It’s back to school for bulls in Hewlett, but elsewhere “Bull and Bear TARPs” abound in Tuesday’s first half. As of 10:50 ET the “SPYder” (SPY) and “Cubes” (QQQQ) are up 0.25% to 0.75% on more of the same ol’ and still hard-to-handle conditions.
Dow component Hewlett Packard (HPQ) delivered an all-too-rare data bit this morning which found bulls cheering and bears covering in pre-market action. The computing giant posted a three cent earnings beat on profits of $1.03 per share and more importantly, raised guidance for Q1 and FY09.
For Q1 the company now sees a profit range of $0.93 - $0.95 and for FY09—an estimated $3.88 - $4.03 versus Street views of $3.85 per share. Execution, increasing market share in a difficult market environment, cost cutting and a stock buyback program were key drivers in Hewlett’s results. Shares of HPQ are up nearly 10% at 32.20, but well off session highs of 33.84.
One reason for bulls showing a bit of intraday restraint are three reports from Corning (GLW), Alpha Natural Resources (ANR) and Host Hotels (HST)—whether traders know the names or not. Corning, the world’s largest LED panel manufacturer, used in those nifty laptops from the likes of umm, Hewlett and television manufacturers—warned this morning. Shares are off 14% at 7.75 and hitting five year lows.
Steam and metallurgical coal producer Alpha Natural Resources is down a similar 14% at 21.35 and retesting its year-to-date lows. The company and metals peer Cliffs Natural Resources (CLF) scrapped their $10.0B merger citing the economic environment and falling commodity prices as factors.
And separately, you might not know Host Hotels, but chances are you’ve slept in one of their beds—just not as much these days. The publicly-owned REIT and majority owner in Marriott withdrew its profit outlook for the fiscal year due to the economy and worsening travel spending trends. Shares of HST are down just fractionally, but sitting at fresh five-year lows of 6.70.
Elsewhere, the broader market remains bid, but barely so—if traders appreciate existing volatility, lower overall prices and negative sentiment good at grinding bulls into submission. That being said, “Bull and Bear TARPs” style action are finding a catalyst in a battle of words featuring TS Paulson and Fed Chief Bernanke versus Congress and the allocation of taxpayers $700B bailout or TARP; the object of their affection.
Simplified and still locked in fisticuffs, lawmakers are looking for funds to be diverted towards foreclosures and Paulson & Co. argue for its use by investing in financial institutions. And at the same time, the testimony is good for making both bears and bulls go “BOO!” on any given intraday candlestick.
On the economic front, mixed PPI data has also been a catalyst worthy of doling out a few bull and bear traps as traders attempt to digest the benefits and negative implications of the report. For October, producers paid 2.8% less than the prior month and bested Street views expecting a decline of 1.9%. However, core levels which exclude food and energy rose by 0.4% and three-tenths above estimates of 0.1%.
And finally, halfway through the lunchtime nosh and a few bulls are still celebrating with a “Yahoo!” The Dow is still leading and up 1.20% with Hewlett to thank in large part. And bulls that happened to conveniently slip into shares of Yahoo (YHOO) in the last four sessions have bragging rights as well on news of Jerry Yang stepping down as CEO. For most other bulls, relatively tight intraday ranges and a tape that continues to fail at finding upside traction despite the historic bottoming witnessed—is difficult business. Results on any bargain-hunting efforts of late, have by and large, been much better served by “buying the dips and selling the very few existing rips” or selling upside juice as a hedge.
“Mooving” forward and I’m inclined to be more neutral and less “Obamaistic” about even those cautiously bullish forays. The self-described “Mama Bottom” in the S&P500 is still holding, but looking increasingly prone to failure and being coined a “Descending Tyangle” in a market which remains very mad, all things considered.
Chris Tyler
Staff Writer & Options Strategist
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