Stocks battled back from early weakness and are trading mixed late Thursday. Economic data was in focus early after the Labor Department reported that its Producer Price Index [PPI] rose a greater-than-expected .7 percent in March. Economists were expecting the gauge of inflation at the wholesale level to rise .2 percent. The spike in the PPI seemed to overshadow a report that showed jobless claims falling by 24,000 to 456,000 last week. Economists were looking for a drop of about 30,000. Meanwhile, the euro remained under pressure on fresh fears about Greece and its debt situation after a report showed the country's deficit widening to 13.6 percent last year. The day's earnings news didn't help much. Dow component Verizon (VZ) slipped on earnings, and 8 percent post-earnings declines in EBAY and Qualcomm (QCOM) weighed on the tech-heavy NASDAQ.
Yet, the major averages were steady by midday and, with help from better housing data and a late-day rally in Goldman Sachs (GS) shares, trading has turned mixed. Heading into the final hour, the Dow Jones Industrial Average is down 25 points and the NASDAQ up 5.7 ahead of Microsoft's earnings after the closing bell. The CBOE Volatility Index (.VIX) hit a morning high of 18.19 and was recently up .05 to 16.37. Trading in the options market is active, with 7.5 million calls and 6.8 million puts traded so far.
Big Prints in Fannie Mae (FNM) after a strategist bought 52500 June 1 puts for .10 to sell 53000 January 2012 $1 puts at 29 cents. Shares are flat at $1.22. The action looks similar to trade seen on Feb 5 when a strategist sold the Mar – Jan 2012 $1 put spread 118,000X — which was apparently a roll from Mar to Jan2012s. Today's spread looks the same and is possibly a premium seller willing to buy shares at $1 (minus the money collected for selling puts) should FNM dip back below $1 per share by the January 2012 expiration.
Sandridge Energy (SD), the Oklahoma City oil and gas driller, is up 6 cents to $7.37 after Susquehanna initiated the stock with a Positive and $11 price target (the firm initiated coverage on 10 oil and gas producers today.) In the options market, one noteworthy trade in SD is a buyer of Jul 7.5 calls at 49 cents, 8950X, on PHLX. 14.7K now traded vs. 23.2K in open interest.
CenturyTel (CTL) is down 93 cents to $35.27 and options volume is running 12X the recent average daily after the company announced plans to buy Denver's Qwest Communications (Q), to create the nation's third biggest local phone service and Internet company. CTL shares are down on the news and the top trade of the day is the sale of 4800 June 35 calls at 85 cents, which was part of a buy-write (72.5 cents over). May 35 calls are the most actives and the action also seems dominated by premium sellers. 8655 traded (54% Bid/45% Mid) vs. 1933 in open interest. Implied volatility is down about 5 percent to 15. The overall tone of trading in the options market seems to reflect lukewarm enthusiasm for the deal.
Implied Volatility Movers
Western Union (WU) is down 2 cents to $17.42 and bullish flow detected, with 7784 calls trading, or 4x the recent avg daily call volume. The focus is on the June and Aug 20 calls. The top two trades: 2850 Aug 20s at 35 cents and 2800 Jun 20 calls at 15 cents, both opening customer buyers on ISE, according to sentiment data. June 17.5, Nov 20, and May 17.5 calls are seeing interest as well. Implied volatility is up about 6.5 percent to 32.5 ahead of an April 27 (before market) earnings release.