Market Wrap for Friday February 4, 2011

NYSE down 3.88 (-0.1%) to 8,285.17
DJIA up 29.89 (+0.3%) to 12,092
S&P 500 up 3.76 (+0.3%) to 1,311
Nasdaq up 15.42 (+0.6%) to 2,769

GLOBAL SENTIMENT

Hang Seng up 1.81%
Nikkei up 1.08%
FTSE up 0.23%

UPSIDE MOVERS

JDSU continues evening gain that followed earnings, guidance
beat.
TSN beats with Q1 results.
PHM revenue tops expectations.
CEG Q4 results top year-ago quarte, guidance mostly above Street view.
AVID easily tops Q4 estimates.
AET beats with Q4 results, guides for 2011 EPS above Street view.
CLX beats with Q2 results.
YRCW beats sales estimates.
WY seeing mixed trade after earnings beat.
SVLF sold to Cerberus Capital.

DOWNSIDE MOVERS

LVS continues downside reaction to mostly in line to better-than-expected
earnings.
FSLR downgraded.
LCC downgraded.
CSTR continues evening drop that followed revenue miss.
HOV prices shares.
MGI beats with Q4 results.
CELL upgraded.

MARKET DIRECTION

Stock averages end higher Friday and for the weekly including a five-
session win streak for the blue-chip Dow Jones Industrial Average. The
Nasdaq leads weekly gains, logging a 3% advance. The DJIA ended up 2.3%
for the week and the S&P 500 gained 2.7%.

Stocks twisted in two-sided action today, as Wall Street reacted to a
mixed January jobs report and settled into consolidation mode after early-
week gains landed the major averages at fresh 2 1/2 year highs. Mostly
improved earnings reports continue to support broad-market gains.

Commodities finished trading lower as crude oil futures succumbed to
bearish investor sentiment after a week that saw solid gains for the
March contract. Gold finished lower while copper and silver show some
signs of life.

Light, sweet crude oil for March delivery finished down $1.51, or 1.7%,
to $89.03 a barrel. In other energy futures, heating oil was down 1.41%
to $2.72 a gallon while natural gas was down 0.37% to $4.32 per million
British thermal units.

Meanwhile, gold futures slipped to close lower as investors weighed a
hodgepodge of news, including Egypt protests, a stronger dollar and
yesterday's rally.

Gold for February delivery finished down 0.3% to $1,349 an ounce. In
other metal futures, silver was up $0.46 to $29.19 a troy ounce while
copper finished up 1.08% to $4.59.

The U.S. economy added a much fewer-than-expected 36,000 new jobs last
month, a number partly influenced by bad weather in many parts of the
country, said some analysts. But the jobless rate unexpectedly fell to
9%, the lowest since April 2009. The data comes after a speech yesterday
afternoon by Federal Reserve Board Chairman Ben Bernanke in which he
commented on the slow growth in jobs.

In a speech Thursday, the Fed chairman said stronger payroll data and a
drop in the unemployment rate could be expected soon. But he also said
that the slow job market improvement so far is holding back the broader
economic recovery.

Cisco Systems (CSCO) announced plans to acquire Inlet technologies, a
privately-held provider of Adaptive Bit Rate (ABR) digital media
processing platforms. Under the agreement, CSCO will pay approximately
$95 million in cash and retention-based incentives in exchange for all
shares of Inlet. According to the company, the acquisition of Inlet will
bolster the capabilities of CSCO's Videoscape TV platform, allowing
service and content providers to deliver video experiences to any device
over any Internet Protocol (IP) network.

Bank of America (BAC) Bloomberg reports the bank will get at least $700
million from QBE Insurance Group for BofA's Balboa insurance unit. The
move is part of BofA's plan to focus on retail customers, commercial
borrowers and investment banking while getting rid of unrelated assets in
order to raise capital.

Verizon (VZ) stopped online sales of the Apple (AAPL) iPhone 4 after one
day, in what the company called the "most successful first day" of online
sales its history, according to a statement. The general market launch of
the iPhone 4 on the Verizon Wireless network will occur on Feb. 10. The
company will open its more than 2,000 Verizon Wireless stores at 7 a.m.
It will also be available at all Apple store locations, Best Buy, select
Wal-Mart stores.

Silverleaf Resorts (SVLF) says it will be bought by SL Resort Holdings
Inc., an affiliate of Cerberus Capital Management, L.P, for $2.50 in cash
per share.

GameStop (GME) announced that its Board of Director had authorized $500
million in additional funds for its share and debt repurchase program.

Shares of health insurer Aetna (AET)reported Q4 earnings of $0.63, a
penny better than the Street view. Revenue was $8.51 billion, vs. the
analyst consensus of $8.4 billion on Thomson Reuters. Aetna projects full-
year 2011 operating earnings per share of $3.70 to $3.80. The Street is
at $3.27 per share.

Yum! Brands (YUM) reported net income of $0.63 per share for the quarter,
beating the Thomson Reuters consensus estimate of $0.60. Sales grew 6% to
$3.56 billion, also topping the Street.

MoneyGram International (MGI) reports Q4 revenue of $303.4 mln, ahead of
Street expectations of $295 mln. EPS loss was $0.23, narrower than the
analyst consensus of a loss of $0.35 per share on Thomson Reuters.

Tyson Foods (TSN) reports Q1 earnings of $0.78 per share, including a
$0.03 per share gain, up from $0.42 per share a year ago. Sales were
$7.61 bln, up from $6.63 bln last year. The Street view was a profit of
$0.62 per share on sales of $7.15 bln.

Bullish Flow

Covanta Holdings (CVA), a Morristown, NJ waste management company, gained 17 cents to $17.33 and options volume surged to almost 40X the average daily levels after 14,000 calls and 175 puts traded on the ticker. June 17.5 calls traded 6,500 contracts and, with roughly 60 percent trading at the ask, it appears that buyers were dominating the action. February and March 17.5 calls saw interest as well. The unusual volume in CVA might be a play on earnings. The company reports on Wednesday of next week.

Bullish trading was also seen in Radioshack (RSH), Goldcorp (GG), and Aetna (AET).

Bearish Flow

Texas Instruments (TXN) saw interesting options action. Shares notched a new 52-week high and finished the day up 45 cents to $35.44. Meanwhile, 22,000 calls and 2,460 puts traded on the chipmaker. February 34 puts, which are $1.44 out-of-the-money and expire two weeks from today, were the most actives. 13,535 traded and the volume included a buyer of 5,000 at 19 cents per contract, according to a source on the exchange floor. February 35 and March 34 puts were busy as well. It's not clear what was driving the put buying in Texas Instruments Friday. Shareholders looking to protect recent gains might be initiating the trades. TXN is up nearly 50 percent since early September.

Bearish flow also surfaced in United Rentals (URI), Acuity Brands (AYI), and Peabody Energy (BTU).

Index Trading

Volume was light across the index market again today. 447,000 calls and 470,000 puts traded across the S&P 500 Index (.SPX) and other cash indexes, which is only 79 percent of the recent average daily volume, according to Trade Alert data. The CBOE Volatility Index (.VIX) lost another .77 to 15.92 and is now a far cry from the levels seen a week ago, when the volatility index closed above 20 for the first time in almost two months. The decline comes after the S&P 500 gained 34.5 points on the week, with help from mostly upbeat earnings and economic news. These domestic stories seemed to overshadow worries about civil unrest in Arab nations, which was the main catalyst for the 24 percent one-day spike in the VIX one week ago.

 

ETF Trading

The top options trades of the day surfaced in the PowerShares QQQ (QQQQ) around mid-session Friday. Shares of the fund, which hold the same one hundred components on the NASDAQ 100, touched new 52-week highs and finished the day up 32 cents to $57.38. Meanwhile, the big options trade of the day was a buyer of 100,000 February – March 55 put spreads at 44 cents. In this trade, the strategist bought the spread at 33 cents. That is, they bought 100,000 March 55 puts at 65 cents and sold 100,000 February 55 puts at 32 cents. This time or calendar spread might be a bet that shares will hold above $55 through the February expiration in two weeks and then move lower through the March expiration. It might also be a roll, or closing out February to open a new bearish position in March.

 

Posted in Commentary, Futures, Options, Stocks, Watchlist