Stocks are indicated broadly lower Monday, as global equity markets slump on fears of more fallout from the financial crisis. Less than an hour before the opening bell on Wall Street, stock index futures point to a possible triple-digit early loss for the Dow Jones Industrial Average. The NASDAQ is indicated 10 to 15 points lower.
Stocks are lower across Asia and Europe before the start of trading in New York. Japan's Nikkei slid 1.2 percent and to a new 26-year lows. Shinsei Bank lost 8.8 percent after announcing plans to boost capital by selling preferred shares. China's Shanghai fell 3.4 percent and Singapore's Straight Times Index lost 3.7 percent.
The banking sector led stocks lower across Europe, with HSBC (HBC), the continent's biggest bank, falling 10 percent on fears of further write-downs. Lloyd's Banking Group reached an agreement that gives UK's government a 77 percent stake in the bank. The FTSE is down 1.4 percent, Germany's DAX lost 1.1 percent, and France's CAC 40 Index gave up 1.5 percent.
In the US, Wells Fargo (WFC), JP Morgan (JPM), America Express (AXP), and the Select Sector Financials are seeing modest losses in pre-market action.
Fears about problems in the financial world were exacerbated after American International Group (AIG) secured more government aid and warned that its collapse could cripple money market funds.
Outside of the financials, Schering Plough (SGP) gained 13.7 percent on news Merck (MRK) is acquiring the company for $41 billion. Texas Instruments (TXN) might see some action ahead of a mid-quarter update after the closing bell. Aflac (AFL) is indicated lower after UBS downgraded the stock to Sell from Neutral.
With no real economic news to guide trading until reports on retail sales and jobless claims Thursday, bonds are drifting lower in uninspired action. The benchmark ten-year Treasury is down a few ticks and now yields 2.88 percent.
The buck gained .73 to 99 against the Japanese yen and the euro edged down .0065 to 1.2588 against the US currency.
Crude oil slipped 30 cents to $45.22 a barrel and gold lost $8.7 to $934 an ounce.
In the options market, trading was active Friday after the major averages finished a back-and-forth session with slim gains. The S&P 500 edged up .8. The CBOE Volatility Index (.VIX) slipped .84 to 49.33 and approximately 7.2 million puts and 7.8 million calls traded on the options exchanges.
Schering Plough (SGP) saw a surge in volume late in the day prior to the takeover announcement. Shares gained $1.31 to $17.63 and options volume rose to six times the normal levels Friday. 46,000 calls traded, compared to 17,000 puts. It appears that some investors were snapping up short-term call as the stock moved higher.
Bullish trading was also seen in National Semiconductor (NSM), Goodyear Tire (GT), and AK Steel (AKS).
The iShares MSCI South Korea Fund (EWY) saw more volume than usual. Shares finished the day up 64 cents to $22.04 and options activity rose to six times the average daily levels. Most of the activity was in the July 21 and 16 puts after a strategist apparently bought a bearish 1X2 ratio spread: buying 5,875 May 21 puts and selling twice as many May 16 puts. Open interest data suggests new positions in both contracts and, if so, the strategist is now poised for a significant move lower in the South Korea ETF.
Bearish trading also surfaced in Ryder Systems (R), Best Buy (BBY), and PNC Financial (PNC).
Frederic Ruffy
WhatsTrading.com
