Possible "G-rated" and happy "Merger Monday" headlines haven't made the final cut with bulls due to a villainous market show out of China. As of 10:45 ET the S&P500 (SPY) is off 1.10% as a somewhat quieted bull tries to make a show of it on this last day of August.
Maybe Wall Street can still put together one of those storybook happy endings? Two surprise merger deals and better-than-expected national manufacturing data have taken a backseat to the latest corrective move in China.
The latest wave of "red chutes" in Asia triggered overnight following continued and growing concerns regarding waning commodity demand and asset prices running ahead of those attached growth miracles still being promoted stateside.
For its part, the worst index performer remains retail traders' vehicle of choice, the Shanghai Index. That market proxy shed a whopping 6.7% and is now off 23% since its early August highs.
Do miracles still happen? This morning could have made bulls giddy with "Merger Monday" headlines to close out what's still been a very good August and a historic six month run for the broader averages.
Baker Hughes (BH) is acquiring BJ Services (BJS) in an oil and gas services deal worth an estimated $5.50B. The merger is valued at a 16% premium compared to Friday night's closing price of $15.43 in shares of BJS.
For Baker Hughes, the stock-and-cash deal looks to be a move to go head-to-head with sector giants Halliburton (HAL) and Schlumberger (SLB). The combined entity of Baker and BJ would establish "a major player in the key NA pressure pumping" market according to Reuters.
In a second and similar type handshake, entertainment giant and Dow component Disney (DIS) is buying up comic book impresario and production company Marvel (MVL). The bid is 29% above Friday's close in a $4.0B stock and cash offer which entitles shareholders to $30 per share in cash plus 0.74 DIS shares for every one share of MVL.
The acquisition of Marvel will give Disney ownership of an additional 5,000 Marvel characters which include marquee film franchises like Spiderman and Ironman. Hmm, Donald Duck versus Spiderman in 2011 anyone?
Separately and also not being considered today's feature showing with bulls, national manufacturing conditions via the Chicago PMI bested views of 48.9% and hit 50%. The August reading improves upon July's 43.4 and also marks the line in the sand between economic contraction and expansion for manufacturing. Today's results are the strongest since January 2008 when the index registered 50.5%.
Elsewhere, Barron's hedged their happy-go-lucky cover story of The Top 100 (bullish) Advisors and which stocks those folks were currently promoting six months into the rally by going after the market's latest love child, insurance giant and ex Dow component AIG Intl (AIG).
Shares of AIG had been doing what Cramer would call "En Fuego" move of late, rising more than 50% last week and 250% for the month of August courtesy of a reverse split attention getter and investors betting on financial turnarounds in government-sequestered zombies.
In the weekend piece, Barron's took a decidedly cautious-to-bearish stance on shares of AIG. The gist of the article discusses AIG's stock being overvalued based on likely short-covering (18% of 700.00M share float), hopeful bulls wanting ex-head Greenberg to take the helm and optimism continued credit and financial market strength will persist in bolstering the insurer's monster portfolio of exotic and one-time toxic instruments that nearly collapsed the company and broader markets.
For their part, investors are booking profits, bailing from momentum and a few bears, finding some relief with shares of AIG off about 8.50% at 46.10. On the option front, most active are Friday's closing ATM's, the now out-of-money but still dollar-heavy September 50 calls.
Nearly 6,800 of the 50s have traded versus open interest of more than 23,000. With today's price schnitzel in shares of AIG, the contract is shedding around 35%, down 2.40 points at $4.30. Implieds are mostly on par with last week's levels and remain at a hefty sounding, but mostly appropriately-priced 145% IV for those committed to the cell with the padded walls.
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler's Forum
The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
