DJ MARKET TALK: Options Players Try To Ride Fed Up
18 Apr 11:22
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
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11:22 (Dow Jones) Bullish call options of large companies and tech
bellwethers trading briskly, largely as investors buy them hoping to catch the
upside from the Fed rate cut. Besides the robust QQQ, or Nasdaq 100 Trust,
near-month calls of big stocks like Microsoft (MSFT), Intel Corp. (INTC) and
General Electric (GE) all seeing heavy action. With April contracts expiring
Friday, many investors also are selling near-month puts that are now
out-of-the-money as stock prices jump. (KT)
11:19 (Dow Jones) EUR/USD rebounds sharply after making fresh 2001 low at
0.8695, lowest since Nov. 30 2000. UK based trader says price action very
choppy with market wrong footed by timing of Fed's cut. Now trading at 0.8736,
support comes in at 0.8695; resistance at 0.8767. (GS)
11:18 (Dow Jones) Fed rate cut leaves traders, economists "very surprised"
and searching for clues, for lack of an evident catalyst at this point for
inter-meeting rate cut. Retail sales and unemployment have been the main
triggers, while trade deficit data with imports being so weak, "certainly shows
weakening domestic demand being a big concern," potentially to the Fed, says
one senior trader in Seattle.
11:12 (Dow Jones) The Nasdaq Composite, now at 2100, is homing in on
significant short-term resistance at 2104-2109. Watch for a twitch at that
level. However, the Fed rate cut may be the fundamental catalyst needed to
power a test of key 2180-2255 resistance by the end of this week. (SC)
11:11 (Dow Jones) Fed's rate cut caught some option investors by surprise,
who scrambled to cover short positions. Others aggressively snap up call
options in big names or indexes to catch the rally. Near-month call options of
the Nasdaq 100 Trust, or QQQ, were the most heavily traded at the Amex and the
CBOE. The now in-the-money April 40 calls, even though they expire Friday,
already traded more than 37,000 contracts, jumping $4.20 to $6.30 at the Amex.
(KT)
11:07 (Dow Jones) Key question on everyone's mind: what does the Fed know
that the market doesn't? Absent anything shocking, the cut looks as much like
an attempt to keep the element of surprise in the Fed's arsenal as a move to
address fundamental threats to the economy. (MC)
11:06 (Dow Jones) FOMC statement points out some positives in economy -
consumption and housing, progress on inventory correction, but softer capital
spending and profitability are worries. FOMC may have wanted to isolate its
actions from any particular economic indicator and there is nothing significant
now to come out before next week. (JM)
11:04 (Dow Jones) Great Fed news for a market where more than a few have been
whispering we might have seen the bottom. But an intermeeting cut at a time
when things seem to be looking at little better immediately raises this
question: Is the Fed now through? Should strategists and economists decide as
much, some of the shine could eventually come off for stocks. Remember that
when it comes to second-guessing the Fed, it's often a question of, "What are
you going to do for us next?" (GC)
11:02 (Dow Jones) The Federal Reserve's 50 basis point rate cut came as a
complete surprise, a trader said. Up until the news, "we were looking at
markets' reaction and they were taking out" expectations of a cut, he said.
(JEN)
10:57 (Dow Jones) Just when some folks thought things were looking better,
BAM! A shocking half-point cut in rates from Fed. Stocks may actually not like
this as session progresses. They're up big now - DJIA gains 300, Nasdaq up 133.
(TG)
10:54 (Dow Jones) Someone forgot to tell Tyco International (TYC) there's an
economic slowdown going on. The broad-based conglomerate is feeling the pinch
from the sluggish economy, but you could never tell from the30% jump in
earnings and 26% increase in sales Tyco reported for its 2Q earlier Wednesday.
Better than that, the company continues to endorse a 20% jump in earnings for
the full year and even suggested there could be upside to guidance. Forgive the
folks over at Cisco (CSCO) if they're covering their ears. (CCW)
10:45 (Dow Jones) Siebel (SEBL) shares under pressure (down 4%) amid
speculation the company will announce layoffs and cut guidance when it reports
1Q tonight. Analysts say layoffs of about 10% of its staffers began very
recently. Bob Austrian of Banc of America says the cuts are "an incremental
sign that management is forecasting a more challenging environment." (MLP)
10:38 (Dow Jones) EUR/USD trading at new 2001 low of $0.8720. USD/JPY setting
new low for the day at Y122.29. Analyst said concerns that weak yen to be
discussed at G7 meeting continue to weigh on the USD/JPY pair. (JEN)
10:36 (Dow Jones) Bear Stearns analyst Marc Falcone trimmed his 2001 earnings
estimate for Championship Auto Racing Teams (MPH) to $1.00 a share from $1.27,
citing higher marketing and promotional expenses as part of the company's
increased investments. (DDO)
10:25 (Dow Jones) The things business is growing faster than the linens
business at Linens 'N Things (LIN), with houseware and home-accessory sales
outpacing home textile sales in the 1Q, the company says. But things didn't
pick up enough to rescue the company from a 2-cent 1Q earnings shortfall. It's
now forecasting earnings of $1.83-$1.86 a share, short of analysts'
expectations of $1.89. That figure assumes 1% to 3% sales growth. But with a
1.8% same-store sales shrinkage so far, the company is behind schedule, says
Alan Rifkin, an analyst at Lehman Brothers. He cut his 2001 net estimate to
$1.78 a share from $1.84. (JMC)
10:17 (Dow Jones) Although Merrill Lynch's Donato Eassey is keeping his
long-term buy rating on NUI Corp. (NUI), he's telling intermediate-term
investors to move to the sidelines for now. NUI's TIC Enterprises, an
outsourcing sales force, is being hurt by weakness in the telecom industry.
Eassey still thinks NUI has a compelling M&A value, and its core utility
businesss is performing well with an adjusted 10% growth rate, but it will take
a while for cost-saving actions at TIC to take hold. He cut his '01 earnings
estimate to $1.82 from $2.24. (CCC)
10:09 (Dow Jones) The dollar is strengthening vs. the euro despite the second
consecutive monthly decline in leading economic indicators. EUR/USD at $0.8761;
USD/JPY at Y122.65. (JEN)
(END) DOW JONES NEWS 04-18-01
11:22 AM |
