Stocks are set to open higher Thursday on better-than-expected earnings from JP Morgan (JPM) and a surprise decline in weekly jobless claims. About an hour before the opening bell on Wall Street, stock index futures indicate that both the Dow Jones Industrial Average and the NASDAQ will open the trading session with modest gains.   

Weekly jobless claims fell. According to the Labor Department, the number of filings for jobless benefits declined by 53,000 to 610,000 last week. The number surprised economists, as they had predicted a decline of only 3,000.

While the jobless claims showed improvement, the latest housing numbers did not. According to data released Thursday morning, builders broke ground at an annual rate of 510,000 homes last month, down from 572,000 the month before. Economists had predicted a decline to 549,000.

Building permits, a better gauge of future activity, fell to 513,000 from 564,000. Economists were expecting 549,000.

Stock index futures seemed to give greater importance to the jobless claims numbers and moved higher when the data were released. Bonds saw modest losses. The benchmark ten-year Treasury is down 7/32nd in early pit trading, and now yields 2.795 percent.

The dollar slipped .28 to 99.01 on the Japanese yen. The euro fell .0012 to 1.32 on the buck.

The Philadelphia Fed Manufacturing Survey is due out at 10:00 a.m. eastern time. Economists expect a reading of -32 in April, which is an improvement from the -35 seen the month before. The University of Michigan Consumer Sentiment Index is the only economic stat due out Friday.    

Among the stocks to watch, JP Morgan (JPM) shares are trading higher after the bank said it earned 40 cents per share on $25 billion in revenues, which was significantly better than Street estimates of 32 cents on $22.95 billion. CEO James Dimon said in the post-earnings conference call that his bank doesn't need to raise any additional capital and that JP Morgan could repay TARP funds tomorrow. JPM is up 1.35 percent to $33 per share in pre-market trading.

Harley Davidson (HOG) rallied 8.9 percent after reporting quarterly earnings of 50 cents per share, which missed by a penny. Revenues topped analyst estimates. G-Market (GMKT) is up 19.7 percent on news Ebay (EBAY) is acquiring the company for $24 per share. Google (GOOG) might see some action ahead of earnings due out after the closing bell.

Crude oil is up .29 to $49.54 a barrel and gold slipped $2.10 to $891.40 an ounce.  

Trading remained active in the options market Wednesday ahead of this week's expiration and as the Dow Jones Industrial Average overcame early weakness to finish up 109 points. The CBOE Volatility Index (.VIX) slipped 1.53 to 36.14. Approximately 7.3 million puts and 11.3 million calls traded across the options exchanges. 

International Paper (IP) saw active trading Wednesday. Shares finished the day up $1.58 to $8.80 after Deutsche Bank upgraded the stock to Buy and said the paper company could generate up to $1 billion in free cash flow in 2009. Options volume jumped to 6X the usual. May 9 calls topped the list of most actives, with 11,400 traded and 63 percent of the volume hitting ask-side of the bid-ask spread. It appears that some premium buyers might have opened new positions in anticipation of additional strength in IP between now and May options expiration.    

Bullish trading was also seen in Varian Medical Systems (VAR), Sun Microsystems (JAVA), and King Pharmaceuticals (KG).

Put volume picked up in Air Tran Holdings (AAI) Wednesday. Shares of the airline company gained 7 cents to $5.33 and most of the activity was in July and January 2010 puts at the $2.5 strike. In the Julys, 4,125 traded and 99 percent hit ask-side of the bid-ask spread. Open interest increased by 3,870 to 9,578 contracts. Another 1,000 Jan 2.5 puts traded (100 percent on the offer and creating 776 contracts of new open interest.) It appears that put buyers dominated the action and implied volatility edged up to 102, from about 98 the day before.   

Bearish trading also surfaced in State Street (STT), The9 Limited (NCTY), and Raymond James (RJF).

Frederic Ruffy
WhatsTrading.com