Early indications point to mixed trading Wednesday, the day after skepticism about government plans for the financial industry sent equity markets reeling. 45 minutes before the opening bell on Wall Street, stock index futures hint at modest gains for the Dow Jones Industrial Average and a small loss for the NASDAQ.
Major US stock market averages suffered losses of 4 percent Tuesday after US Treasury Secretary Tim Geithner provided a framework for a comprehensive financial rescue package. While many of the aspects of the plan were as expected, a clear lack of details and actionable items raised concerns that the government isn't doing enough to help major financial institutions rid themselves of the toxic debt that strain the credit markets and pose a risk to the solvency of some of the biggest banks.
Yet, while fear sent stocks plunging Tuesday, the situation appears to be stabilizing Wednesday morning. Equity markets are modestly lower overseas. In Asia, Japan's Nikkei edged down .3 percent and Hong Kong's Hang Seng gave up 2.5 percent. In Europe, major averages were mixed, with modest losses seen in France and the UK, but small gains in Germany's DAX.
The economic calendar remains light. A report released at 8:30 ET, showed the trade balance shrinking from $41.6 to $39.9 billion in December, compared to consensus forecasts of $35.7 billion.
With little else to guide trading, bonds are holding a bit higher in quiet trade. The benchmark ten-year Treasury is up a few ticks and yields 2.82 percent. The dollar is steady at 90.14 on the yen and 1.2969 against the euro.
Crude oil is up 56 cents to $39.11 ahead of weekly inventory data at 10:30 a.m. ET. Gold gained $11 to $825.20 an ounce.
Among the stocks to watch, Research in Motion (RIMM) will weigh on the NASDAQ after the company lowered its fourth quarter earnings outlook. RIMM fell 12.3 percent. Applied Materials (AMAT) is trading lower after reporting earnings that met analyst estimates, but revenues that fell short of expectations. NVidia (NVDA) shares are taking a hit after the company posted an 18-cent quarterly loss, which was double the analyst estimate.
An offering is on tap for today. Bristol Meyers (BMY) spins off Mead Johnson Nutrition in a $600 million initial public offering.
In the options market, volume and volatility picked up as the Dow Jones Industrial Average sank 382 points Tuesday. Approximately 8.8 million calls and 7.7 million puts traded on the day. The CBOE Volatility Index (.VIX) rallied 3.03 to 46.67.
The Proshares Ultra Financials (UYG), an exchange traded fund that moves twice (200 percent) the moves in the Dow Jones Financial Index, sank 69 cents to $3.01 Tuesday. In the options market, call volume surged to more than 200,000 contracts, compared to 33,000 puts. February 4, March 4, and February 3 calls saw the most volume and it seemed that some investors were aggressively selling premium as shares of the ETF fell towards $3.
Comerica (CMA) took a hit and put buying picked up. Shares of the regional bank finished down $3.40 to $15.66 and options volume jumped to two times the average daily levels. 7,450 puts and 2,540 calls traded. Bearish trading was also seen in Vale (RIO), Broadcom (BRCM), and Newell Rubermaid (NWL).
Savient Pharmaceuticals (SVNT) saw a second day of active trading. Bullish spread traders surfaced in the stock Monday. Tuesday, with shares down 9 cents to $5.72, investors were showing interest in May 15 call options. Bullish trading was also seen in Century Aluminum (CENX), Microchip Technology (MCHP), and Juniper Networks (JNPR).
Frederic Ruffy
WhatsTrading.com
