Early indications point to market weakness Tuesday, with early focus on earnings and the financials. About an hour before the opening bell on Wall Street, stock index futures indicate the Dow Jones Industrial Average might lose another 60 or 70 points in early trading.
With no economic data due out until Thursday morning, earnings are the main focus of attention on Wall Street. Dow components Merck (MRK), DuPoint (DD), Coca Cola (KO), and Caterpillar (CAT) are all lower on the heels of their respective earnings reports.
DuPont slipped 3.3 percent after reporting earnings of 54 cents per share, which beat Street estimates by 2 cents. Revenues fell short of estimates and the chemical company also issued inline guidance for the full year.
Merck (MRK) is off 3.3 percent after reporting earnings of 74 cents per share and three cents shy of analyst estimates. Revenues also fell below expectations.
Coke is off 2 percent after reporting 65 cents per share for the quarter, which was in-line with Street estimates. Caterpillar fell 5.5 percent after posting its first quarterly loss since 1992.
Yahoo (YHOO) and Advanced Micro (AMD) report earnings after the closing bell.
Meanwhile, the financials will be watched the day after credit worries sent BofA (BAC) and Citi (C) reeling for respective losses of 24 percent and 19.5 percent. The selling continues Tuesday morning. BAC is down another 6.5 percent and C is off 5.4 percent.
Treasury Secretary Tim Geithner is on Capitol Hill today speaking about the bank stabilization plan.
Stocks are trading broadly lower overseas as well. In Asia, Hong Kong's Hang Seng lost 3 percent and Japan's Nikkei closed down 2.3 percent. UK's FTSE is leading markets lower across Europe with a 1.7 percent decline.
Faltering financials and the flight-to-safety bid are giving bonds are modest lift in early pit trading. The benchmark ten-year Treasury bond is up 6/32nd and yields 2.81 percent.
The dollar edged up .07 to 89.06 against the yen. The euro is up .0013 to 1.2931 against the dollar.
Crude oil slipped 62 cents to $45.26 a barrel. Gold gained $6.5 to $894 an ounce.
Trading was active in the options market and volatility rose after the financial led the Dow Jones Industrial Average to a 289-point loss Monday. The CBOE Volatility Index (.VIX) snapped back 5.24 to 39.18. Approximately 9.1 million calls and 7.9 million puts traded across the exchanges.
NetApp (NTAP) call options were active Monday after Barron's mentioned that IBM (IBM) might start eyeing the company now that IBM and Sun Microsystems (JAVA) merger talks have broken down. NTAP bucked the bearish trend and finished the day up 20 cents to $17.79 per share. 22,000 calls and 4,000 puts traded on the day. Active trading was seen in June 12.5, May 17.5, May 20, and May 21 calls.
Bullish trading was also seen in Dicks Sporting Goods (DKS), Nothrup Grumman (NOC), Data Domain (DDUP), and the US Oil Fund (USO).
Bearish traders surfaced in Sony (SNE) Monday. Shares fell 67 cents to $25.70 and options volume rose to 3X the normal levels. Most of the activity was in October puts at the $20 strike. 5,137 contracts traded. Open interest increased to 5,182 from 199 contracts. In addition, with 100 percent of the volume hitting ask-side of the bid-ask spread, it appears that some investors were buying puts to open new positions as shares of the Japanese electronics company slipped lower Monday.
Bearish trading also surfaced in Calpine (CPN), WR Grace (GRA), and Amkor Technology (AMKR).
Frederic Ruffy
WhatsTrading.com
