Stocks are set to open steady Tuesday morning, with better-than-expected economic data helping to keep a floor under prices in early trading. Less than an hour before the opening bell on Wall Street, stock index futures indicate that both the Dow Jones Industrial Average and the NASDAQ will open the trading session with modest gains.
Housing starts showed some unexpected improvement during the month of February. According to the Commerce Department, builders broke ground at an annual rate of 583,000 homes last month. The number was much better than January's 477,000 (revised up from 466,000) and also significantly better than economist forecasts of 450,000.
Meanwhile, building permits, a better gauge of future activity, rose to 547,000 from 531,000. Economists had predicted a decline to 500,000.
A separate report from the Labor Department showed inflationary pressures subsiding a bit in February. The Producer Price Index [PPI], a gauge of prices paid at the wholesale level, rose .1 percent, which follows a .8 percent increase in January. Excluding food and energy, the index rose .2 percent. Economists were looking for a .4 percent increase in the headline number and a .1 percent increase in the core index.
Stock index futures, which had fallen in the red prior to the economic numbers, edged higher on the data and bonds held steady. The benchmark ten-year Treasury bond is little changed and still yields 2.4 percent.
The dollar gained .70 to 98.92 against the Japanese yen and the euro slipped .0001 to 1.2959 against the US currency.
Crude oil is down 26 cents to $47.09 and gold gave up $3.30 to $918.80 an ounce after Rio Tinto warned that commodities prices won't stage much of a rebound this year.
Shares of Dow component Alcoa (AA) are trading down 11.3 percent after the aluminum maker said it was slashing its dividend 82 percent to 3 cents and also said it is selling stock and debt.
In the options market, trading volume picked up Monday ahead of this week's expiration. Sentiment seemed somewhat cautious, as the Dow Jones Industrial Average gave up early gains and closed down 7 points. The CBOE Volatility Index (.VIX) edged up 1.50 to 43.86 and approximately 7.25 million puts and 9.1 million calls traded across the options exchanges.
American International Group (AIG) options were actively traded. The company was in focus during the trading day after President Obama vowed to block hefty executive bonuses unveiled over the weekend. There is also talk that the Treasury Department will begin requesting delivery of stock certificates of companies that are largely government-controlled, which would make it harder for short sellers to borrow shares of AIG, Fannie (FNM), and Freddie (FRE). AIG rallied 33 cents to 83 cents and 38,000 calls traded on the day, compared to 3,200 puts.
Bullish trading was also seen in Frontier Oil (FTO), Raytheon (RTN), Principal Financial Group (PFG), and Direxion Financial Bull 3X Shares (FAS).
Some of the education stocks took a hit Monday. Shares of Strayer Education (STRA) lost $20.64 to $150.45 after a Wall Street research boutique apparently issued a cautious report on STRA. Options volume rose to 3 times the normal levels, with 4,200 puts and 1,900 calls traded. March 150 and March 140 puts were the most actives, and seemed to include some premium buying on concerns that volatility might continue heading into this week's options expiration.
Bearish trading also surfaced in Staples (SPLS), Cavium Networks (CAVM), Illinois Toolworks (ITW), and the ISE British Pound Index (.BPX).
Frederic Ruffy
WhatsTrading.com
