Stocks are set to open broadly higher on hopes the worst is over for the global economy. Less than an hour before the opening bell on Wall Street, stock index futures indicate the Dow Jones Industrial Average might add more than 100 points in early trading. The NASDAQ is set to add 15 or 20.
Stocks moved broadly higher overseas after the major averages closed with solid gains in the US Wednesday. The Dow Jones Industrial Average jumped 169 points yesterday after the Federal Reserve said the recession might be easing.
Stocks rallied across Asia. Japan's Nikkei gained nearly 4 percent and Hong Kong's Hang Seng rose 3.8 percent. Major averages are broadly higher across Europe, with a 2.4 percent gain in Germany's DAX pacing the advance.
In the US, the economy is back in focus. A report released before the stock exchanges opened showed weekly claims falling to 631,000 last week, down from 645,000 and better than economist estimates of 640,000.
A separate report showed personal incomes falling .3 percent and spending declining .2 percent in March. Economists had predicted a decline of .2 percent in incomes and .1 percent in spending.
Stock index future had moved higher prior to the economic numbers and held on to the gains when the data were released.
Bonds are lower. The benchmark ten-year Treasury is down 6/32nd and yields 3.13 percent. The dollar gained .77 to 98.26 against the yen. The euro fell .0039 to 1.3229 on the buck.
A report on regional manufacturing activity is due out at 9:45 a.m. eastern time. Economists expect the Chicago Purchasing Managers Index [PMI] to improve to 35 in April, up from 31.4 the month before.
Among the stocks to watch, Dow components Procter & Gamble (PG) and Exxon Mobile (XOM) are seeing modest gains after earnings. PG is up 1 percent after reporting 84 cents per share for the quarter, which beat Street estimates by 4 cents.
XOM edged up .6 percent after reporting 92 cents for the quarter, which missed by 3 cents. However, revenues totaled $64 billion, and well ahead of the $54 billion analysts had expected.
The automakers are in the spotlight after the Wall Street Journal reported that Chrysler is on the brink of bankruptcy. An announcement is due out at Noon eastern time. Investors seem unfazed. GM (GM) shares are up 5.5 percent to $1.91.
Crude oil is up 61 cents to $51.58 and gold sank $18.50 to $882.00 an ounce.
Volume in the options market picked up a bit as stocks rallied Wednesday. The CBOE Volatility Index (.VIX) fell 1.75 to 36.20 and approximately 7.8 million calls and 6.2 million puts traded across the exchanges.
Gerdau (GGB), a Brazil-based steel and iron company, saw increasing options activity Wednesday. Shares gained 27 cents to $6.97 and options volume rose to 2X the normal levels. 3,600 calls and only 5 puts traded. The top trade of the day was 2500 May 7.5 calls at the offer for 15 cents. Open interest data indicates an opening call buy. It appears that June 7.5 calls were also being bought. There was no news to explain the increasing activity, but it seemed to reflect a bullish view in anticipation of a move higher in Gerdau shares.
Bullish trading was also seen in Nokia (NOK), Chico's FAS (CHS), and Virgin Media (VMED).
Las Vegas Sands (LVS) puts were heavily traded Wednesday. Shares of the casino operator rose 74 cents to $7.72 and May 6 puts saw heavy trading. More than 54,000 contracts changed hands, compared to only 4,800 contracts of existing open interest. One player bought 40,000 contracts against a position in LVS shares. Another appeared to buy 8,500 contracts outright. The put buying seems to reflect expectations for heightened volatility in LVS in the short-term. Earnings are due out soon (exact date not posted), perhaps before the May options expiration.
Bearish trading also surfaced in International Paper (IP), Xilinx (XLNX), and BofA (BAC).
Frederic Ruffy
WhatsTrading.com
