Stocks are indicated higher Friday morning, after the latest monthly unemployment report showing the economy losing fewer jobs than expected in April and after the results of the government's bank industry stress tests sparked a rally in some of the financials.
Less than an hour before the opening bell on Wall Street, index futures indicate that the Dow Jones Industrial Average might add 100 points at the open. The NASDAQ is set to open 10 to 15 points higher.
Stock index futures held steady after the latest unemployment report from the Labor Department showed the economy losing 539,000 jobs in April, which was not as bad as the 600,000 job loss economists had predicted. As expected, the unemployment rate jumped to 8.9 percent from 8.5 percent.
Some of the other details were weaker than expected. March numbers were revised down to show a loss of 699,000 jobs, down from an initial reading of 663,000. Hourly earnings rose .1 percent, and less than the .2 percent economists had expected. The average workweek held steady at 33.2 hours.
Stock index futures had pushed solidly higher before the jobs numbers hit the newswires and held on to most of the gains when the data were released. Some of the bank stocks found a bid late Thursday when government released results of bank industry stress tests. 10 of the 19 banks tested will need to raise a total of $75 billion, which was not as bad as some market watchers had feared.
Dow components BofA (BAC) and Citi (C) are up 9.8 percent and 7.6 percent. While both need more capital, the news had been leaked before the official government report was released.
Wells Fargo (WFC) and Morgan Stanley (MS) are trading lower after announcing plans to raise capital through common stock offerings.
PNC (PNC), Key (KEY), GMAC (GMAC), Regions Financial (RF), Fifth Third (FITB) and SunTrust (STI) are also being asked to raise more capital.
Bonds are lower. After taking a big hit following a poor auction of 30 year Treasury bonds Thursday, the benchmark ten-year Treasury bond is down another 3/32nd and yields 3.32 percent.
The dollar gained .11 to 99.20 against the yen. The euro is up .0084 to 1.3474 on the buck.
Crude continues to push higher. Crude gained another $1.15 to $57.86. Gold edged down 50 cents to $915 an ounce.
Trading was active in the options market Thursday, as volatility picked up a little and the Dow Jones Industrial Average closed down 102 points. The CBOE Volatility Index (VIX) bounced back from 7-month lows to finish up .99 to 33.44. Approximately 12.5 million calls and 9.5 million puts traded across the seven exchanges.
Elan (ELN) calls were active as takeover chatter resurfaced Thursday. The talk is unsubstantiated, but seemed to help lift the shares. ELN gained 48 cents to $7.04. In the options, volume rose to 3X the typical levels. 23,000 calls and only 400 puts traded. May 7 calls were the most actives, with 12,400 traded. There seemed to be a mix of both buyers and sellers in the contract. Some of the activity was probably closing trades, as May options come off the board a week from tomorrow.
Bullish trading was also seen in Sandisk (SNDK), Ann Taylor (ANN), and NASDAQ (NDAQ).
Call activity picked up in Patterson-UTI Energy (PTEN) Wednesday, as some investors were buying June 15s. Sentiment seemed to shift Thursday, however. The stock fell 81 cents to $14.24 and options volume rose to 2X the usual. 4,200 June 15 puts traded and nearly all of that volume hit ask-side of the bid-ask spread. Open interest data indicate 3,250 contracts of new positions were opened. Looks like put buyers looking for Thursday's slide to continue. Barclay's downgrades the stock to UnderWeight today.
Bearish trading also surfaced in Cypress Semiconductor (CY), Manitowac (MTW), and Scientific Games (SGS).
Frederic Ruffy
WhatsTrading.com
