Early indications point to a steady open on Wall Street Tuesday, but with not much new information to guide the market one way or the other. About forty-five minutes before the opening bell on Wall Street, index futures indicate that the Dow Jones Industrial Average might gain 40 or 50 points in early trading.
BofA (BAC) will help the Dow in morning action. Shares gained 2.4 percent in pre-market trading after the company raised $7.3 billion from overseas investors through the sale of a stake in China Construction Bank. The move was intended to bolster the bank's capital position and meet new government requirements.
Four other banks announced plans to tap the equity market to raised needed capital.
Ford Motor (F) is also issuing new common shares to raise funds. The automaker announced plans for an offering of 300 million shares. Ford is down 4.3 percent on the news. Shares of General Motors (GM), which is teetering on the brink of bankruptcy, are down 13.1 percent to $1.25 per share.
Bonds are lower after scoring big gains the day before. The benchmark ten-year Treasury bond slipped 12/32nd and yields 3.21 percent.
The dollar is taking a hit, down .55 to 97.05 on the yen. The euro recaptured 1.37 for the first time since late March.
Commodities are seeing early strength. Crude oil jumped $1.45 to $59.95 and briefly made a move back beyond $60 Tuesday morning. Gold gained $8.50 to $922 an ounce.
In the options pits, trading was active Monday and is likely to remain busy heading into the expiration later this week. Approximately 11.7 million calls and 8.5 million puts traded across the seven exchanges.
Risk perceptions rose a bit after the Dow Jones Industrial Average fell 156 points. The CBOE Volatility Index gained .82 to 32.97.
Norfolk Southern (NSC) shares slipped $1.57 to $36.44 following relative weakness in the rail names (UNP, BNI, CSCX, GMT, KSU) Monday. In NSC options, volume rose to 2X the usual. 9000 puts and 1425 calls traded. June 34 puts were the most actives, with 5,500 contracts traded total. In addition, with 88 percent hitting ask-side and volume exceeding existing open interest, it appears that put buyers were dominating the action and opening new positions in anticipation of further weakness in NSC.
Bearish trading also surfaced in Verisign (VRSN), Progressive (PGR), and Trina Solar (TSL).
Wyeth (WYE) calls were actively traded Monday. The stock closed down 19 cents to $43.66. Call volume jumped to 28,000 contracts, or about 10X normal. October 45 calls were the day's most actives, with 16,250 traded and open interest increased by 14.5K. In addition, with almost all of the trades hitting ask-side of the bid-ask spread, it appears that call buyers were dominating the action and looking for the stock to climb above 45 between now and mid-October.
Bullish trading was also seen in JA Solar (JASO), Elan (ELN), and Advanced Micro (AMD).
Frederic Ruffy
WhatsTrading.com
