an annual rate of 6.54 million, up from 6.10 million and better than the 6.25 million economists were expecting. S&P 500 Index (SPX) hit a new 52-week high and VIX fell to within striking distance of its Nov 20 intra-day low of 19.77 and falling well below its 1-year closing low of 20.47 set on Nov 24.
Unusual Volume Movers
iShares Real Estate Fund (IYR) is seeing 5X average daily trading volume, with 191,000 contracts traded and call volume representing 77 percent of today's activity.
iShares China Fund (FXI) is seeing 2X average trading volume, with 93,000 contracts traded and puts representing 93 percent of today's trading activity.
Rambus (RMBS) is seeing 2X normal trading volume. 50,000 contracts have traded, with call options representing about 79 percent of today's volume.