Shares of Nike are sprinting higher but the baton for a market lift has been dropped in Wednesday's intraday trading. As of 11:15 ET the SP-500 (SPY) is off 0.85% on mostly mixed reports and end-of-quarter rebalancing that's apparently out-of-whack for bulls wanting more steroid enhanced performance.
"Holy Schnikes!" Some technical-based cup-with-handle leadership has emerged from Nike (NKE) following its better-than-expected profit results. Shares gapped aggressively higher and are trading up an even firmer 7.50% at 64.60 after the athletics gear giant posted a $0.07 beat with earnings of $1.04 aided by cost cutting efforts.
For the bears, a sales drop of 11.7% on revenues of $4.80B also missed Street views of $4.90B. At the same time, worldwide orders fell 6%. However, the currently in-control bulls appear to be responding to Nike's stronger-than-expected gross margins of 46.2% versus forecasts of 43.8% and generally strong analyst favor punctuated by Goldman's shift from "Neutral" to "Buy."
In other corporate confessionals and apparently forcing bulls to choke, shares of franchise restaurant operator Darden's (DRI) are off 8.10% at 33.20. The owner of eateries like Red Lobster, Olive Garden and LongHorn Steakhouse missed views by a penny with profits of $0.67 per share, fell shy of meeting sales forecasts and issued reduced, bracketing but weak FY10 EPS guidance of $2.59 - $2.85 versus consensus estimates of $2.81.
On the economic front, a pre-market bid firmed into the Opening Bell following better-than-expected GDP results that trumped stronger-than-expected job losses [254K vs 200K] via the ADP report. Bulls cheered Q2 GDP data that showed an annualized drop of 0.7% versus expectations calling for a decline of 1.20% and which marked a solid improvement from earlier estimates of 1.0%. PCE data came in with an in-line increase of 2.0%, while personal consumption fell by 0.9% but beat views by one-tenth of a percent.
Helping take some of the wind out of the bulls sails this morning, early on and with the sound of the Opening Bell still reverberating in the background, regional manufacturing data from the Chicago PMI disappointed investors. A contraction reading of 46.1 badly missed estimates calling for a two point expansion reading of 52 to improve upon the then trending up August reading of 50.0.
Elsewhere, a report on weekly oil inventories has, almost ironically enough, sent Black Gold (USO) gushing higher by 3.75% to 35.60 following a larger-than-expected build of 2.79M versus 2.00M. More in keeping with the report which suggests continued waning demand, the energy complex (OIH, XLE) has failed to find a sympathetic bid with its mixed fractional performance.
Prodding oil bulls higher, traders can look to dollar (UUP) weakness in Wednesday's first half, as well as likely short-covering. Intraday, the price surge in USO has broken a small bearish flag below daily supports built over the past week.
Finally, in heat-seeking option action Chipotle Grill (CMG) is seeing a bit of unusual put activity. More than 6,200 puts versus just a couple hundred calls have traded. The action is concentrated in an apparent opening put vertical on 3,000 contracts using the October 90 and 85 puts.
Priced around $.055 per spread the positioning looks to a nice way to sell some "hot and spicy" premium with protection following yesterday's cup-with-handle breakout above shares "proper buy point" of 95.28. Of course, the buyer of the spread might say otherwise, but depending on whether the spread is linked to an existing long stock position, both traders may be rooting for the same thing without even realizing it.
Chris Tyler
Senior Staff Writer & Options Strategist
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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.
