Stocks are indicated lower Monday morning amid ongoing worries about the global economy and corporate earnings. Forty-five minutes before the opening bell on Wall Street, stock index futures hit at a third consecutive triple digit loss for the Dow Jones Industrial Average.
Uncertainty about government efforts to stimulate the economy is weighing on sentiment. Republican leader Mitch McConnell warned Sunday that the stimulus package passed in the House last week might be defeated in the Senate because of too much spending.
Meanwhile, President Obama's "bad bank" plan hasn't yet emerged from the White House amid concerns about the feasibility of the proposal.
The lack of action in Washington comes ahead of a busy economic calendar this week, including key payroll data Friday expected to show the economy losing another 500,000 jobs in January.
Data released Monday morning showed personal incomes falling .2 percent and spending falling 1 percent in December. Economists were looking for declines of .4 percent and .9 percent, respectively.
Data on construction spending and manufacturing are due out at 10:00 a.m. ET. Economists expect the construction numbers to show a 1.2 percent decline for December, which follows a .6 percent drop the month before.
The ISM manufacturing index is expected to edge up to 32.5 in January, not much changed from 32.4 the month before.
Bonds are holding a bit higher in early pit trading. The benchmark ten-year Treasury bond gained three ticks and now yields 2.828 percent. The dollar slipped 89.305 on the yen and the euro is making a run below 1.275 on the buck.
Crude oil slipped 68 cents to $41.00 a barrel on concerns about global demand. Gold is giving back some recent gains, down $14.4 to $914 an ounce.
Stocks traded broadly lower in overseas action. In Asia, Japan's Nikkei fell 1.5 percent and Hong Kong's Hang Seng gave up 3.1 percent. Similar losses were seen across Europe, with France's CAC 40 Index pacing the decline with a 2.4 percent slide.
Among the stocks to watch, Pfizer (PFE) is moving higher after Credit Suisse upgraded the stock to Outperform from Neutral. American International Group (AIG) might see action after the Wall Street Journal reported the company is in talks with the government about a financial lifeline for some assets. Humana (HUM) is lower after reporting quarterly earnings of $1.03 per share, which missed analyst estimates by four cents. Sandisk (SNDK) reports after the closing bell.
Trading in the options market turned decidedly more cautious late in the week, as the Dow Jones Industrial Average suffered its second double digit loss Friday and finished the month of January down 8.8 percent. The CBOE Volatility Index (.VIX) finished the day up 2.24 to 44.87 and approximately 5.9 million puts and 5.7 million calls traded across the US exchanges.
The ProShares UltraShort Real Estate ETF (SRS), an exchange-traded fund is designed to move two times the inverse of the Dow Jones Real Estate Index, finished the day up $3.62 to $59.32 and trading was active in April calls. Notable spread trades surfaced in the SRS April 60 and April 100 call spread, as some players positioned for a substantial move higher in the ETF.
UBS (UBS) March 12.5 and March 10 puts were active. Shares finished the day up 43 cents to $12.45 and the activity had all the characteristics of bear put spreads. Bearish order flow also picked up in Juniper Networks (JNPR), Broadcom (BRCM), and Chattem (CHTT).
Meanwhile, many of the gold mining companies saw bullish trading, as gold continued its run higher. Gold rose more than $20 Friday and gained 15 percent over two weeks. Bullish spread trading was seen in Newmont Mining (NEM) and Barrick Gold (ABX). Speculative call buyers surfaced in Harmony Gold (HMY) and Coeur D'alene (CDE).
Frederic Ruffy
WhatsTrading.com
