Stocks are indicated lower Friday morning, with poor economic data and shares of Citigroup (C) expected to weigh on the Dow Jones Industrial Average in early trading. Less than an hour before the opening bell on Wall Street, stock index futures suggest that Dow might fall more than 130 points in early trading. The NASDAQ is indicated 20 to 25 points lower.
Shares of Citigroup are down 43 percent to $1.40 after the bank said it had reached a deal with the government in which the government and some private investors will swap preferred shares for common stock. The plan does not include any additional government funds. Citi also said it will reshuffle is board and suspend dividend payments on preferred shares.
Dow component BofA (BAC) is down 17.5 percent to $4.43 and JP Morgan (JPM) fell 6.3 percent to $21.61.
On the economic front, a report released before the start of trading in New York showed economic growth [GDP] plunging 6.2 percent in the fourth quarter, which was a lot worse than economist estimates for a 5.4 percent decline.
The Chicago Purchasing Manager's Index [PMI] is due out at 9:45 ET. Economists expect the gauge of regional manufacturing activity to fall to 33 in February, down from 33.3 the month before.
University of Michigan revised Consumer Sentiment Index for February follows at 10:00. Economists expect a final reading of 56, down slightly from 56.2 reported earlier this month.
Bonds are seeing gains amid ongoing weakness in the equity market. The yield on the benchmark ten-year Treasury, which ran back to 3 percent early Thursday, is back down to 2.92 percent.
The dollar fell .98 to 97.23 on the yen. The euro slid .0096 to 1.2614 against the US currency.
Crude oil is off $2.10 to $43.12 a barrel and the flight-to-safety trade is lifting gold. The precious metal gained $18 to $960.60.
In the options market, trading was relatively uneventful Thursday, even as the Dow Jones Industrial Average closed down 89 points to 7,182 and 220 points from its best levels of the day. The CBOE Volatility Index (.VIX) edged down .01 to 44.66. Approximately 6.5 million calls and 5.1 million puts traded on the day.
Calls on Dell Computer (DELL) saw action ahead of earnings. 84,000 contracts traded, or about five times the normal levels. Shares slipped 15 cents to $8.21 and 34,000 March 9 calls traded. Another 17,730 March 8 calls crossed the tape. While some of the activity was likely closing trades ahead of the news, some buyers seemed to be taking bullish positions in anticipation of a post-earnings rally. Shares are up 1.2 percent after the company reported earnings that were not too far from Street expectations.
Bullish trading was also seen Titanium Metals (TIE), SanDisk (SNDK), and BofA (BAC).
Industrial electric equipment maker Eaton (ETN) saw increasing volume Thursday. Shares fell $2.19 to $36.27 to a new 52-week low. Options volume jumped to four times the typical levels and March 35 and 30 puts saw the most action, with about 4500 contracts traded total. With volume exceeding existing open interest, it appears that some investors were taking bearish positions in the company ahead of a presentation at a NYC analyst meeting now underway Friday morning.
Bearish trading was also seen in Suncor Energy (SU), Wells Fargo (WFC), and Bankrate (RATE).
Frederic Ruffy
WhatsTrading.com
