Stocks are indicated lower Friday, the day after the Dow Jones Industrial Average staged an impressive afternoon rally that, over the course of three hours, lifted it from a low of 7,966 to a high of 8,870, or 11.3 percent. At the end of Thursday's trading session, the Dow had added 553 points, or 6.7 percent, and recovered more than 80 percent of the losses from the three days before. The Dow is down 109 points on the week.
Indications point to early losses for the Dow Friday morning, as investor focus shifts back to the economic data. Less than an hour before the start of trading in New York, stock index futures indicate the Dow might fall more than 125 points in early trading. The NASDAQ is indicated about 15 points lower.
The latest retail sales numbers offered investors little reason to cheer. According to the Commerce Department, sales fell a record 2.8 percent during the month of October. Economists were looking for a 2.2 percent drop. Excluding autos, sales fell 2.2 percent, also worse than the 1.2 percent economists had expected.
Reports on business inventories and consumer sentiment are due out at 10:00 a.m. Eastern Time. Economists expect the business inventories report to show a decline of .1 percent in September. The University of Michigan Sentiment Index for November is expected to show a preliminary reading of 57, down from 57.6 at the end of October.
Bonds are holding higher on the heels of the weak retail sales data. The benchmark ten-year Treasury bond is up 11/32nd and now yields 3.74 percent. The buck is mixed, falling 1.56 to 96.36 on the yen. The euro slipped back to 1.265 against the US currency.
Trading is relatively quiet elsewhere. In Asia, Japan's Nikkei added 2.7 percent and Hong Kong's Hang Seng gained 2.4 percent. Major averages were trading 2 to 3 percent higher across Europe, with German's DAX pacing the advance with a 3 percent gain.
Crude oil is up 16 cents to $58.40 a barrel. Gold gained $30 to $735 an ounce.
Among the stocks to watch, Ford (F) and General Motors (GM) might see action after Senate Democrats pushed forward plans to vote on the $25 million loan next week. JC Penney (JCP) is trading down after reporting better-than-expected third quarter profits, but guiding estimates down for the fourth quarter. Citigroup (C) announced job cuts. Nokia (NOK) shares sank after the company cut its outlook for fourth quarter mobile device sales.
In the options market, trading volume perked up, as investors reacted to the wild market swings Thursday. Approximately 7.8 million puts and 7.7 million calls traded across the options exchanges. The CBOE Volatility Index (.VIX) finished down 7.46 to 59.
Put options on Urban Outfitters (URBN) saw active trading, after an investor closed a massive bear put spread in the January 2010s that included about 80,000 contracts. The position was initiated in July and, with shares down 55 percent since that time, the investor possibly netted $25 million on this trade.
Puts on Best Buy (BBY) were active for a second day. Activity picked up Wednesday after the electronics retailer issued an earnings warning, citing "rapid, seismic changes in consumer behavior." It continued Thursday, with another with 26,000 BBY puts and 4,500 calls traded Thursday. Bearish traders also showed interest in Verizon (VZ), American Express (AXP), and Charles Schwab (SCHW).
Abercrombie & Fitch (ANF) November call options saw active trading ahead of an earnings report due out today. Prudential (PRU) was the subject of bullish spread trading early in the day. Bullish order flow was also seen in Research in Motion (RIMM), Micron Technology (MU), and the Ultra Oil & Gas Proshares (DIG).
Frederic Ruffy
WhatsTrading.com
