Stocks are set to open lower on worries about the spreading of a deadly flu. About forty-five minutes before the opening bell on Wall Street, stock index futures indicate the Dow Jones Industrial Average might lose 150 points at the open. The NASDAQ is indicated 20 to 25 points lower.
The swine flu isn't yet a pandemic, but fears are growing that its spread could affect the global economy just when a recovery appears to be getting underway. More than 100 people have died in Mexico and mild cases of the flu have infected people in the US and Canada as well. Spain is the first European country with a confirmed case.
Some sectors, especially those heavily involved in tourism like airlines, hotels, and cruise ships, are considered at risk if the outbreak continues. Makers of antivirals, GlaskoSmithKline (GSK), and Roche Holdings, moved higher in overseas trading.
Concern about swine flu comes as investors brace for another busy week of earnings news. Results Monday morning are mixed.
Dow component Verizon (VZ) is out with quarterly earnings of 63 cents per share, which was 4 cents better than analyst estimates. Humana (HUM) said it earned $1.22, which beat Street estimates by four cents. Qualcomm (QCOM) reported a quarterly loss of 3 cents per share.
The financials will be in focus this week, as investors wait for further details about the government's "stress tests". While official news isn't due out until May 4, the action in the share prices will be watched closely as a government white paper released Friday emphasized the value of common equity when measuring bank capital.
Dow components BofA (BAC) and Citi (C) are down 3.7 percent and 4 percent, respectively, in pre-market trading.
With no economic data due out until Tuesday morning, bonds are getting a lift from the "flight-to-safety" bid. The benchmark ten-year Treasury bond is up about a half point and yields 2.94 percent.
The dollar fell .49 to 96.69 against the yen. The euro slipped .0123 to 1.3118 on the dollar.
Crude oil is down $2.70 to $48.85 a barrel and, after three days of big gains, gold fell $4.80 to $909.30 an ounce.
Volume and volatility eased in the options market after stocks moved mostly higher Friday. The Dow finished up 119 points and the NASDAQ gained 42. The CBOE Volatility Index (.VIX) slipped .33 to 36.82 and 7.5 million calls and 5.8 million puts traded across the exchanges.
Gold and silver miner Coeur D'Alene (CDE) saw increasing volume Friday. Gold gained about $20 over the past two days and finished the week around $914 an ounce. Meanwhile, CDE shares moved up 25 cents to $1.34 and options volume rose to 4X the normal levels Friday. A lot of the activity was concentrated in Jan 2010 calls at the $2.5 strike. 5,800 traded, all in lots of 500 or fewer contracts. In addition, with 91 percent hitting ask-side and open interest increasing by 2,500, it appears that call buyers were dominating the action and positioning themselves for additional gains in CDE.
Bullish trading was also seen in Eldorado Gold (EGO), Eastman Kodak (EK), CIT Group (CIT), and the PHLX Housing Sector Index (HGX).
Bearish traders surfaced in Lulumon Athletica (LULU) Friday. Shares rose 66 cents to $14.35 and options volume rose to 2X the typical levels. 3,100 puts and 330 calls traded. While May 12.5 puts were actively traded, June 12.5 puts were the day's most actives. More than 2000 traded and, with nearly all of the volume hitting at the offer and open interest increasing by 2000, it looks like put buyers were dominating the action and possibly bracing for weakness in LULU shares.
Bearish trading also surfaced in United Healthcare (UNH), Chesapeake (CHK), Baldor Electric (BEZ), and the SPDR Retail Trust (XRT).
Frederic Ruffy
WhatsTrading.com
