Stocks are set to open lower Monday, with weakness in Bank of America (BAC) and pre-earnings jitters weighing on early trading. About an hour before the opening bell on Wall Street, stock index futures indicate that the Dow Jones Industrial Average might lose more than 120 points in early trading. The NASDAQ is indicated 25 to 30 points lower.
A busy week of earnings news kicked off with a report from Bank of America (BAC). The bank said it earned 44 cents per share on $36 billion in revenues last quarter. Results easily topped analyst estimates of 4 cents per share on $27.1 billion in revenues.
However, BAC is trading down 7.7 percent this morning after a big run-up leading up to the news. The stock gained 11 percent last week. Some investors might be selling shares Monday on concerns about mounting credit loss provisions and after BofA also said credit quality deteriorated further across all businesses as home prices continued to fall.
Eli Lilly (LLY) is trading a bit higher, however, after reporting quarterly earnings of $1.20 per share, which topped analyst estimates by 11 cents.
Halliburton (HAL) reported 44 cents per share, which topped analyst estimates by 3 cents. Revenues fell short of expectations, however, and shares of the oil driller are lower in pre-market action.
International Business Machines (IBM) and Texas Instruments (TXN) report after the closing bell.
Some mergers were announced. Oracle (ORCL) announced plans to buy Sun Micro (JAVA) for $9.50 per share and a 42 percent premium to Friday's closing price. Pepsico (PEP) is buying the remaining stake in Pepsi Bottling (PBG) for $29.50 per share.
On the economic front, the calendar is light over the next few days. The list of leading indicators is scheduled for 10:00 a.m. eastern time. Economists expect the report to show a decline of .2 percent for March. Beyond that, the economic calendar is empty until week jobless claims Thursday morning.
With not much news to guide the early action, bonds are reacting to the slide in the stock index futures. The benchmark ten-year Treasury is up 16/32nd and its yield has fallen back to 2.89 percent.
The dollar fell .86 to 98.27 on the Japanese yen. The euro is off .0074 to 1.2966 against the buck.
Meanwhile, crude oil is under pressure. Crude fell $2.72 to $47.61 a barrel. Gold is trying to snap back from recent losses, now trading up $5.5 to $873.40 an ounce.
In the options market, trading was active Friday due to the options expiration. Approximately, 9 million puts and 13 million calls traded across the options exchanges.
Risk perceptions fell. The Dow Jones Industrial Average saw a modest 6-point gain on the session, posted a sixth consecutive weekly gain, and rose to two-month highs. The CBOE Volatility Index (.VIX) fell 1.85 to 33.94 and to six-month lows.
Tyson (TSN) shares gained 23 cents to $11.17 and options order flow seemed to reflect expectations for higher prices Friday. The top trade of the day was 3,200 July 12.5 calls for 70 cents on the ISE, where data indicate the trade was an opening customer call buy. 6,600 traded total, with 79 percent trading at the asking price. Open interest increased to 6,375 from 766 contracts, the activity appears to be new positions in anticipation of a move beyond $12.5 by the July expiration. Earnings expected on May 4.
Bullish trading was also seen in MGIC Investments (MTG), Stryker (SYK), Dryships (DRYS), and the ProShares UltraShort Lehman Bond Fund (TBT)
AMAG Pharmaceuticals (AMAG) saw bearish order flow Friday. Shares finished the day down 9 cents to $41.41 and options volume rose to 5X the normal levels. More than 2000 May 30 puts traded and 98 percent traded ask-side of the bid-ask spread. Open interest in the contract increased by 1,935 to 4,200. Another 1,200 May 25 puts traded, and 99 percent hit ask-side of the spread. OI increased by 852 to 1,718. Implied volatility edged down to 97 from 100. Earnings due out around April 23 (unconfirmed).
Bearish trading also surfaced in Regions Financial (RF), ASML (ASML), Synta Pharmaceuticals (SNTA), and the PHLX Swiss Franc Index (.XDS).
Frederic Ruffy
WhatsTrading.com
