Early indications point to market strength Wednesday morning, after the latest jobs data were not as grim as some economists feared and after shares of some of the major banks battled back from morning losses to move higher.
About forty-five minutes before the opening bell on Wall Street, stock index futures indicate that the Dow Jones Industrial Average might add 70 points at the open.
The US economy lost 491,000 private sector jobs in April, according to the latest report from Automatic Data Processing. Economists were looking for a loss of 645,000.
In addition, while the headline number suggests that the economy is still losing jobs, the losses were not nearly as bad as the month before. March numbers were revised to show a loss of 708,000 jobs, down from an initial reading of 742,000.
Weekly jobless claims numbers are due out Thursday and then attention turns to the Labor Department's monthly payroll report Friday. Economists expect the report to show a loss of 620,000 jobs in April and an unemployment rate of 8.9 percent, up from 8.5 percent the month before.
Bonds are lower on the better than expected ADP jobs numbers. The benchmark ten-year Treasury bond is off 5/32nd and yields 3.18 percent.
The dollar gained .19 to 98.98 against the yen. The euro is up .0074 to 1.3370 on the buck.
Bank of America (BAC) is in the spotlight after the Wall Street Journal reported that the bank might need to raise more than $30 billion in capital. The article comes a day before the official release of stress test results Thursday and the day after the Wall Street Journal reported that 10 of 19 banks will need to raise more capital due to the stress tests.
The initial reaction to the news sent BAC to under $10 in pre-market trading. Shares had battled back, however, and were recently trading for $11.14, up 2.8 percent from Tuesday's close. Dow components JP Morgan (JPM) and Citi (C) are also moving higher.
Commodities are strong. Crude oil is up 77 cents to $54.60 ahead of weekly inventory data due out at 10:30 eastern time. Gold gained $2.10 to $906.40 an ounce.
Sentiment remained bullish in the options market Tuesday, as the Dow Jones Industrial Average traded in a narrow 95-point range and closed down 16 points. The CBOE Volatility Index (.VIX) fell 1.12 to 33.41. About 9.9 million calls and 5.7 million puts traded on the exchanges, which sent the total put-to-call ratio to .58 and its lowest levels in more than three years.
Among the individual names seeing action, Amylin (AMLN) and Eli Lilly (LLY) calls were actively traded Tuesday after the two companies (along with Alkermes) announced a new drug application to the Federal Drug Administration for exanatide as a once a week treatment for diabetes. AMLN shares gained 27 cents to $11.85 on the news and 10,000 calls traded on the biotech company, compared to 1,700 puts. LLY gained 73 cents to $34.54 and 13,000 calls traded, compared to 2,600 puts.
Bullish trading was also seen in Geron (GERN), AIG (AIG), and Rackable Systems (RACK).
Put volume picked up in Oracle (ORCL) late Tuesday. Shares finished the day up 4 cents to $19.01 and 24,000 puts traded on the software-maker, compared to 4,600 call options. The top trade of the day was 17,000 June 14 puts for a dime, which was a large put buy, according to a source on the PHLX.
Bearish trading also surfaced in Wells Fargo (WFC), RR&D Donnelly (RRD), and Knight Transportation (KNX).
Frederic Ruffy
WhatsTrading.com
