Selling Cash Covered Puts

SEC Said to Consider New Rules After Market Plunge

2010-05-08T07:55:00.000-07:00

The U.S. Securities and Exchange Commission is considering regulatory changes aimed at slowing stock trading during periods of cascading prices, even though the agency hasn’t yet concluded what caused this week’s market plunge, two people familiar with the matter said.

SEC officials are weighing whether uniform trading curbs should be imposed across markets for companies that have fallen a certain percentage, said the people, who declined to be identified because the discussions are preliminary. The agency is examining whether any rules should include a time element because a steep decline that occurs in minutes may be more detrimental to markets than a decline over several hours, one of the people said.

U.S. regulators and exchanges are trying to determine what happened after stocks fell May 6, temporarily erasing more than $1 trillion in market value, in a rout fueled by waves of computerized trading. The SEC and Commodity Futures Trading Commission said in a joint statement yesterday that declines for individual stocks were “inconsistent” with well-functioning markets and pledged to make “structural” changes if necessary.

SEC spokesman John Nester declined to comment on internal agency discussions. Lawmakers are pressing the SEC for answers.

“Yesterday’s flash crash was incredibly startling,” Representative Paul Kanjorski said in a statement, announcing a May 11 hearing to examine the incident. “We cannot allow technological problems, regulatory loopholes, or human blunders to spook the markets and cause panic.”

Computer Glitch

Kanjorski, a Pennsylvania Democrat, also sent a letter to SEC Chairman Mary Schapiro seeking the agency’s views on the incident and asking what power it has to prevent future crashes.

While the SEC is in the early stages of reviewing market data, the agency hasn’t found evidence indicating that an erroneous trade or a computer glitch triggered the market rout, one of the people said.

CNBC citied “multiple sources” in reporting May 6 that New York-based Citigroup Inc. may have made a mistake in entering a transaction that contributed to the plunge. Citigroup said it found no evidence it was involved in an erroneous trade, a finding supported by futures market CME Group Inc.

SEC officials have internally circulated at least two memos outlining market mechanisms suspected of triggering or fueling the market decline, a person familiar with the discussions said.

Washington Briefing

One memo, circulated two days ago, outlines a scenario described publicly by stock-exchange officials, people who saw the document said. The theory advanced by the other memo couldn’t be determined.

SEC commissioners were scheduled to be briefed on the incident yesterday by the agency’s trading and markets division in Washington, the people said.

One SEC memo, according to people who saw it, discusses a theory raised yesterday by NYSE Euronext spokesman Ray Pellecchia, who said sudden price moves in multiple stocks reached so-called liquidity replenishment points. That prompted the exchange to slow trading in those shares as it tried to ensure an orderly market. Such incidences allow other exchanges to ignore NYSE price quotes.

Trades sent to electronic networks then fueled the drop, said Larry Leibowitz, chief operating officer of NYSE Euronext. While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the decline snowballed as orders went to venues lacking liquidity to match them, he said in an interview yesterday.

Uniform Practices

NYSE competitors such as Nasdaq OMX Group Inc. don’t use liquidity replenishment points. The SEC and CFTC in their joint statement raised concerns that the plunge may have been caused by exchanges not adhering to uniform practices.

“We are scrutinizing the extent to which disparate trading conventions and rules across markets may have contributed to the spike in volatility,” the regulators said. Ideas under discussion would make sure all trading platforms follow the same policies when prices fall precipitously.

A circuit breaker for individual stocks across all markets would avoid the problem of individual markets making their own decisions about trading, said Brett Mock, chairman of the Security Traders Association, a trade group of brokers and asset management companies based in Darien, Connecticut.

The SEC and CFTC said their market oversight units are continuing to review trading data and will make findings public. The SEC’s enforcement division, which investigates violations of securities rules, will also try to determine if market participants exploited the turmoil to profit illegally, two people with direct knowledge of the matter said.

Increased Competition

Increasing competition has eroded NYSE and Nasdaq’s trading volume. Less than 30 percent of transactions in NYSE and Nasdaq listed companies takes place on their networks with orders dispersed to as many as 50 venues. Most rival platforms are fully electronic.

Lawmakers including U.S. Senator Ted Kaufman, a Delaware Democrat, have urged the SEC since last year to increase regulation of markets that rely on computer algorithms to execute thousands of trades in seconds. Kaufman, who has raised concerns about potential manipulation or false trades triggering a crisis, urged the SEC this week to step up its oversight.

“No one knows what is happening in the exchanges when this trading is going on,” he said on the Senate floor May 6 after the market plunge. “All we have been requesting from the Securities and Exchange Commission is that they take a look at what is happening.”

bear market started with the Goldman Sachs news?

2010-05-07T19:34:00.000-07:00

What a week it was. In fact the last two weeks completely erased year to date gains on the majority of indices. My XOM and especially MON positions are well under water now, but there is still some months to expiration though. I guess with selling puts, it's a matter of patience. With the VIX now at 40%, I decided to place the following position with my 8K margin left:

sell to open 1 PUT DIA 2010DEC31 67 for $1.15 USD
net premium: $103.80 USD
margin requirement: $6,596.20
strategy used: near all March 2009 lows
probability of success: very high
comments: with Dow Jones closing @ 10,380.43, there is a downside protection of 35.46%, this trade has a high chance of expiring worthless. This is a bet that we will never see those March 2009 lows of 6,440.08 in my lifetime at least.

Stocks Tumble as Debt Concern Spurs Electronic Rout (1000 points decline)

2010-05-06T19:57:00.000-07:00

U.S. stocks tumbled the most in a year as waves of computerized trading exacerbated a selloff triggered by Europe’s debt crisis, sparking a slide in Asian shares. U.S. index futures stabilized and the euro climbed.

The rout briefly erased more than $1 trillion in U.S. market value as the Dow Jones Industrial Average fell almost 1,000 points, a 9.2 percent plunge that was the biggest intraday percentage loss since 1987 and largest point drop ever, before paring declines. Japan’s Nikkei 225 Index tumbled 3.5 percent as of 2:47 p.m. in Tokyo and the MSCI Asia Pacific Index slumped 1.9 percent.

Standard & Poor’s 500 Index futures fell 0.4 percent, having earlier gained 0.7 percent, and the euro strengthened 2 percent against the yen after Japanese Finance Minister Naoto Kan said the Group of Seven plans to hold a conference call to discuss the Greek debt crisis. “People are selling in a panic,” said Hisakazu Amano, who helps oversee the equivalent of $22 billion at T&D Asset Management Co. in Tokyo. “Investors will put money back into risk assets when the Greece issues cool down.”

Stocks got pummeled amid concerns European leaders won’t do enough to keep the most indebted nations from defaulting. The losses snowballed as computerized trades sent to electronic networks caused some stocks to briefly drop more than 90 percent of their value. Procter & Gamble Co., the world’s biggest consumer products company, fell as much as 37 percent before recovering all but 2.3 percent of its decline.

‘Unusual Trading’

The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint statement that they will examine “unusual trading” that contributed to the plunge and two people with direct knowledge of the matter said regulators plan to examine whether securities professionals triggered the selloff or exploited the turmoil for profit.

The Nasdaq OMX Group Inc. said it will cancel trades of stocks that moved more than 60 percent. While the first half of the Dow average’s plunge probably reflected normal trading, the selloff snowballed because of computerized orders sent to venues with no investors willing to match them, Larry Leibowitz, the chief operating officer of NYSE Euronext, said in an interview on Bloomberg Television.

Japan’s Nikkei was set for its biggest slump since March 2009, with companies reliant on European exports leading declines. South Korea’s Kospi Index sank 2.4 percent. Hong Kong’s Hang Seng Index lost 0.7 percent, led by HSBC Holdings Plc, Europe’s largest bank.

Global Declines

The MSCI Emerging Markets Index dropped 1.6 percent to 935.25, extending this week’s retreat to 8.5 percent, the biggest decline since Feb. 20, 2009. The MSCI Asia Pacific Index lost 1.9 percent to 117.61. The gauge joined the MSCI World Index and the Stoxx 600 Index in wiping out its advance for 2010. The MSCI World, which tracks 23 developed nations, lost 0.7 percent, taking a four-day slump to 7.1 percent.

Futures on the S&P 500 fell to 1,117.50. The index fell as much as 8.6 percent, its biggest intraday plunge since December 2008, before closing down 3.2 percent at 1,128.15. The Dow average closed 3.2 percent lower at 10,520.32. It was the biggest percentage drop on a closing basis since April 20, 2009, for both measures.

The euro rose after Japan’s Kan said at a press conference in Tokyo that European members in the G-7 “will probably explain” steps taken with the International Monetary Fund to assist Greece. “I don’t think we will be asked to take specific action, such as currency intervention.”

The euro strengthened to 116.56 yen from 114.32 yesterday in New York, when it reached 110.70, the lowest since December 2001. Europe’s currency climbed to $1.2667 from $1.2620.

Treasuries Fall

Swaps in South Korea show banks are hoarding dollars as Greece’s crisis prompted companies to seek the safety of the world’s reserve currency.

The one-year basis swap, in which two parties exchange floating interest rates for the dollar and the won, widened to minus 152 basis points from minus 106 at the end of last week. A wider negative rate signals that investors are willing to receive reduced won interest payments to obtain dollars.

Treasuries fell, paring the biggest weekly gain in eight months as stock futures rose. The yield on the benchmark 10-year Treasury note rose three basis points to 3.42 percent, according to BGCantor Market Data. The 3.625 percent security due February 2020 sank 7/32, or $2.19 per $1,000 face amount, to 101 22/32. The yield fell 14 basis points yesterday and is down 22 basis points this week.

‘Some Relief’

“There’s some relief in the flight to quality,” said Tomohisa Fujiki, an interest-rate strategist in Tokyo at BNP Paribas Securities Japan Ltd. The company’s U.S. branch is one of 18 primary dealers that trade government debt with the Federal Reserve.

Copper for three-month delivery on the London Metal Exchange lost as much as 2.7 percent to $6,760 a metric ton, and traded at $6,782. Europe’s debt crisis dragged prices down by 8.7 percent this week.

Yesterday’s declines came after European Central Bank President Jean-Claude Trichet held interest rates at a record low of 1 percent and said the bank didn’t discuss whether to purchase government bonds to stem the region’s debt crisis.

“Nerves are frayed,” said Prasad Patkar, who helps manage about $1.7 billion at Platypus Asset Management Ltd. in Sydney. “After the global financial crisis, it’s not irrational for investors to shoot first and ask questions later. We need the European Central Bank to come out decisively and put a stop to this before things spin out of control. If not, we may find ourselves in a tailspin.”

Regulatory Scrutiny

After the subprime market collapsed, the U.S. government agreed to spend, lend or commit as much as $12.8 trillion to stabilize the financial system.

The S&P 500 fell 1.7 percent through about 2 p.m. in New York when the decline began to steepen. Between 2:30 and 2:45, the index lost another 5.8 percent before bottoming at 1065.79 and starting to rebound.

The SEC and CFTC said they are “working closely” with regulators and exchanges to study the trading. The NYSE told CNBC that there were no system errors as speculation of bad trades swirled through the market.

Citigroup Inc. said it found “no evidence” of erroneous trades after CNBC reported the bank made a potentially bad transaction amid the Dow’s plunge. CME Group Inc., the world’s largest derivatives exchange, said in a statement that Citigroup’s stock-index futures trades didn’t appear irregular or unusual.

Trade Cancellation

The Nasdaq trade cancellation applies to transactions between 2:40 p.m. and 3 p.m. The Nasdaq listed 286 securities that will have trades canceled on its website. The list includes Accenture Plc, Exelon Corp. and exchange-traded funds such as the iShares DJ Select Dividend Index fund.

P&G said it’s looking into electronic trading of its stock to determine whether it was made in error.

The Dow and S&P 500 briefly erased their yearly gains yesterday before paring losses. Bank of America Corp., Hewlett- Packard Co. and American Express Co. tumbled more than 4.3 percent to help lead declines in the Dow as all 30 of its companies dropped at least 1.6 percent. The 998.5-point slide was the Dow’s largest intraday point decrease ever, according to News Corp.’s Dow Jones & Co. unit.

General Electric Co., the world’s biggest maker of jet engines, power-generation equipment and locomotives, fell as much as 17 percent before ending down 4.4 percent. Apple Inc. tumbled as much as 22 percent, the most since 2000, and ended down 3.8 percent.

Stock Options

Technology stocks and industrial companies in the S&P 500 had the biggest intraday declines on record, losing as much as 10 percent and 11 percent, respectively. Both groups ended down less than 3.4 percent.

The benchmark index for U.S. stock options surged as much as 63 percent, the most since February 2007, to 40.7 before paring its advance to 32 percent and closing at an almost one- year high of 32.8. The VIX, as the Chicago Board Options Exchange Volatility Index is known, measures the cost of using options as insurance against declines in the S&P 500.

The S&P 500 moved in an 8.73 percent range between its high and low, the widest since Nov. 20, 2008, when the VIX closed at a record 80.86.

About 19.3 billion shares changed hands on U.S. exchanges, the most since October 2008 and more than double the 2010 average. Almost 10 stocks fell for each that rose on U.S. exchanges.

Greek Bonds

Bonds of debt-laden European nations tumbled yesterday. The yield on Spain’s 10-year note surged 24 basis points, or 0.24 percentage point, to 4.42 percent, the highest since June. Italy’s 10-year yield jumped 22 basis points to 4.27 percent.

The 10-year Greek bond yield surged 1.14 percentage points to 11.31 percent, the highest in Bloomberg data going back to 1998. The nation’s two-year debt surged 1.46 percentage points to 16.36 percent, also a record in Bloomberg data.

German bunds gained, sending the yield premium investors demand to own Greek and Spanish 10-year debt instead of Europe’s benchmark bond to records.

The 110 billion-euro ($140 billion) aid package to avoid a default by Greece has failed to prevent bond yields from rising, driving up borrowing costs for countries including Spain and Portugal. Greece’s parliament approved austerity measures demanded by the European Union and IMF.

‘All About Europe’

Sovereign debt contagion may spread across Europe, affecting the banking systems of Portugal, Spain and Italy, as well as Greece, Moody’s Investors Service said in a report.

“It’s all about Europe,” said Tom Wirth, senior investment officer for Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. “There’s a perception that what’s going on in Europe will be dragging the region back into a recession. The question is how much of that is going to be contagious to the rest of the world.”

Spain paid the highest yield since 2008 to sell five-year bonds. The Treasury sold 2.35 billion euros of the notes in an auction in Madrid to yield 3.532 percent. That was 0.716 percentage point more than it paid on similar securities in the most recent sale, nine weeks ago.

Prime Minister Jose Luis Rodriguez Zapatero this week railed at investors who dumped Spanish bonds on concern that the rescue plan for Greece may not insulate other euro-region governments from the crisis. The premier is trying to reduce a budget deficit that’s almost four times the European Union’s limit and regain the confidence of fund managers.

IPO Delays

The turmoil battered initial public offerings.

Ron Burkle’s Americold Realty Trust postponed the largest U.S. initial public offering of 2010, while Hong Kong’s Swire Properties Ltd. shelved its sale as the biggest stock-market slump in a year roiled IPOs.

Americold, the warehouse operator owned by Burkle’s Yucaipa Cos., pulled its $660 million sale after slashing the midpoint price by 33 percent yesterday, according to Bloomberg data and a filing with the SEC.

Swire Properties, landlord to Time Warner Inc. in Hong Kong, dropped its plan to raise as much as HK$20.8 billion ($2.7 billion). Smile Brands Group Inc., the Santa Ana, California- based provider of support services to dental groups, also shelved its $132 million IPO today.

Goldman Sachs!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

2010-04-16T21:00:00.000-07:00

Today's # ONE news shortly after 10:30 AM on expiration day, was Goldman Sachs. My XOM put expired worthless despite this major carnage and this will free up some marging for a new trade. Here's the major news driver for today:

Goldman Sachs Sued by SEC for Fraud Tied to CDOs

Goldman Sachs Group Inc. was sued by U.S. regulators for fraud tied to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression. The firm’s shares tumbled 13 percent and financial stocks slumped.

Goldman Sachs created and sold CDOs linked to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicles, the Securities and Exchange Commission said today. Billionaire John Paulson’s firm earned $1 billion on the trade and wasn’t accused of wrongdoing. The SEC also sued Fabrice Tourre, a Goldman Sachs vice president who helped create the CDOs, known as Abacus.

“The product was new and complex but the deception and conflicts are old and simple,” SEC Enforcement Director Robert Khuzami said. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

Goldman Sachs became emblematic of public outrage at the banking industry after posting a record $13.4 billion profit in 2009, a year after receiving $10 billion in taxpayer aid during the financial crisis. It repaid the funds in June. The company, led by Chief Executive Officer Lloyd Blankfein, 55, has been criticized by lawmakers and pundits for issues from its pay practices to its role in helping Greece mask the size of its debts. It called the SEC’s claims “unfounded.”

Financial Stocks Slump

“Civil charges and the disgorgement are not the issue -- the threat to Goldman is reputational,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. The danger is to “ultimately its market share with its prized institutional and corporate clients.”

Shares of Goldman Sachs, based in New York, dropped $23.57, or 13 percent, to $160.70 as of 4:02 p.m. in New York Stock Exchange trading. It marked the biggest one-day decline since Jan. 20, 2009, and pushed the value of Warren Buffett’s options to buy Goldman Sachs shares down by $950 million.

Goldman’s ‘Integrity’

Buffett, Berkshire Hathaway Inc.’s chief executive officer, got the warrants on $5 billion of Goldman Sachs stock as part of an agreement that extended financing to the bank during the depths of the 2008 credit crisis. The deal reflected Buffett’s belief in “not just the strength of Goldman but its integrity,” Ronald Olson, a Berkshire director said this week in an interview.

The cost to protect against a default on Goldman Sachs’s debt jumped 30.5 basis points, or 0.305 percentage point, to 120.5 basis points.

“The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation,” Goldman Sachs said in a statement today.

The firm put together the Abacus deal in 2007, a year in which Goldman Sachs earned a then-record $11.6 billion, a figure it surpassed in 2009, when it earned $13.4 billion. Goldman Sachs paid Blankfein $68.5 million for 2007 -- $600,000 in salary, plus a $67.9 million bonus.

According to the SEC’s complaint, Tourre, now 31, sent an e-mail to a friend in January 2007 saying, “The whole building is about to collapse” in reference to CDOs tied to subprime mortgages.

‘Fabulous Fab’

“Only potential survivor, the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrousities!!!” Tourre wrote in the e- mail, according to the SEC. The agency didn’t identify the recipient of the note.

Reached at his London office today, Tourre declined to comment. “I need to jump, thank you, goodbye,” he told Bloomberg News before hanging up. A call to Pamela Chepiga, a lawyer for Tourre at Allen & Overy LLP, wasn’t returned. Tourre, a graduate of Ecole Centrale Paris, one of France’s top engineering schools, and Stanford University, joined Goldman Sachs in July 2001, according to his LinkedIn profile.

Goldman Sachs and Tourre knew it would be difficult, if not impossible, to sell the CDO if they disclosed to investors that Paulson played a significant role in selecting the collateral and was also betting against it, the SEC said.

‘Surreal’ ACA Meeting

The bank also knew that at least one potential investor, Dusseldorf, Germany-based IKB Deutsche Industriebank AG, wasn’t likely to invest in a CDO that didn’t have a collateral manager to analyze and select the portfolio, according to the complaint.

In January 2007, Goldman Sachs approached ACA Management LLC, a firm that analyzes credit risk, to select the portfolio for a CDO transaction sponsored by Paulson. In an internal memo on March 12, 2007, Goldman said it would “leverage ACA’s credibility and franchise” to help distribute the transaction, the SEC said.

Paulson, Tourre and a representative from ACA met in February 2007 to discuss assets that would be included in the residential-mortgage backed security, the SEC said. While Paulson and Tourre knew Paulson intended to short the security, ACA wasn’t in the loop.

“I am at this ACA meeting,” Tourre wrote in an e-mail to an unidentified Goldman Sachs employee during the meeting. “This is surreal.”

Goldman’s ‘Extensive Disclosure’

Goldman Sachs also said that it lost more than $90 million because it had an investment in the deal, overwhelming the $15 million it made in fees. The firm said it provided “extensive disclosure” to IKB and ACA about the risk of the underlying mortgage securities. Goldman Sachs never told ACA that Paulson was going to be a “long” investor in Abacus, and ACA selected the underlying securities, the firm said.

Paulson & Co., which oversees $32 billion, said in a statement that the fund didn’t make any misrepresentations connected to the Abacus deal.

“While Paulson purchased credit protection from Goldman Sachs on securities issued under the Abacus ABS CDO program we were not involved in the marketing of any Abacus products to any third parties,” the New York-based firm said. “ACA as collateral manager had sole authority over the selection of all collateral in the CDO.”

Paulson could be the target of investor lawsuits now that the SEC is investigating how Abacus was put together, said Thomas Adams, who worked in the CDO groups for two bond insurers and is now a partner at New York-based Paykin Krieg & Adams LLP.

“There haven’t been many investor lawsuits on these kinds of deals,” Adams said. “This opens the door to civil claims across a number of transactions.”

Bank of America Corp. and JPMorgan Chase & Co. lost at least 4 percent today as all 27 companies in the S&P 500 Diversified Financial Index declined. In Europe, Deutsche Bank AG dropped 8 percent.

The case is Securities and Exchange Commission v. Goldman Sachs, 10-cv-03229, U.S. District Court, Southern District of New York (Manhattan).

Dow Average Closes Above 11,000 for First Time Since '08 on Greek Aid Plan

2010-04-12T17:22:00.000-07:00

Historic close at 11,000. Downhill from here? Here's today magical close recap:

U.S. stocks rallied, giving the Dow Jones Industrial Average its first close above 11,000 since September 2008, as takeovers and a $61 billion rescue for Greece bolstered equities before Alcoa Inc. starts the first-quarter earnings season.

Alcoa gained 1.3 percent before reporting results following the close of today’s trading. Palm Inc. surged 17 percent as the creator of the Pre smartphone was said to be seeking bids for the company. DynCorp International Inc. rallied 48 percent following an agreement to be bought by Cerberus Capital Management LP. Mirant Corp. and RRI Energy Inc. jumped more than 14 percent on plans to combine in a $1.6 billion merger.

The Standard & Poor’s 500 Index increased 0.2 percent to 1,196.48 at 4 p.m. in New York, building on its longest stretch of weekly gains in a year. The Dow rose 8.62 points, or 0.1 percent, to 11,005.97.

“We do expect to see earnings gains for most companies in the cyclical sectors,” Fred Dickson, chief market strategist at D.A. Davidson in Lake Oswego, Oregon, which manages around $25 billion, wrote in an e-mailed note. “The story will be the margin by which companies top estimates and the extent of upward revisions in their second-quarter revenue and earnings guidance.”

Combined profit for S&P 500 companies will increase 30 percent in the first quarter from a year earlier, according to analyst estimates compiled by Bloomberg. The S&P 500 has jumped 77 percent from a 12-year low in March 2009 as the economy returned to growth and the Federal Reserve kept its benchmark interest rate near zero to safeguard the recovery.

Protection From Losses

The premium on options that insure against losses in the S&P 500 over those wagering on gains, known as skew, has risen to the highest level since June 2008, data compiled by Bloomberg show. Traders sought protection as shares rallied for six weeks, pushing a measure of momentum that compares stocks with their 50-day average to the most bearish reading in 13 months, according to Bespoke Investment Group LLC.

Intel Corp., JPMorgan Chase & Co., Bank of America Corp. and General Electric Co. are also scheduled to report results this week. Alcoa advanced 1.3 percent to $14.57. After the close, it reported first-quarter profit excluding some items of 10 cents a share, beating the average analyst estimate of 9 cents.

The Chicago Board Options Exchange Volatility Index, or VIX, fell to 15.57, the lowest since July 2007.

Palm, Mirant

Palm rallied 17 percent to $6.04, its highest price since March 3. The company is working with Goldman Sachs Group Inc. and Frank Quattrone’s Qatalyst Partners to find a buyer, according to three people familiar with the situation. Taiwan’s HTC Corp. and China’s Lenovo Group Ltd. have looked at the company and may make offers, said the people, who declined to be identified because a sale hasn’t been announced.

Mirant gained 18 percent, the most since October 2008, to $12.68. The power generator and RRI Energy said they will combine their companies in a $1.6 billion stock transaction to form the second-largest independent U.S. power producer. RRI climbed 15 percent, its biggest gain in 11 months, to $4.53.

China Petroleum & Chemical Corp., Asia’s biggest refiner, agreed to buy ConocoPhillips’s stake in oil-sands producer Syncrude Canada Ltd. for $4.65 billion. ConocoPhillips rose 1.2 percent to $55.96. China Petroleum, also known as Sinopec, fell 1.1 percent to $84.93 in U.S. trading.

Dyncorp

DynCorp, a defense contractor that helped train Iraqi police, agreed to be acquired by Cerberus Capital Management LP for about $1.5 billion, including the assumption of debt. DynCorp gained 48 percent to $17.41.

Deals where U.S. companies are being purchased have totaled $200.2 billion, compared with $191.7 billion in the same period last year, as businesses that stored cash during the worst downturn since the Great Depression put money to work again.

“The trend is positive,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees more than $75 billion in client assets. “When large companies are trying to buy smaller ones, they’re obviously optimistic about the economy and their future. That spreads throughout the system.”

Greek stocks and bonds rallied after European governments yesterday offered Greece a 45 billion euro rescue package at below-market interest rates in a bid to stem its fiscal crisis and restore confidence in the euro.

EU Loans to Greece

Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That’s less than the three-year Greek bond yield of 6.98 percent on 9. Another 15 billion euros would come from the International Monetary Fund.

The euro increased the most in seven months versus the dollar, while oil fell for a fourth day, declining 0.7 percent to $84.34 in New York.

Financial companies posted the biggest advance among 10 industry groups in the S&P 500, rising 0.5 percent collectively. NYSE Euronext gained 5.9 percent to $32.31 after the largest U.S. stock-exchange operator by total market share had its 2010 and 2011 earnings estimates increased at JPMorgan Chase & Co. because of potential growth in derivatives trading.

American International Group Inc. rose 8.1 percent to $41.22 on speculation the Treasury Department may lower its stake in the bailed-out insurer.

Overcoming Concerns

“The same issues that were haunting us” over the past few years “are still out there,” said Edward Yardeni, president of Yardeni Research, in an interview on Bloomberg Radio, “but the economy’s overcoming some of those concerns and the important thing is earnings are really coming in real strong for the market.”

Energy stocks in the S&P 500 climbed 0.3 percent as a group. Peabody Energy Corp. rose 3.6 percent to $48.01 after a spokesman said the world’s biggest coal producer is in preliminary talks with Coal India Ltd. over “long-term” supply agreements and potential cooperative ventures.

Caterpillar Inc. rose 2.2 percent to $66.73. The world’s largest maker of bulldozers and excavators was raised to “outperform” from “neutral” at Robert W. Baird & Co.

Clean Energy Fuels Corp. declined 7.6 percent to $19.82. The company co-founded by billionaire T. Boone Pickens to provide natural gas for motor vehicles may fall as much as 30 percent because of a potential warrant exercise by Pickens by 2012, Barron’s reported, without citing anyone.

Monster Worldwide Inc. fell 2 percent to $15.37 after it said it has received a request for additional information from the U.S. Federal Trade Commission on its proposed acquisition of the assets of Yahoo! HotJobs.

U.S. Stocks Advance in Longest S&P 500 Winning Streak in a Year (DOW 11,000 resistance?)

2010-04-10T13:40:00.000-07:00

Bears are getting really frustrated! Is DOW 11,000 short term resistance? Will we see the pull back? Will sell in May and go away hold this year around? Unfortunately, I have no more margin left, so I can't complain that much, but it seems MON is going down while the rest of the market are making new highs. Here's today's market recap that pretty much sums up what happened this week:

U.S. stocks rose for a sixth week, giving the Standard & Poor’s 500 Index its longest winning streak since April 2009, as reports showed the fastest job growth in three years and higher-than-estimated retail sales.

Banks and retailers led the advance in the S&P 500, with Regions Financial Corp. and Macy’s Inc. rising 5.2 percent or more following the economic reports. American Express Co. and Microsoft Corp. rallied at least 4 percent, leading the Dow Jones Industrial Average, as European Central Bank President Jean-Claude Trichet saying he doesn’t expect Greece to default on debts bolstered optimism a financial crisis will be averted.

The S&P 500 advanced 1.4 percent to 1,194.37 this week, building on its biggest first-quarter rally since 1998. The Dow climbed 70.28 points, or 0.6 percent, to 10,997.35. It exceeded 11,000 for about 10 seconds yesterday, crossing that threshold for the first time since September 2008.

Stocks “remain in a powerful bull market,” said Michael Sheldon, chief market strategist at RDM Financial Group in Westport, Connecticut, which oversees $650 million. “Until something changes, it seems unlikely we’re going to have a substantial pullback.”

Alcoa Inc. becomes the first Dow company to report quarterly results on April 12. Combined profit for S&P 500 companies will increase 30 percent from a year earlier, according to analyst estimates compiled by Bloomberg. Intel Corp., JPMorgan Chase & Co., Bank of America Corp. and General Electric Co. also post results next week.

Jobs, Retail Sales

Economic reports helped drive this week’s rally by stocks.

U.S. employers added 162,000 jobs last month, the most since March 2007, figures from the U.S. Labor Department showed on April 2, which stock exchanges were closed for Good Friday. March sales at 31 chain stores rose 9 percent, the biggest one- month gain since March 1999, the New York-based International Council of Shopping Centers said April 8.

The Institute for Supply Management’s index of service industries, which make up about 90 percent of the economy, showed the fastest growth since May 2006. Inventories at U.S. wholesalers rose 0.6 percent in February, a sign companies are ramping up orders as sales climbed to the highest level in more than a year.

Measures of S&P 500 banks and retailers advanced 4.4 percent, 3.7 percent and 3.4 percent, the most among 24 industries in the index.

Takeover Speculation

Regions Financial climbed 11 percent to $8.59. SunTrust Banks Inc. rallied 5.5 percent to $28.65 after Credit Suisse Group AG said it may be a takeover target for overseas financial companies. Goldman Sachs Group Inc. rose 5.2 percent to $179.12. Bank of America Corp. increased 3.1 percent to $18.59.

Gap Inc. gained 5.2 percent to $24.85 after March sales at the clothing seller rose 11 percent, about three times the estimate by Retail Metrics.

Target Corp., the second-largest U.S. discount chain, climbed 4.8 percent to $55.67 after exceeding estimates for March sales and saying first-quarter profit will top forecasts.

US Airways pared its weekly retreat to 1.1 after surging 11 percent on April 8 amid speculation it would purchase UAL Corp. The tie-up probably would be an all-stock transaction, with the smaller US Airways as the acquirer, said two people familiar with the matter, who asked not to be identified because the negotiations are private. Spokesmen for the companies declined to comment.

UAL, the owner of United Airlines, rose 5.1 percent to $20.50.

Casinos Surge

Wynn Resorts Ltd. advanced 13 percent to $87.17, MGM Mirage surged 23 percent to $14.80 and Las Vegas Sands Corp. advanced 13 percent to $24.12. A Nevada report showed gaming revenue statewide rose almost 14 percent in February from the same month a year earlier. Las Vegas Strip revenue increased 33 percent.

The S&P 500 rallied 4.9 percent during the first quarter, the biggest advance to start a year since 1998. The index is up 2.1 percent in the second quarter.

“We’ve come back from the brink fairly meaningfully, we’ve seen huge recovery in the value of risk assets,” Tobias Levkovich, New York-based Citigroup Inc.’s top U.S. equity strategist, said in a Bloomberg Radio interview. “What we still have are intermediate and justifiable concerns around sovereign credit, around the structural unemployment issues.”

Massey Energy Co. slid 12 percent to $46.72.

An April 5 explosion at the company’s Upper Big Branch mine in Montcoal, West Virginia, killed 25 people in the worst U.S. mining disaster since 1970. The mine was issued two citations on the day of the explosion. One was given because inspectors found that mine maps were out-of-date. A similar situation contributed to the deaths of two Massey miners in January 2006 at the Aracoma Coal Co. Alma Number 1 mine fire.

April Fool's Day! Markets hit a new 18 month high!

2010-04-01T03:38:00.000-07:00

RIMM did go down quite a bit, a good 7% after missing earnings estimates. I expected a market pull back due to this bad earning report, but it did not materialized. No April Fool's Day joke! Selling the 22JAN2010 45 RIMM PUT would have been nice, but no more margin left for now. Here's today's market recap:

U.S. stocks rose, sending the Standard & Poor’s 500 Index to an 18-month high, as signs of strength in global manufacturing and a drop in jobless claims boosted optimism in the economy.

Alcoa Inc., the largest U.S. aluminum producer, and Freeport-McMoRan Copper & Gold Inc. climbed more than 3 percent as metal prices advanced. Exxon Mobil Corp. and Chevron Corp. rallied as oil rose to almost $85 a barrel. Stocks pared gains as technology companies turned lower amid concern Apple Inc.’s iPad will hurt sales of laptops and tomorrow’s payrolls report may undermine confidence in the labor market.

The S&P 500 gained 0.7 percent to 1,178.1 at 4:30 p.m. in New York. The index capped a fifth straight weekly advance, the longest streak in almost a year. The Dow Jones Industrial Average rose 70.44 points, or 0.7 percent, to 10,927.07. Two stocks gained for each that fell on U.S. exchanges.

“The trend is higher,” said David Heupel, who helps manage $60 billion at Thrivent Financial in Minneapolis. “Businesses are showing strength. We’ve been getting further evidence of a sustainable recovery. We’re seeing a pick-up in cyclicals. The strength in emerging markets is also critical. The market just doesn’t want to go down.”

The S&P 500 erased yesterday’s drop as government data showed the average number of jobless claims over the past month fell to the lowest level since 2008, indicating the economic recovery prompted companies to retain staff. Initial jobless applications dropped by 6,000 to 439,000 last week, in line with the median economist forecast in a Bloomberg survey, Labor Department figures showed.

Jobs Report

Tomorrow’s Labor Department payrolls report is forecast to show employers added 184,000 jobs in March, the most in three years, according to the median estimate in a survey of economists.

Benchmark indexes extended gains in early trading as the Institute for Supply Management’s factory index rose to 59.6, exceeding the most optimistic forecast in a Bloomberg News survey of 77 economists, from 56.5 in February. Readings above 50 signal expansion. The group’s gauge of exports rose to the highest level since 1989, while orders and production increased at faster rates last month.

Overseas reports showed that China’s manufacturing expanded for a 13th month, business sentiment in Japan rose to the highest since 2008 and factories in Britain and the euro region stepped up output as the global economic recovery strengthened.

‘Sustainable Growth’

“I do see a sustainable growth on a global basis,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. “There had been a lot of fear about a slowdown of the Chinese economy. There’s a lot of capacity there.”

The S&P 500 yesterday snapped a three-day streak of gains after a private report showed employers unexpectedly cut jobs, spurring concern employment isn’t rebounding as strongly as economists have predicted. The equity benchmark has still climbed for five straight weeks, the longest stretch since April 2009. The index rose 1 percent over the past four days. U.S. stock markets are closed tomorrow for the Good Friday holiday.

S&P 500 gauges of energy and raw-materials producers advanced at least 1.6 percent. Aluminum, copper and lead led base metals prices higher as the manufacturing expansion and shrinking global inventories signaled demand may be improving.

Alcoa, Schlumberger, Caterpillar

Alcoa gained 3.2 percent to $14.70, while Freeport, the world’s largest publicly traded copper producer, added 3.3 percent to $86.28. Schlumberger Ltd., the oilfield services provider, rose 1.8 percent to $64.57 as oil climbed to a 17- month high near $85 a barrel. Exxon Mobil advanced 0.9 percent to $67.61, and Chevron went up 1.1 percent to $76.69.

Ford Motor Co. added 0.5 percent to $12.63. The automaker boosted first-quarter sales in China by 84 percent to 153,362 vehicles. The tally includes ventures and wholly owned units. Ford’s U.S. sales rose 40 percent, trailing analyst estimates.

JPMorgan Chase & Co. rose 1.1 percent to $45.18. The second-largest U.S. bank may raise its annual dividend to between 75 cents and $1 if three conditions are met, Chief Executive Officer Jamie Dimon said in his annual letter to shareholders. The bank would like to see “several months” of improvement in the U.S. jobless rate, “significant reduction” in consumer charge-offs and “more certainty around the regulatory requirements for bank capital levels,” Dimon wrote.

Legg Mason Inc. had the biggest gain in the S&P 500, jumping 6.9 percent to $30.66. The Baltimore-based asset manager was raised to “outperform” from “market perform” at Keefe, Bruyette & Woods Inc.

NetApp, Borders

NetApp Inc. surged 5.3 percent to $34.26 after MKM Partners LLC and Pacific Crest Securities Inc. cited “strong” sales growth at the maker of storage computers.

Borders Group Inc. soared 48 percent to $2.54 after saying that it repaid a loan and secured more financing, while also posting a gain in fourth-quarter earnings.

Technology shares were the worst performers in the S&P 500 among 10 industries, while software companies had the only decline among 24 groups.

Microsoft Corp. fell 0.4 percent to $29.16, after slumping 2.3 percent, amid speculation Apple’s new product will reduce demand for computers running Windows. Amazon.com Inc. slid 2.9 percent to $131.81 as publishing executives said the online bookseller will give publishers control over prices of electronic versions of books to head off competition from Apple.

Weakness in Tech Bellwethers

“I’m not surprised to see this type of selloff,” said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles. “It’s a three-day weekend. Plus, there’s been significant weakness today in tech bellwethers. Microsoft is not the only one that would be hurt by a successful iPad. Anyone that sells either laptops or supplies is certainly at risk of seeing lower demand. And we also got a disappointing report from RIM.”

Research In Motion Ltd. retreated 7.4 percent to $68.48 after the maker of the BlackBerry reported fourth-quarter revenue and shipments that fell short of analysts’ estimates and said its profit margin will shrink in the quarter ending in May.

Analysts at Goldman Sachs Group Inc. lowered their recommendation for the shares to “sell” from “neutral,” saying RIM’s products will lag behind the iPhone and Android.

BlackRock Inc. slid 3.1 percent to $211.05. The world’s biggest asset manager was cut to “sell” from “buy” at Citigroup Inc., which cited “slowing flow and EPS growth.” The broker also lowered its price estimate on the stock to $190 from $269. Separately, Deutsche Bank AG downgraded its rating on the asset manager to “hold” from “buy.”

Mosaic Declines

Mosaic Co. retreated 4 percent to $58.33. North America’s second-largest crop-nutrient producer reported third-quarter profit excluding some items of 50 cents a share, missing the average analyst estimate of 62 cents.

The relative calm in U.S. stock trading during the past four weeks may soon be shattered, according to Michael K. McCarty, managing partner at Differential Research LLC.

“Skepticism is being expressed in the options market” about the absence of volatility, McCarty said today in an interview. He cited the gap between the VIX Index, a fear gauge that’s based on S&P 500 option prices, and a similar indicator tied to the S&P 500’s swings.

The VIX, formally known as the Chicago Board Options Exchange Volatility Index, fell for the fourth day in five, dropping 0.7 percent to 17.47.

RIM Fourth-Quarter Sales, Shipments Miss Estimates

2010-03-31T16:55:00.000-07:00

Research In Motion Ltd., maker of the BlackBerry, reported fourth-quarter sales and shipments that missed analysts’ estimates, sending the shares down as much as 11 percent in late trading.

RIM said today that revenue in the quarter ended Feb. 27 was $4.08 billion, less than the $4.31 billion average of estimates compiled by Bloomberg. The average selling price of its phones was about $311, trailing projections from Goldman Sachs Group Inc. and Mackie Research Capital Corp.

RIM’s prices have dropped as the company expands overseas into countries such as Indonesia and Brazil with cheaper models like the Curve. That may not be enough to counter slowing shipment growth in North America, according to Mackie analyst Nick Agostino in Toronto.

“Investors have concerns about North American sales and that’s why you’re seeing a selloff,” said Agostino, who anticipated an average selling price of $319. Agostino advises clients to buy the shares and doesn’t own any.

RIM, based in Waterloo, Ontario, slid as much as $7.97 to $66 in late trading after falling 95 cents to $73.97 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have gained 9.5 percent this year.

Fourth-quarter net income rose to $710.1 million, or $1.27 a share, compared with $518.3 million, or 90 cents, a year earlier.

Margin Forecast

RIM, which didn’t break out sales geographically in its press release, shipped 10.5 million devices in the quarter, trailing the 10.9 million estimate of Citigroup Inc. analyst Jim Suva. RIM Co-Chief Executive Officer Jim Balsillie defended the company’s North American performance on a conference call today.

“North America is doing very, very well,” said Balsillie, 49. “Don’t misconstrue something that shouldn’t be misconstrued.”

RIM said its gross margin, or the percentage of sales left after production costs, will be 44.5 percent in the quarter ending in May, down from 45.7 percent in the previous period. Margins will narrow as the company introduces new devices, Balsillie said.

The executive has increased spending on research and development to compete with touch-screen models like Apple Inc.’s iPhone and Motorola Inc.’s Droid. The companies are vying for smartphone customers as shipments are projected to grow at three times the pace of handsets overall, according to Gartner Inc.

Sales in the first fiscal quarter will be $4.25 billion to $4.45 billion, and earnings per share will be at least $1.31, RIM said. That compared with $4.34 billion in sales and profit of $1.23 a share, the average of estimates compiled by Bloomberg.

It expects to add 4.9 million to 5.2 million new customers, topping the 4.2 million estimate of Citigroup’s Suva.

Motorola’s Droid, which was released in November, sold 1 million units in its first 74 days, similar to the original iPhone’s success in 2007, according to Flurry Inc., a company that tracks smartphone use.

markets ended lowered to end an amazing 1st quarter of 2010

2010-03-31T16:50:00.000-07:00

What a month of March, what a start to 2010. 1st quarter of 2010 is in the books and the market rallied nicely from February lows. What is in store for the rest of the year? RIMM missed earnings, so on April Fool's Day, I expect the market will most likely sell off. Here's today's market recap:

Stocks and the dollar fell while Treasuries advanced as reports showed American employers unexpectedly cut jobs and growth in business activity trailed estimates. Gold rose and oil rallied to a 17-month high.

The Standard & Poor’s 500 Index dropped 0.3 percent at 4:14 a.m. in New York, trimming a fourth-straight quarterly advance. The Stoxx Europe 600 Index lost 0.1 percent. The yield on the 10-year Treasury note fell 3 basis points to 3.83 percent. Gold for June delivery rallied 0.8 percent to $1,114.50 an ounce, while the Dollar Index slipped 0.5 percent to 81.069. The Swiss franc rallied as the nation’s leading economic indicators climbed to the highest since November 2007.

U.S. companies cut an estimated 23,000 jobs this month, ADP Employer Services said, compared with a median economist estimate for an increase of 40,000 in a Bloomberg News survey. The data spurred concern economists are too optimistic about the rebound in employment two days before a Labor Department report forecast to show the biggest growth in jobs in three years.

“The ADP report caused jitters,” said E. William Stone, who oversees $102 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “Our view is that the recovery is sustainable, but I don’t think you can officially call it right now. When you get a question out there about the future recovery, you’re going to see market jitters.”

The S&P 500 trimmed gains on the final day of the quarter. The benchmark index climbed 4.9 percent since Dec. 31, its best first-quarter rally since 1998. The index fell to its low of the session today after the Institute for Supply Management-Chicago Inc. said its business barometer fell to 58.8 from 62.6 in February, trailing the median economist estimates of 61.

Dow Retreats From High

Cisco Systems Inc., Microsoft Corp. and DuPont Co. led the Dow Jones Industrial Average down from an 18-month high. Ford Motor Co. slid 5.4 percent on the UAW retiree fund’s plan to raise $1.78 billion by selling warrants to buy Ford stock. Chevron Corp. led energy producers higher as oil topped $83 a barrel and President Barack Obama said he will allow drilling off the East Coast.

A benchmark indicator of U.S. corporate credit risk rose after the ADP report. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 1.9 basis point to a mid-price of 88.2 basis points as of 3:10 p.m. in New York, according to Markit Group Ltd. The index, which typically increases as investor confidence deteriorates and falls as it improves, has dropped 3.3 basis points in March, the second straight monthly decline, Markit and CMA DataVision prices show.

European Stocks

Banks led European shares lower, with BNP Paribas tumbling 2.5 percent in Paris after WestLB AG cut its recommendation on the shares.

Ireland’s benchmark ISEQ Index gained 0.9 percent, trimming a 1.5 percent advance after the U.S. jobs report. The rally came as the National Asset Management Agency announced details of its plan to revive the financial system. Bank of Ireland Plc jumped 24 percent in Dublin after saying it expects to avoid state control by raising most of its 2.7 billion-euro target for capital from private investors.

Irish Banks

The dollar declined against 11 of 16 major currencies, led by a 1.3 percent loss versus the South African rand.

The Swiss franc rose against all 16 major counterparts except the rand, climbing 1.9 percent against the Japanese yen, 1.2 percent versus the U.S. dollar and 0.5 percent against the euro.

The Zurich-based KOF research institute said its monthly aggregate of indicators that aims to predict the economy’s direction about six months ahead increased to 1.93 from a revised 1.9 in February. The franc rose even after Swiss National Bank Governing Board member Jean-Pierre Danthine said the bank will stop “any excessive appreciation.”

The MSCI Asia Pacific Index fell 0.6 percent, the steepest retreat since March 4.

Greek bonds fell, with the yield on the 10-year bond rising 9 basis points to 6.53 percent. The yield premium investors demand to hold Greek 10-year bonds instead of benchmark German bunds increased 11 basis points to 344 basis points, the highest since Feb. 25.

The seven-year note, the first security sold by Greece since the European Union and International Monetary crafted a possible aid package last week, extended declines in its second day of trading. The yield climbed to 6.37 percent, from 6 percent when the security was issued on March 29, according to Royal Bank of Scotland Group Plc prices on Bloomberg.

Greece Borrowing Needs

Greece needs to borrow 11.6 billion euros ($15.6 billion) before the end of May after April funding was “taken care of,” Petros Christodoulou, director general of the Public Debt Management Agency, said in a Bloomberg Television interview. Greece plans to sell a global bond in dollars in the next two months.

Moody’s Investors Service downgraded the deposit and debt ratings of five of the nine Moody’s-rated Greek banks due to a weakening in their stand-alone financial strength and anticipated additional pressures stemming from the country’s economic prospects in the foreseeable future.

Precious metals rallied, with gold capping a sixth straight quarterly gain. Platinum advanced 1.4 percent to $1,641.50 an ounce in London and palladium added 1.8 percent to $480 an ounce. Crude oil rose 1.7 percent to $83.76 a barrel in New York trading, the highest settlement since Oct. 9, 2008. A weaker dollar tends to lift prices of dollar-denominated currencies.

Soybeans tumbled the most in three months and corn dropped to the lowest price since October after the U.S. reported larger inventories than analysts expected. Wheat reached a five-month low as planting topped forecasts.

Shares in Japan, Sweden, Russia and Switzerland did best during the first quarter among the 20 biggest stock markets, with benchmark indexes rising at least 5 percent. Spain, China, Taiwan and Hong Kong did worst, falling 2.9 percent or more.

Last Friday's trade looking good with this market rally

2010-03-30T17:18:00.000-07:00

It seems that last Friday's trade is really paying off. The markets keep on marching up once again. When will this rally come to an abrupt stop? Who knows? Anyway, I have no more margin to play with until April's expiration. Here's today's market recap:

U.S. stocks rose as an improved outlook for industrial companies and better-than-estimated data on consumer confidence and home prices overshadowed concern government deficits will derail the economic recovery. 3M Co. rallied 3.6 percent as Morgan Stanley said profit may top estimates after Danaher Corp. boosted its earnings forecast, sending the maker of Craftsman tools up 4.5 percent. Home Depot Inc. and Lowe’s Cos. climbed as the S&P/Case-Shiller index of home prices in 20 U.S. cities and the Conference Board’s confidence gauge topped economists’ estimates.

The Standard & Poor’s 500 Index increased less than 0.1 percent to 1,173.27 at 4:37 p.m. in New York. The Dow Jones Industrial Average increased 11.56 points, or 0.1 percent, to 10,907.42. About 7.3 billion shares changed hands on all U.S. exchanges, 13 percent fewer than the three-month daily average as trading slowed amid the Passover holiday.

“We’re definitely off the bottom,” said Michael Mullaney, who helps manage $9 billion at Fiduciary Trust Co. in Boston. “There’s improvement in confidence and sentiment. People seem to be more comfortable about spending again. We’ll continue to see strength in stocks.”

Benchmark indexes fluctuated earlier after S&P cut Iceland’s credit rating and Greece failed to sell half the 12- year bonds it offered, reigniting concern governments around the world will struggle to finance growing budget deficits.

The Dow closed at an 18-month high after the 20-city home- price index unexpectedly climbed 0.3 percent and the Conference Board’s sentiment gauge rose to 52.5 in March from 46.4 in February.

First-Quarter Rally

The S&P 500 has rallied for the last four weeks, heading for a fourth straight quarterly advance, on speculation the economy is recovering from the worst contraction since the Great Depression. The benchmark index for U.S. stocks has climbed 5.2 percent since Dec. 31, its best first-quarter rally since 1998.

“We expect stocks to deliver at least a 15 percent return over the next 12 months,” said Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which oversees $8.5 billion. “It obviously won’t be a very strong upturn, but things are getting better.”

Traders attributed part of the market’s gains today and yesterday to “window dressing,” in which investors buy shares of the best-performing companies at the end of the quarter to shore up their portfolios.

Quarter’s End

“It’s just the end of the quarter,” said Mark Bronzo, an Irvington, New York-based money manager at Security Global Investors, which oversees $21 billion. “We’ve had a decent quarter so it’s probably a little bit of window dressing. The economic numbers continue to be a little better and today’s numbers were not an exception.”

U.S. Treasury Secretary Timothy F. Geithner said U.S. employers soon may start hiring again after weathering the worst recession since the Great Depression.

“The economy is getting stronger,” Geithner said yesterday in an interview on CNBC. “We’re probably just on the verge now of what we think will be a sustained period of job creation finally.”

Stocks could rise “another 3 to 5 percent,” Russ Koesterich, the San Francisco-based head of investment strategy for scientific active equities at BlackRock Inc., which manages $3.35 trillion in assets, told Bloomberg Television. “If you want to be aggressive, I wouldn’t get short the market right now. There are a couple of things that are still going to support you -- lower rates, good macro environment and earnings estimates for the first quarter.”

Tech, Industrial Rally

Technology and industrial shares gained in the S&P 500.

3M Co. was the best performer in the Dow, jumping 3.6 percent to $84.28. Shares of the maker of 55,000 products from Post-It Notes to respiratory masks will rise over the next 30 days, Morgan Stanley said.

MEMC Electronic Materials Inc. had the biggest gain in the S&P 500, climbing 5.7 percent to $15.51. The shares rose to the highest price since October and call-option trading increased on speculation the maker of silicon wafers for solar modules and semiconductors may be acquired. Bill Michalek, an MEMC spokesman, said the company doesn’t comment on market speculation.

Danaher Corp. advanced 4.5 percent to $80.88 after increasing its first-quarter profit forecast to 90 cents a share or more. The company previously anticipated earnings at or above the high end of a range of 77 cents to 82 cents. The average estimate of 15 analysts surveyed by Bloomberg was 83 cents.

iPhone

Verizon Communications Inc. rallied 2.6 percent to $31.23, for the second-biggest gain in the Dow. The Wall Street Journal reported Apple Inc. is developing a version of its iPhone that will work over the Verizon Wireless network.

AT&T Inc. has been the exclusive U.S. carrier for the iPhone since its debut in 2007, gaining an advantage over rivals in the smartphone market. An agreement with Apple, which has sold more than 42 million iPhones, would let Verizon Wireless take advantage of rising demand for the device.

AT&T had the biggest decline in the Dow, retreating 2.1 percent to $25.95. Apple gained 1.5 percent to $235.85, a record. Research in Motion Ltd. slipped 1 percent to $74.92.

Financial stocks had the biggest decline in the S&P 500 among 10 industries, falling 0.7 percent. Citigroup Inc. retreated 2.2 percent to $4.09, Goldman Sachs Group Inc. slid 1.5 percent to $171.38 and Bank of America Corp. fell 1.6 percent to $17.76.

Iceland, Greece

The S&P 500 pared gains today after Iceland’s local currency credit ratings were cut by S&P, which cited restrictions triggered by the imposition of capital controls.

Greece’s surprise auction of 5.9 percent bonds maturing October 2022 attracted demand for less than half the debt on offer. The country’s increase of its existing 12-year issue raised 390 million euros ($523 million), compared with an upper limit of 1 billion euros.

“Greek bonds are getting killed,” said David Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. “There’s a lot of concern on sovereign debt. People are worried that the situation is not resolved.”

U.S. economic growth may slow in the second half of the year, Nouriel Roubini, the New York University economist who predicted the financial crisis, said in a speech in Mumbai. The U.S. economic recovery will be “U” shaped, Roubini said.

‘Confirmed Breakout’

The S&P 500, heading for its biggest first-quarter gain since 1998, will probably rise 13 percent in the next few months after staging a “confirmed breakout,” says Katie Stockton of MKM Partners.

The benchmark measure of U.S. equities closed above its January high of 1,150.23 for two consecutive weeks on higher- than-average trading volume, after failing to stay above that level in the previous week. That breakout confirms the S&P 500 has entered a new phase of its yearlong rally and may reach 1,325, said Stockton, who boosted her projection from between 1,220 and 1,230.

“The breakout was decisive,” Stockton, chief market technician at Greenwich, Connecticut-based MKM Partners, said in an interview. It indicates “the trend will persist at its current rate,” she added.

U.S. Economy: Profit Surge May Help Broaden Expansion

2010-03-27T05:11:00.000-07:00

Too many bulls now? There is so many bullish news since the 8% mini-correction or pull back in early February 2010. Is this a bull trap and the bear will take over? Hard to say at this stage. We are definitely out of the worst recession since the great depression. In my opinion, there's still a long way to recovery with unemployment still near the 10% mark and existing home sales declining over the past several months. 1st quarter corporate earnings is just around the corner and this will either guide the markets higher, lower or even sideways. I believe the markets will pause a bit after this amazing rally of about 10%. The DOW rallied about 1000 points since February 5, 2010 lows. Maybe the old adage "Sell in May and go away" will hold true this year.

The fastest pace of economic growth in six years during the final three months of 2009 fueled a surge in corporate profits that may set the stage for job gains and a broadening of the U.S. recovery.

Company earnings increased 8 percent in the fourth quarter, capping the biggest year-over-year gain in 25 years, figures from the Commerce Department showed today in Washington. The economy expanded at a 5.6 percent annual rate.

“The fact that you see a sustained recovery in profits over the last four quarters, that’s a vote of confidence that the next phase of the recovery could be upon us,” said Jonathan Basile, an economist at Credit Suisse in New York. “And that phase is when companies begin to spend those profits, with more investment and more hiring.”

Caterpillar Inc. and Boeing Co. are among manufacturers seeing stronger demand as business investment, consumer purchases and exports keep climbing, indicating the recovery is being maintained this year. Americans’ optimism was higher than anticipated in March as companies slowed the pace of job cuts, a separate report showed.

The Reuters/University of Michigan final consumer sentiment index for this month held at 73.6. The preliminary reading of the measure, released two weeks ago, was 72.5. Economists forecast the final gauge would fall to 73, according to the median estimate in a Bloomberg News survey.

Gains in sentiment that may lead to a pickup in consumer spending, which accounts for about 70 percent of the economy, hinge on employment growth that has yet to materialize.

Stocks Advance

Stocks rose on analyst upgrades, takeover speculation and a European plan to help Greece avoid default before erasing most of the gain amid concern about tension between North and South Korea. The Standard & Poor’s 500 Index advanced less than 0.1 percent to 1,166.59 at 4:04 p.m. in New York.

Fourth-quarter corporate profits, reported by the Commerce Department today for the first time, increased by $108.7 billion to $1.47 trillion. Earnings jumped 31 percent from the same period in 2008, the biggest increase since 1984.

The economy was forecast to grow at a 5.9 percent annual pace, the same as the government estimated in February, according to the median estimate of 76 economists in a Bloomberg survey.

The downward revision reflected larger decreases in commercial construction and stockpiles, and a smaller gain in consumer spending than estimated last month.

Inventories and Growth

Efforts to stabilize inventories provided the biggest boost to growth last quarter, contributing 3.8 percentage points to GDP.

Business investment in new equipment advanced at a 19 percent pace last quarter, the biggest gain since 1998.

A Commerce Department report this week showed companies ordered more long-lasting goods from factories in February, driven primarily by bookings for commercial aircraft, machinery and metals. The gains suggest the manufacturing rebound will keep propelling the recovery even as commercial construction continues to slump.

Boeing, seeking to reclaim its title as the world’s biggest commercial-plane maker, said this month it will boost production of its largest jets to meet increasing demand. There has been a “dramatic pickup” in air-freight shipments and passenger travel in the past four to five months, marketing chief Randy Tinseth said in a March 19 interview.

Hiring Plans

Caterpillar, the world’s largest maker of construction equipment, also said this month it plans to hire 500 workers starting this year to expand a generator plant in Newberry, South Carolina. Caterpillar has started recalling some workers in Indiana and other states after cutting more than 19,000 jobs last year amid the recession.

Consumer spending rose at a 1.6 percent pace last quarter after a 2.8 percent gain in the prior three months. Spending added 1.2 percentage points to GDP. Household purchases dropped 0.6 percent last year, the biggest decrease since 1974.

The job market is one part of the economy where a recovery has yet to take hold. Payrolls fell by 36,000 last month after a 26,000 drop in January. The U.S. has lost 8.4 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era.

Payrolls probably increased this month, according to the median estimate of economists surveyed before a Labor Department report due April 2.

Bernanke on Labor Market

Federal Reserve Chairman Ben S. Bernanke said yesterday in testimony to the House Financial Services Committee that the “unemployment situation is very weak,” with 40 percent of the jobless being out of work for a long time, and the housing market is “still quite weak.” Policy makers this month reiterated a pledge to keep the target interest rate on overnight loans between banks low for “an extended period.”

According to the University of Michigan’s survey, one in four consumers reported hearing news of job gains this month, compared with one in 20 a year ago. Americans still said they expect some economic setbacks over the next five years, growth will be slow and the unemployment rate will have “only marginal declines in the year ahead.”

“Consumers anticipated the economy to improve but nonetheless expected their own personal financial situation to remain unfavorable,” Richard Curtin, the survey’s chief economist, said in a statement.

U.S. Stocks Trim Advance, Treasuries Gain on Korea Concerns

2010-03-27T05:01:00.001-07:00

U.S. stocks trimmed gains and Treasuries rose as concern that tensions between North and South Korea were escalating triggered a flight from risky assets. Gold futures rallied 1 percent, the most in a week.

The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,166.59 at 4:19 p.m. in New York after gaining as much as 0.7 percent earlier. The iShares MSCI South Korea Index Fund, a U.S. exchange traded fund tracking stocks in that nation, erased a 1.4 percent gain and slid 0.6 percent as a South Korean naval vessel sank near the border of North Korea. Trading of puts, which give investors the right to sell the fund, surged to a record. Futures on South Korea’s Kospi 200 Index expiring in June lost 0.6 percent.

“This is really all about that variable we call the geopolitical; it’s about Korea,” said Peter Kenny, a managing director in institutional sales at Knight Equity Markets LP in Jersey City, New Jersey. “It’s taken some of the euphoria out of the market.”

The earlier rally in U.S. equities came as analyst upgrades and takeover speculation boosted financial and retail companies and concern eased over a possible Greece default. RadioShack Corp. jumped 8.5 percent on a New York Post report that the electronics chain is considering a sale of the company. Apple Inc., Progressive Corp., Urban Outfitters Inc. and SLM Corp. advanced after analysts either raised price targets or lifted their ratings on the shares.

The Dollar Index, which tracks the currency against six major trading partners, slipped 0.6 percent to 81.602.

Korea Concern

The iShares MSCI South Korea Index Fund fell 0.6 percent to $48.74 in New York. Trading of put options that give the right to sell the ETF surged to a record of more than 55,000 contracts. The most-active contracts were April $45 puts, which jumped 40 percent to 35 cents.

The South Korean naval vessel sank off Baengnyeong island in the Yellow Sea, near the border with North Korea, an official in the office of President Lee Myung Bak said. The cause was unclear, he said. About 50 crew members were still being searched for, with 58 rescued, said the official, who declined to be identified in accord with government policy. President Lee convened a meeting of security officials to discuss the incident, said the official, giving no further details.

Greece Aid

The early rally in stocks also came as European leaders backed a proposal late yesterday for a mix of International Monetary Fund and bilateral loans for Greece, while saying the nation probably won’t need help to cut the region’s biggest budget deficit. The U.S. economy grew at a 5.6 percent annual rate last quarter, the government said, and the Reuters/University of Michigan final consumer sentiment gauge for March topped forecasts as the pace of job cuts slowed.

“The transition from an economy that’s been driven by monetary and fiscal stimulus back to more of a traditional, consumer and business-driven growth may provide some opportunities,” said Greg Woodard, portfolio strategist at Manning & Napier in Fairport, New York, which manages $28 billion. “But it’s probably to provide some more volatility as we move through 2010.”

Treasuries rose for the first time in four days, sending yields down, as lower-than-average demand at this week’s record- tying $118 billion note auctions pushed yields to levels that encourage buying.

The two-year yield dropped 4 basis points, or 0.04 percentage point, to 1.05 percent. Yields on 10-year notes decreased 3 basis points to 3.86 percent after rising yesterday to 3.92 percent, the highest level since June 11.

Treasury Demand

Demand waned at this week’s auctions of two-, five- and seven-year notes as signs of improvement in the economy boosted appetite for higher-yielding assets. At the seven-year sale yesterday, investors bid for 2.61 times the amount of debt on offer, the least in 10 months.

President Barack Obama has increased U.S. marketable debt to a record $7.4 trillion as he borrows to sustain the U.S, economic expansion.

Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates. Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television’s “Political Capital With Al Hunt.”

“I’m very much concerned about the fiscal situation,” said Greenspan. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.”

Euro Gains

The euro strengthened 1 percent to $1.3410 against the dollar and the Athens Stock Exchange’s ASE Index climbed 4.1 percent, the most since Feb. 9. The yield on the two-year Greek note tumbled 20 basis points to 4.46 percent.

“Investors see the agreement as a backstop, and it is helping sentiment towards the euro,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London, of the Greek accord reached in Brussels. “However, this is a rather uninspired recovery and it’s difficult to say that this is an unequivocal vote of confidence.”

The MSCI World Index of 23 developed nations’ stocks increased 0.2 percent.

European stocks fell, with the Stoxx Europe 600 Index losing 0.5 percent to trim a fourth straight weekly gain, on concern mounting government debt may derail the economic recovery even after the European Union agreed a Greek aid plan.

‘No Choice’ for Europe

Unipol Gruppo Finanziario SpA sank 7.7 percent in Milan, the most in a year, after Italy’s third-largest insurer announced a share sale and posted a full-year loss. Veolia Environnement SA, the world’s largest water company, slipped 1.1 percent in Paris after JPMorgan Chase & Co. advised selling the stock.

“Europe has no choice but to solve the Greece situation,” said Bruce McCain, chief investment strategist at Cleveland- based Key Private Bank, which manages $25 billion. “If you have confidence solving the debt crisis, the euro will rise against the dollar. However, the buyers of stocks over there will be discouraged to buy because of the weakness of their economies.”

The MSCI Asia Pacific Index increased 1 percent, its biggest advance in more than a week. The Kospi closed 0.6 percent higher before the South Korean ship sank. Japan’s Nikkei 225 Stock Average rose to the highest level since October 2008 and the Shanghai Composite Index rallied 1.3 percent.

Emerging Markets

China helped lead the MSCI Emerging Markets Index 0.4 percent higher, its first gain in three days. Brazil’s Bovespa index climbed 0.4 percent. Russia’s Micex Index increased 0.6 percent after the central bank cut its main refinancing rate for the 12th time in less than a year, lowering it a quarter point to 8.25 percent.

Nickel for delivery in three months rose 3.4 percent to $23,600 a metric ton on the London Metal Exchange to lead industrial metals higher. Copper, lead and tin also advanced.

Gold for June delivery added 1 percent to $1,105.40 an ounce on speculation demand will increase amid escalating debt concerns and the Korea incident.

Crude oil fell for a third day, retreating 0.7 percent to $80 a barrel in New York after climbing as much as 1.2 percent earlier.

Bove Says Shares of U.S. Banks May Quadruple by 2012

2010-03-27T04:58:00.000-07:00

Is the following article a sign of a top in the financial sector? You will be the judge.

Bank stocks, the leaders of the biggest U.S. market rally since the 1930s, may quadruple over the next two to three years as loan defaults decrease, according to Dick Bove of Rochdale Securities LLC.

“Stocks are going to go much higher,” Bove, who is based in Lutz, Florida, said in a telephone interview. “The catalyst is the reduction in loan losses. That’s all that investors in banks care about.”

The Standard & Poor’s 500 Financials Index has risen 162 percent from a 17-year low one year ago as the U.S. government spent, lent or guaranteed more than $8 trillion and the Federal Reserve kept its benchmark interest rate near zero to end the worst recession in seven decades.

Bove said the financial industry has already seen a “bottom” in writedowns from the collapse of the subprime mortgage market that spurred losses of almost $1.8 trillion, freezing credit markets in 2008.

Financial shares had the only gain today among 10 industries in the S&P 500, climbing 0.2 percent.

A decline in provisions for bad loans may overshadow industry profits, he said. Earnings at banks in the S&P 500 are projected to fall 33 percent in the first quarter, before rebounding 63 percent in the second quarter, according to the average analyst estimates compiled by Bloomberg.

Improvement in Loan Quality

“Investors have decided they will bet on that rather than worrying about fundamentals,” he said. “The fundamentals are not good. The first quarter will not show any particular strength in bank earnings. What it will show is an improvement in loan quality and that’s all people are looking at.”

Nearly 60 percent of the “big public companies” will lose money in the first quarter, Bove said.

Bove is the highest-ranked analyst at estimating share- price movements of Morgan Stanley, according to data compiled by Bloomberg. The results of his predictions have been mixed. He recommended selling Lehman Brothers Holdings Inc. stock four months before it collapsed, helping investors avoid a 65 percent plunge in the shares. Bove raised it to “buy” on Aug. 21, 2008, and Lehman filed the world’s largest bankruptcy three weeks later.

While Bove has “buy” ratings for Bank of America Corp., Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc., he said investors should sell SunTrust Banks Inc. and Wells Fargo & Co.

SunTrust

SunTrust is “not making any money,” he said. Analysts on average estimate the lender will lose $1.41 a share this year, excluding some items, according to data compiled by Bloomberg. “Why would I want to buy into a company that isn’t going to make any money for 12 to 18 months?”

On Wells Fargo, Bove said that “the earning assets of the company are declining, the non-interest income is declining and the non-interest expenses are rising.”

SunTrust’s spokesman Michael McCoy and Wells Fargo’s spokeswoman Julia Tunis Bernard declined to comment.

Bove expects that the dividends at U.S. banks will increase over the next two to three years. The S&P 500 Financials Index pays 1.05 percent of its average share price in dividends, compared with 1.83 percent for the S&P 500, according to data compiled by Bloomberg.

“The government at the moment is saying you can’t do it,” he said. “These banking companies were at one point in time yield vehicles and they were owned by income funds. The banks are going to get back to being that type of investment.”

1 opening trade for March 26, 2010

2010-03-26T16:52:00.000-07:00

With these insane markets, we pulled the plug and use up almost all the margin available on the following trade:
sell to open 4 PUT MON 2011JAN22 65 for $4.95 USD

net premium: $1,965.05 USD
margin requirement: $24,034.95
strategy used: near 52-week low
probability of success: medium
comments: with MON closing @ $71.10, there is a downside protection of 8.58%, this trade has a medium chance of expiring worthless. if we observe the price action over the course of this month, there is a strong support at USD 70. i am fairly confident this trade will be successful, as people will always need to eat and the commodities sector so far has underperformed most other sectors during this amazing rally.

up and down, major market reversal

2010-03-25T16:05:00.000-07:00

At one point the DOW was up in the triple digits. By 1PM, the markets made a major reversal to close slightly positive at the end the day. This brought the VIX close to that 19% mark. Most positions I wish to implement are somewhat unfeasible at this stage. Here's today's market recap:

U.S. stocks fell for a second day as a disappointing Treasury auction and discord among European leaders about how to rescue Greece erased a rally in the final half hour of the session. The 10-year note’s yield climbed to the highest level since June, and the dollar rallied.

Schlumberger Ltd. and ConocoPhillips paced declines in 38 of 40 energy companies in the Standard & Poor’s 500 Index as a stronger dollar wiped out early gains in oil. Monsanto Co. and DuPont Co. helped lead producers of raw materials lower. Citigroup Inc. advanced 2.9 percent as the government was said to plan an orderly sale of its stake in the bank, while Qualcomm Inc. and Best Buy Co. rallied at least 3.6 percent on profit forecasts that topped analysts’ estimates.

“One of the big things affecting the psychology of the market is concern about global government debt levels,” said Michael Shinnick, a South Bend, Indiana-based money manager at Wasatch Advisors Inc., which manages $7 billion. “To the extent there are signs that the debt problem is not going to be a later problem but a near-term problem, the market gets concerned.”

The S&P 500 slipped 0.2 percent to 1,165.73 at 4 p.m. in New York after rallying as much as 1.1 percent and surpassing its highest close in 18 months. The Dow Jones Industrial Average increased 5.06 points, or less than 0.1 percent, to 10,841.21, wiping out most of a 119-point rally. More five stocks retreated for every three that rose on the New York Stock Exchange and Nasdaq Stock Market.

Yields Spike

The yield on 10-year Treasuries, which determines borrowing costs for homeowners, companies and other governments around the world, climbed 0.03 percentage point to 3.88 percent at 5 p.m. in New York after jumping 0.17 point yesterday. The yield touched the highest since June when it reached 4 percent.

The Dollar Index, which measures the U.S. currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, rose 0.5 percent to 82.207, the highest level since May.

The euro weakened as much as 0.4 percent to $1.3268 as European Central Bank President Jean-Claude Trichet told French television that the region needs to take responsibility for its members and that possible International Monetary Fund aid for Greece is “very, very bad.” French President Nicolas Sarkozy bowed to German Chancellor Angela Merkel’s demand for an IMF role in a potential rescue package for Greece.

The record-tying $32 billion sale of seven-year notes today attracted a yield of 3.374 percent, compared with the average forecast of 3.372 percent in a Bloomberg News survey of 8 of the Federal Reserve’s 18 primary dealers. The current seven-year note yield rose 3 basis points, or 0.03 percentage point, to 3.33 percent.

Auction Disappointment

“The bond auction disappointed investors,” said James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “The question is how high bond yields will have to go and how much of a hurdle will that be for the stock market. Trichet’s comments also did not help a market that has gone up too far, too fast.”

Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., told Bloomberg Radio the almost three-decade bond market rally may be drawing to a close.

Excess borrowing in nations including the U.S., U.K. and Japan will eventually lead to inflation as governments sell record amounts of debt to finance surging deficits, Gross said. Pimco, which announced in December that it would offer stock funds for the first time, is advising that investors buy the debt of countries such as Germany and Canada that have low deficits and higher-yielding corporate securities.

Bond Market ‘Slammed’

“The U.S. Treasury market has gotten slammed over the past two days,” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, wrote in an e-mail. “This is the last thing a fragile economy needs because yields aren’t spiking because all of a sudden the U.S. economy is great again.”

Schlumberger, the oilfield services provider, slid 2.3 percent to $60.76. ConocoPhillips, the oil producer and refiner, lost 1.9 percent to $51.53. Crude oil for May delivery declined 8 cents to settle at $80.53 a barrel in New York after rallying as much as 1.1 percent. The contract extended losses in electronic trading after the close of the New York Mercantile Exchange, sliding as much as 0.6 percent.

Genzyme Corp. fell 7.6 percent to $51.13 for the biggest drop in the S&P 500. The world’s largest maker of enzyme- replacement therapies was cut to “underweight” from “neutral” at JPMorgan Chase & Co.

Red Hat Inc. fell 5.9 percent to $28.90. The software maker said 2011 earnings excluding some items will be 71 cents to 74 cents a share. Analysts surveyed by Bloomberg estimated 76 cents.

Ambac Tumbles

Ambac Financial Group Inc. slumped 17 percent, the most since Nov. 10, to 66 cents. The bond insurer will hand control of subprime mortgage-related contracts to a regulator amid concern its collapse would trigger losses for holders of municipal debt.

Earlier gains in U.S. stocks also came as Federal Reserve Chairman Ben S. Bernanke, presenting to the House Financial Services Committee testimony that was released Feb. 10 during a snowstorm that delayed his appearance until today, said the U.S. economy still needs low interest rates and that the central bank will raise them “at the appropriate time.”

The S&P 500 has risen 72 percent from a 12-year low in March 2009 as the economy returned to growth and a record-long slump in earnings ended. The aggregate profit for companies in the S&P 500 increased in the fourth quarter from a year earlier for the first time since the second quarter of 2007.

‘Back in Sync’

Qualcomm climbed 5 percent to $42.19 for the second-biggest gain in the S&P 500. The company said it will earn 56 cents to 58 cents a share excluding some items in the quarter ending this month on sales of at least $2.55 billion. Qualcomm previously forecast profit of 49 cents to 53 cents on sales of at least $2.4 billion.

“This puts Qualcomm back in sync with the rest of the major technology companies that are reporting strong results,” said Howard Ward, chief investment officer for growth equities at Gabelli & Co. in Rye, New York, which oversees $26 billion including Qualcomm shares. “It’s becoming more difficult to refute the notion that we’re going to be looking at 3 or 3.5 percent GDP growth in the first quarter.”

Technology companies in the S&P 500 beat analyst estimates for earnings-per-share by 17 percent in the fourth quarter, according to Bloomberg data. For the index as a whole, profits exceeded the average estimates by 5.4 percent. Adobe Systems Inc., the world’s biggest maker of graphic-design programs, yesterday rose 3.7 percent after its sales forecast topped analyst estimates.

Retailers Rally

Amazon.com Inc. led retailers in the S&P 500 to the biggest gain among 24 industries. Shawn Milne, an analyst at Janney Capital Markets, said industry data suggest sales growth improved in February. Amazon rose 5.2 percent to $134.73, the highest price since Dec. 30.

Priceline.com Inc., the online travel agency, rose 4.6 percent to $255.03. EBay Inc., the most-visited online auction site, gained 2.3 percent to $27.56. Its sales growth also improved in February, Milne’s report said, and Credit Suisse Group AG upgraded the shares to “outperform” from “neutral.”

Best Buy, Citigroup

Best Buy increased 3.6 percent to $42.66. The company earned $1.82 a share in the fiscal fourth quarter, 1.7 percent more than the average estimate in a Bloomberg survey of 17 analysts. Reduced prices for flat-panel TVs before the National Football League’s Super Bowl championship game on Feb. 7 boosted U.S. sales.

Citigroup climbed 2.9 percent to $4.27, leading financial stocks in the S&P 500 to a 0.4 percent gain. The share-sale plan being contemplated by the government is similar to those used by executives to protect themselves against accusations of insider trading, the people with knowledge of the matter said.

The government’s sale of its stake will allow Citigroup to “act more freely and competitively,” said Timothy Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York, which manages $2 billion, including shares of Citigroup. “We like it as a recovery situation.

U.S. Stocks Advance to Send S&P 500 Index to 18-Month High (new 52 week high)

2010-03-23T17:30:00.000-07:00

Another nice rally. The buy and hold strategy has outperformed the put selling strategy at this stage about a 2 to 1 ratio. If I took much more risk, I would have closed the gap, but I would still be somehow behind the eight ball. Needless to say, we stayed put. Here's today's market recap:

U.S. stocks advanced, sending the Standard & Poor’s 500 Index to an 18-month high, as signs of growing demand for steel and semiconductors boosted confidence the economic recovery is strengthening.

Cliffs Natural Resources Inc. led a rally in steel companies on a report that Brazil’s Vale SA raised prices. Intel Corp. paced gains among chipmakers as Taiwan Semiconductor Manufacturing Co. lifted its forecast for global output in 2010. Caterpillar Inc. and Kraft Foods Inc. led the Dow Jones Industrial Average to its biggest rally in more than two weeks. Benchmark indexes extended gains as European nations moved closer to an agreement to provide financial aid to Greece.

The S&P 500 increased 0.7 percent to 1,174.17 as of 4:33 p.m. in New York, its highest close since Sept. 26, 2008. The Dow average climbed 102.94 points, or 1 percent, to 10,888.83, also an almost 18-month high.

“We’re seeing revenues begin to accelerate, and current- quarter profits will be up close to 40 percent year-on-year,” said David Sowerby, a Bloomfield Hills, Michigan-based money manager at Loomis Sayles & Co., which manages $140 billion. “That has been an incredible stimulus to stock prices.”

The S&P 500 has rallied 74 percent from a 12-year low in March 2009 as the economy returned to growth and a record-long slump in earnings ended. The aggregate profit for companies in the S&P 500 increased in the fourth quarter from the year- earlier period for the first time since the second quarter of 2007. Analysts estimate first-quarter earnings will grow 30 percent, according to a Bloomberg survey.

Cliffs Natural, U.S. Steel

Cliffs Natural Resources, North America’s biggest iron-ore producer, rose 6.9 percent to $69.72, the highest since September 2008. U.S. Steel, the second-largest U.S.-based steelmaker by 2009 sales, gained 4.9 percent to $63.32. Steel companies in the S&P 500 rose 4.6 percent as a group.

Vale SA, the world’s largest iron-ore producer, more than doubled the rate for one type of ore for three months starting April 1, Valor Economico reported. Credit Suisse Group AG said the company is pushing for a pricing system that would allow it to increase rates by about 90 percent. The company said it hadn’t communicated any product price changes to capital markets. The company’s American depositary receipts climbed 5.1 percent to $31.57.

Industrial companies were among the biggest gainers in the S&P 500, led by General Electric Co. and Caterpillar Inc. General Electric, the biggest seller of jet engines, medical- imaging equipment and power turbines, gained 1.4 percent to $18.33. Caterpillar, the world’s largest maker of bulldozers and excavators, increased 4.1 percent to $62.41 for the biggest gain in the Dow.

‘More Confident’

“People have gotten a little more confident,” said Bob Tull, chief operating officer of the Boston-based Old Mutual Global Index Trackers fund, which has about $5 billion under management. “Our economy has as much perception to it as reality. People are thinking it’s getting better and it is getting better.”

Intel, the world’s largest semiconductor maker, rose 1.9 percent to $22.67. The Philadelphia Semiconductor Index climbed 2.3 percent to the highest intraday level since August 2008. A gauge of chip companies in the S&P 500 also closed at a 19-month high and posted the biggest advance among 24 industries, rallying 2 percent.

Chip Demand

Taiwan Semiconductor, the largest custom-chip maker, forecast global semiconductor market output will grow 22 percent this year, compared with a previous forecast of 18 percent, the Economic Daily News reported, citing Chairman Morris Chang.

Integrated Silicon Solution Inc. rallied 15 percent to $8.58. The maker of chips for consumer electronics and mobile phones said it probably earned at least 20 cents a share in the fiscal second quarter, beating its earlier forecast of 12 cents at most.

Apple Inc., the maker of the iPhone, jumped 1.6 percent to a record $228.36.

Google Inc., the world’s largest Internet search engine, fell 1.5 percent to $549 and was the biggest drag on the S&P 500. Google yesterday defied China’s censorship rules by redirecting Chinese users to an unfiltered Hong Kong Web site, threatening its ability to operate in the world’s largest Internet market.

Amazon.com Inc., the world’s largest Internet retailer, declined 0.9 percent to $129.26. The Wall Street Journal reported Sony is dropping the price on its Pocket Reader to $169 until April 4, $90 less than Amazon’s Kindle.

Housing Data

Builders’ shares rose even after an industry report showed sales of existing homes fell for a third month in February, indicating unemployment is hindering government efforts to revive demand for housing. A gauge of 12 homebuilders across S&P indexes advanced 0.7 percent.

Existing home dropped 0.6 percent to a 5.02 million annual rate, the lowest level in eight months and in line with the median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed. The median price decreased 1.8 percent from February 2009.

Walgreen Co., the largest U.S. drugstore chain, increased 1.6 percent to $35.91. The company reported second-quarter sales in line with analysts’ estimates and said its profit margin improved from the year-earlier period.

Carnival Corp. increased 2.4 percent to $38.81. The biggest cruise-line operator raised its full-year profit forecast as ticket prices rebounded from last year’s lows.

Wendy’s/Arby’s Group Inc. rose 3.9 percent to $4.86. The third-largest U.S. fast-food chain said that its board boosted the company’s stock repurchase authorization by $50 million to a total of $250 million.

quadruple witching, one expired trade and one new trade and DOW's 8th straight winning streak is over

2010-03-19T16:36:00.000-07:00

The markets behaved much like I expected today. Volume was light and the markets did finish down -albeit not that much on this quadrule witching day. Our unique March option position:

sell to open 1 PUT XOM 2010MAR20 65 for $1.18 USD

expired worthless. We took advantage of this market pull back turn to re-establish an XOM position using same premise as the previous trades since the March trade was history.

sell to open 1 PUT XOM 2010OCT16 65 for $3.40 USD

net premium: $328.80 USD
margin requirement: $6,171.20
strategy used: near 52-week low and strong support @ $65
probability of success: low to medium
comments: with XOM closing @ $67.04, the downside protection is 3.04%, this trade has a low to medium chance of expiring worthless, if we take a closer look at the graph there seems to be a huge support level @ $65 and further the 52-week low is sitting @ $61.86 - these two factors may play in our favor

Here's today's market recap:

U.S. Stocks Decline, Breaking Eight-Day Winning Streak for Dow

U.S. stocks declined, ending an eight-day winning streak for the Dow Jones Industrial Average, as India’s unexpected interest rate boost spurred speculation withdrawals of economic stimulus will curtail global growth.

Exxon Mobil Corp. and Dow Chemical Co. dragged energy and raw-material producers to the biggest losses in the Standard & Poor’s 500 Index as oil fell below $80 a barrel. Financial shares dropped after Goldman Sachs Group Inc. cut estimates for banks and brokerages. Palm Inc. plunged 29 percent after forecasting sales that trailed analysts’ estimates and Canaccord Financial Inc. cut its share-price estimate to zero.

The S&P 500 fell 0.5 percent to 1,159.90 at 4 p.m. in New York, trimming its third straight weekly advance to 0.9 percent and had the biggest daily decline since Feb. 23. The Dow lost 37.19 points, or 0.4 percent, to 10,741.98 after rising 2.2 percent since March 8. Almost two stocks dropped for each that rose on U.S. equity exchanges.

“Keep an eye on the punch bowl,” Larry Kantor, head of research at Barclays Plc, told Bloomberg Radio before the announcement in India. Governments that injected funds into their economies to jumpstart growth are “going to be withdrawing that stimulus,” he added. “That’s actually the big risk.”

Most stocks fell yesterday on concern the Federal Reserve will boost the discount rate, the amount charged on direct loans to banks. Economists said this may occur before the next meeting of the Federal Open Market Committee on April 28. Fed spokesman David Skidmore declined to comment.

16-Month High

India’s central bank unexpectedly raised rates for the first time since July 2008 after inflation accelerated to a 16- month high. The Reserve Bank of India increased the benchmark reverse repurchase rate to 3.5 percent from a record-low 3.25 percent and the repurchase rate to 5 percent from 4.75 percent, according to a statement in Mumbai. The surprise decision comes a month before the bank’s scheduled monetary policy meeting.

“Whenever you have any noise about central banks making that shift in policy, you’re going to get that market reaction,” said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc. in Cincinnati. “We’re going to start to see signals and actions from the Fed suggesting that they’re preparing for that policy shift, and the market will react. On top of that, we’ve had a huge move in the stock market. So it wouldn’t surprise me to see people protecting profits.”

$12 Trillion

The S&P 500 climbed to the highest level since September 2008 on March 17. This week’s rally brought the surge from a 12- year low last March to 72 percent after governments and central banks around the world maintained low interest rates and committed more than $12 trillion to stimulate the economy.

Stock swings have narrowed, with the 10-day average change between intraday lows and highs for the S&P 500 falling to 0.8 percent from 1.8 percent on Feb. 8.

“I don’t expect big moves,” said Peter Jankovskis, who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Stocks are fairly valued after the rally we’ve had from the lows. People are waiting for more signals that the economic recovery is sustainable.”

More than 10.3 billion shares changed hands on U.S. exchanges, the most since Feb. 5 and 20 percent higher than the average in 2010, as the expiration of futures and options on stocks and equity indexes spurred trading. The process known as quadruple witching occurs every three months.

‘Cautious Tone’

“The expiration is only magnifying the cautious tone,” said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles. “Buyers have been more cautious with the market being up eight days in a row and heading into the weekend’s health-care vote. More people are concerned with locking in recent gains.”

The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose for the first time in four days, advancing 2.1 percent to 16.97. The index, a measure of how much investors pay for insurance against declines in stocks, moves in the opposite direction of the S&P 500 about 80 percent of the time.

The energy and raw-materials industries in the S&P 500 fell more than 0.9 percent as the dollar rose, reducing the appeal of commodities as an alternative investment.

The Dollar Index, a measure of the U.S. currency’s performance against those of six major trading partners, advanced 0.6 percent. The euro fell as concern Greece will fail to secure financial assistance from the European Union reduced demand for the currency.

Exxon, Dow

Exxon dropped 0.5 percent to $67.04, while Dow Chemical retreated 3.5 percent to $28.95. Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, slid 2.2 percent to $78.51.

Financial shares in the S&P 500 dropped 0.7 percent after Goldman Sachs said it was cutting estimates on banks and brokers with ties to the capital markets by 15 percent following February results.

Goldman said it favored JPMorgan Chase & Co. and Bank of America Corp. versus Morgan Stanley and Citigroup Inc., and reiterated its sell recommendation on Jefferies Group Inc.

Palm slumped 29 percent to $4. Revenue in the quarter ending in May will be less than $150 million, Chief Financial Officer Doug Jeffries said yesterday on Palm’s third-quarter conference call. Analysts in a Bloomberg survey had estimated $300 million on average.

Price Estimate of $0

The company also reported its 11th straight quarterly loss. Deutsche Bank AG slashed its price estimate on the stock 38 percent to $5. Canaccord cut its estimate to zero from $4 on solvency concerns.

DirecTV fell 3.4 percent to $33.42. The largest U.S. satellite-television was cut to “hold” from “buy” at Citigroup Inc.

David Tice, chief portfolio strategist for bear markets at Federated Investors Inc., said he still expects the S&P 500 to plunge following the biggest rally since the 1930s. The measure may fall to 400, or 66 percent below yesterday’s close, he said.

“We still have vast excesses and imbalances that still need to be worked off,” Tice told Bloomberg Television. Tice’s bearishness has proved wrong over the past year. In May, he said the index would sink to 400 within six months. He repeated the forecast in November.

A gauge of health-care companies had the biggest gain in the S&P 500 among 24 industries.

Beating Estimates

Aetna Inc. rose 3.7 percent to $34.46. The third-largest U.S. health insurer said it expects first-quarter operating profit per share to exceed analysts’ estimates.

U.S. health-care stocks are poised to rally if the industry overhaul being considered by Congress becomes law because it removes uncertainty and expands coverage, BlackRock Inc.’s Bob Doll said.

The companies also are “still very cheap” relative to their earnings prospects, said Doll, vice chairman and global chief investment officer for equities at New York-based BlackRock, which oversees $3.4 trillion. Amgen Inc., UnitedHealth Group Inc. and Johnson & Johnson are “favorites” at the world’s biggest asset manager, he said in an interview yesterday in Dayton, Ohio.

The House of Representatives plans to vote on a $940 billion overhaul of the U.S. health-care system that aims to extend coverage to 32 million uninsured Americans on March 21. Health-care companies and health-maintenance organizations, known as HMOs, will benefit most because more people will be insured as the U.S. population ages, Doll said.

The S&P 500 has entered an “air pocket” of little resistance as it pushed to a 17-month high, according to analysts at Instinet, who say the benchmark could extend its rally. The area of little resistance extends to between 1,180 and 1,200, where prices may keep rising even with low volume, said Instinet’s chief market technician John Schlitz.

“Should the index eventually reach” 1,225, “we expect significant resistance to develop,” Schlitz said. The 61.8 percent Fibonacci retracement level of the bear market resides within 10 points of that level, he said.

Dow gains for 8th straight day

2010-03-18T16:44:00.000-07:00

Well, markets made another 52-week high either intraday or closing. Amazingly, the DOW gained for the 8th straight day. Tomorrow is option expiration and my March XOM put will most likely expired worthless barring from some kind of major catastrophe. Further, tomorrow is referred as quadruple witching day, where four different types of options and futures contracts expire on the same day. I expect a more volatile session and the markets should end the week pretty flat. Needless to say, no new trades have been opened since a good three weeks. My FSLR bet is really paying off. You really need to be patient at this game. Here's today market recap:

The Dow industrials rose for an eighth consecutive session on Thursday, lifted by a rise in Boeing's stock, while a mixed group of economic figures kept the broader S&P 500 in check.

The Dow's gains came even though more stocks declined than advanced on the broad New York Stock Exchange and on a lower volume day in terms of trading, one day before the expiration of quarterly futures and options.

Boeing (BA.N), up 2.2 percent at $70.87, gave the Dow its biggest boost after Bernstein Research said the 787 program "appears to be making substantial progress." Boeing, which marked its highest close since late June 2008, is the Dow's best-performing stock so far this year.

"The volume is low again, the market hangs in there, (there's) no volatility," said Todd Leone, head of listed trading at Cowen & Co. in New York

"The market just can't get going (in either direction) and so we just slowly move up."

Economic data was mildly supportive. The Philadelphia Federal Reserve Bank's index showed factory activity expanded more than expected in March, although new orders fell.

The Dow Jones industrial average (.DJI) gained 45.50 points, or 0.42 percent, to end at 10,779.17. The Standard & Poor's 500 Index (.SPX) dipped 0.38 point, or 0.03 percent, to 1,165.83. The Nasdaq Composite Index (.IXIC) gained 2.19 points, or 0.09 percent, to close at 2,391.28.

The Dow's eight-session winning streak is the longest since an eight-day string of gains that ended August 27, 2009.

PALM PLUNGES AFTER BELL

After the bell, Palm Inc (PALM.O) delivered news that might weigh on technology shares on Friday, forecasting sharply lower-than- expected revenue in the fiscal fourth quarter on dismal smartphone sales.

Shares of Palm, which has exposure to both consumers and businesses, dropped 13.5 percent to $4.89 after the bell. In regular Nasdaq trading, the stock rose 5.2 percent to $5.65.

During the regular session, FedEx Corp (FDX.N), advanced 3.2 percent to $92.67 after the world's largest package delivery company posted a sharply higher quarterly profit that beat Wall Street's estimate.

United Parcel Service Inc (UPS.N), a FedEx rival, climbed 2.5 percent to $64.42. The Dow Jones Transportation Average (.DJT), which includes both FedEx and UPS, gained 1 percent.

DRILLERS SLUMP, NIKE JUMPS

Oil service companies' shares dropped after UBS cut its price target on 11 drillers and oil service companies while also removing its "short-term buy" rating on Nabors Industries Ltd (NBR.N) and Helmerich & Payne Inc (HP.N).

Nabors shares lost 4.8 percent to $20.63 and Helmerich slid 5.3 percent to $38.88. The PHLX Oil Service Sector index (.OSX) dropped 2.8 percent.

Both Nike Inc (NKE.N) and GameStop (GME.N) rallied after reporting results. Nike's stock climbed 5.3 percent to $74.66, a day after the largest global sports gear maker reported a third-quarter profit that beat expectations. GameStop shares jumped 6.6 percent to $21.16 after the video-game retailer forecast full-year sales growth of 4 percent to 6 percent.

But Intel Corp (INTC.O) slipped 0.2 percent to $22.20, as chip stocks limited the Nasdaq's gain. Macquarie Equities Research started coverage of the stock and the semiconductor sector with a "neutral" rating, expecting utilization rates for the chip arena to peak in the next one or two quarters.

The PHLX Semiconductor index (.SOXX) shed 0.7 percent.

HEALTH INSURERS CLIMB

Health insurers' shares gained on the day as the U.S. House of Representatives appear to be on track to vote on the healthcare reform bill on Sunday, offering the prospect of removing some uncertainty for investors.

The Morgan Stanley Healthcare Payor Index (.HMO) rose 3.1 percent.

In other economic news, the Labor Department said consumer prices were flat in February, reinforcing the Federal Reserve's commitment to keep its benchmark interest rate low for a while. A separate report showed a dip in new claims for jobless benefits in the latest week.

Volume has been thin ahead of key options expirations on Thursday and Friday, when four different types of options and futures contracts expire in a convergence known as "quadruple witching."

About 7.66 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's estimated daily average of 9.65 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 3 to 2. On the Nasdaq, about 15 stocks fell for every 11 that rose.

markets keep on marching and making new 52-week high

2010-03-16T16:09:00.000-07:00

With three days till expiration, my only March open position:

sell to open 1 PUT XOM 2010MAR20 65 for $1.18 USD looks good indeed.

We have to be patient and wait for a substantial pullback before we can start selling some PUT options again. Yesterday was a small opportunity, but the market rallied to close positively. It sucks to be a bear right now, but you have to patient, a pullback is eminent in my opinion. Here's today's recap:

U.S. stocks rose, with the Standard & Poor’s 500 Index reaching a 17-month high, as the Federal Reserve said it will leave its main interest rate near zero for an extended period to safeguard the economic recovery.

Citigroup Inc. and Wells Fargo & Co. paced gains in financial shares after the central bank said that while the economy is improving, low rates are still needed for an extended period. Intel Corp. rallied 4 percent after saying it shipped more than 100,000 of its new chips. General Electric Co. rose 4.5 percent on plans to possibly resume dividend raises next year. Harley-Davidson Inc. jumped on renewed buyout speculation.

The S&P 500 increased 0.8 percent to 1,159.46 at 4:04 p.m. in New York, the highest since October 2008. The Dow Jones Industrial Average rose 43.83 points, or 0.4 percent, to 10,685.98 for a sixth straight gain, the longest stretch of the year. The SPDR S&P 500 ETF Trust, an exchange-traded fund tracking the benchmark index, rose for a 13th day to extend a record streak of gains.

“The FOMC statement wasn’t materially different, but there were some nuances out there that support the market,” said Cliff Remily, a money manager at Santa Fe, New Mexico-based Thornburg Investment Management, which oversees $57 billion. “The statement reaffirms that we are in a recovery and their views on the labor market and business spending certainly helped.”

The S&P 500 closed at 1,150.23 on Jan. 19, the highest level since October 2008, and then plunged 8.1 percent through Feb. 8 on concern that European nations including Greece will fail to pay back debt and speculation that the Fed will need to rein in emergency stimulus measures as the economy improves. The index has since erased that loss and extended its rebound since March 9, 2009, to 71 percent.

Fed Statement

The Fed said today that the labor market is stabilizing and business spending has risen, while inflation remains subdued. Although bank lending continues to contract, the Fed said, financial conditions should spur economic growth. Still, the Fed said, the economy is likely to require low interest rates for an extended period of time.

“The market really liked what it heard for a quick pop,” said Dan Cook, senior market analyst at IG Markets Inc. in Chicago, who expects a possible change in rates in the second half of 2010. “People got their orders in pretty quick.”

An earlier report showed prices of imported goods fell in February more than anticipated, a sign there is little inflation pressure coming from abroad. The import price index declined 0.3 percent, the first drop in seven months, the Labor Department said.

Greece Rating

Benchmark equity indexes extended gains in late-morning trading after Greece had the threat of a cut to its credit rating reduced by S&P, which cited the country’s efforts to narrow a budget deficit that is more than four times the European Union’s limit. S&P affirmed the nation’s BBB+ rating, removing it from “creditwatch negative,” meaning the company is no longer considering an imminent reduction to the grade.

“Greece is also helping to drive investor sentiment,” said Thomas Nyheim, a money manager at Christiana Bank & Trust Co. in Greeneville, Delaware, which manages $5.2 billion. “With the stable rating now, it doesn’t look like problems are pervasive throughout Europe.”

Citigroup rose 4.1 percent to $4.05. The bank 27 percent owned by the U.S. is bolstering a unit that trades stocks with the lender’s own money after a proposed government ban of proprietary trading helped spur eight of its 22 employees to defect, people with direct knowledge of the matter said.

Wells Fargo climbed 1.3 percent to $30.28, the highest price in five months.

Intel, GE

Intel climbed 4 percent to $22.01, its biggest gain since August and its highest price since September 2008. The world’s largest semiconductor maker said it already has shipped more than 100,000 units of its Xeon 5600, a server chip that officially goes on sale today.

GE had the biggest gain in the Dow, advancing 4.5 percent to a 15-month high of $18.07. The company, which last year cut its shareholder dividend for the first time since the Great Depression, may resume increases in 2011 and repurchase stock for the first time since 2008 amid a “snapback” at the finance unit, Chief Financial Officer Keith Sherin said.

The world’s biggest maker of jet engines and medical imaging machines has “earnings momentum slowly building,” and “for the first time in over 10 years, the pieces are in place for earnings upside,” JPMorgan Chase & Co. said in a note to clients.

‘Pretty Well’

“The market has done pretty well year-to-date,” said Randy Bateman, who oversees $13 billion as chief investment officer at Huntington Asset Advisors in Columbus, Ohio. “We’ll still see catalysts to move stocks higher. Good cash flow, merger and acquisition activity, stock buybacks and dividend increases will tempt investors. We’re looking for a pretty good year of double- digit return.”

Limited Brands Inc. rallied 4.2 percent to $24.71. The owner of the Victoria’s Secret and Bath & Body Works chains said its board approved a dividend of $1 per share and authorized a $200 million share repurchase program.

Financial Engines Inc. surged 44 percent to $17.25 in its first day of trading after the investment adviser co-founded by Nobel laureate William Sharpe became the first U.S. company to price an initial public offering above its forecast range this year.

Harley-Davidson Speculation

Harley-Davidson had the biggest gain in the S&P 500, rising 7 percent to $28.35. The biggest U.S. motorcycle maker rallied on renewed speculation it may be acquired.

“We’ve been seeing rumors of a leveraged buyout,” said Patrick Mortimer, director of options trading at Pipeline Trading Systems LLC in New Hope, Pennsylvania. Bob Klein, a Harley-Davidson spokesman, couldn’t be reached for comment.

Real-estate companies had the second-biggest gain after chipmakers among 24 industries in the S&P 500, rising 2.5 percent as a group. Billionaire investor Sam Zell said real estate investment trusts will have enough cash to boost dividends in the future and that he expects more takeovers in the industry.

Equity Residential, the largest publicly traded U.S. apartment owner, surged 3.3 percent to $39.37. ProLogis gained 3 percent to $14.21. Kimco Realty Corp. rose 3.2 percent to $15.57.

Housing Starts

Homebuilders advanced, led by Lennar Corp., even after a report showed housing starts in the U.S. fell in February as record snowfall in parts of the country hampered construction, while fewer building permits signaled demand is stagnating. Builders broke ground on 575,000 homes at an annual rate last month, down 5.9 percent from January’s revised 611,000 pace, Commerce Department figures showed. Building permits, a sign of future construction, decreased for a second month.

EBay Inc. rose 2 percent to $26.79. The most-visited U.S. e-commerce site started a Send Money application for Apple Inc.’s iPhone. EBay said mobile transactions grew almost six- fold last year, to $141 million.

Wyndham Worldwide Corp. fell 2.8 percent to $24.07. The franchiser of Days Inn hotels and Super 8 motels was lowered to “neutral” from “buy” at Goldman Sachs Group Inc.

Sequenom Inc. tumbled 22 percent to $6.08. The biotechnology company posted a fourth-quarter loss excluding some items of 30 cents a share, 21 percent wider than the average analyst estimate.

strong markets indeed, new 52-week intraday high

2010-03-12T16:58:00.000-08:00

Overall, the first two week of March were amazing. The S&P 500 gained an impressive 4.12% in the first two weeks of March alone. Today the S&P 500 closed down by a miniscule 0.25 points. We made no new trades since the beginning of the month. With the VIX under 18% once again, we will have to wait and see and be patient. Selling premiums once again is not worth it at this time. We will never force a trade, just for the sake of trading.

Here's today's recap:

Most U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from a 17-month high, as a drop in consumer confidence overshadowed an unexpected increase in retail sales.

Citigroup Inc. and Bank of America Corp. fell more than 1.5 percent and S&P 500 financial shares ended a 10-day streak of gains, the longest since at least 1989. Pfizer Inc. slid 1.2 percent as its drug failed to halt the progression of advanced breast tumors. Caterpillar Inc. helped lead the Dow Jones Industrial Average higher on signs of growing Chinese demand for construction machinery. Even with today’s drop in the S&P 500, futures on the index rose for an 11th day, the longest streak ever.

About 10 stocks declined for every nine that rose on the New York Stock Exchange and Nasdaq Stock Market. The S&P 500 fell less than 0.1 percent to 1,149.99 at 4:08 p.m. in New York, erasing an early gain of 0.3 percent after a decrease in the Reuters/University of Michigan preliminary consumer sentiment index signaled continuing concern over the job market. The Dow rose 12.85 points, or 0.1 percent, to 10,624.69.

“It looks like confidence is beginning to wane,” said Michael Mullaney, who manages $9 billion at Fiduciary Trust Co. in Boston. “Confidence is going to suffer until we get real improvement on the jobs front. In addition, the stock market is a little bit extended right now. A minor pullback wouldn’t be surprising.”

U.S. stocks rose for a third day yesterday, sending the S&P 500 Index to the highest level since October 2008, as Citigroup Inc. led a rally in bank shares. The S&P 500 gained 1 percent this week and the Dow climbed 0.6 percent.

Futures on the S&P 500 expiring this month climbed 0.7 point to 1,151.3 today amid growing speculation the economic recovery will be sustained. That’s the longest streak since they were created in 1982.

‘Half Full’

The S&P 500 closed at a 15-month high of 1,150.23 on Jan. 19, and then plunged 8.1 percent through Feb. 8 on concern that European nations including Greece will fail to pay back debt and speculation that the Fed will need to rein in emergency stimulus measures as the economy improves. The index has since erased that loss to extend its rebound since March 9, 2009, to 70 percent.

“The glass may be half full, but people are not quite certain they can hold on to the glass,” said Jason Pride, director of investment strategy at Glenmede in Philadelphia, which manages $18 billion. “The market is jittery. Every little piece of news will make people nervous or happy. On top of that, the excess debt situation throughout the developed markets is a big headwind. That will keep economic growth at a subpar level.”

Financials Retreat

Financial shares in the S&P 500 retreated for the first time in 11 sessions, losing 0.4 percent as a group.

Citigroup Inc. fell for the first time in nine days after Oppenheimer & Co. said the stock is fairly valued and under a “cloud” as long as the U.S. government remains a major shareholder. Citigroup dropped 5 percent to $3.97 after yesterday rising to the highest since November.

Charles Schwab Corp. sank 3.5 percent to $18.43 after saying it expects first-quarter earnings to be as much as 4 cents a share lower than its fourth-quarter results. Fourth-quarter net income was 14 cents. The average estimate of analysts surveyed by Bloomberg was for a first-quarter profit of 15 cents a share.

Bank of America had the biggest decline in the Dow, dropping 1.6 percent to $16.85.

Health-care stocks in the S&P 500 dropped 0.4 percent collectively.

Pfizer retreated 1.2 percent to $17.08. The world’s largest drugmaker said the cancer drug Sutent failed to halt the progression of advanced breast tumors in two studies. The company also stopped a trial of an experimental medicine to treat lung malignancy.

Abbott, United Technologies

Abbott Laboratories fell 1.8 percent to $54.52. The maker of the arthritis medicine Humira was cut to “sell” from “hold” at Citigroup Inc., which said the company may face “underlying profitability trouble” this year.

United Technologies Corp. slipped 0.7 percent to $71.53. The maker of Pratt & Whitney jet engines said it expects 2010 earnings per share of $4.40 to $4.65. The average estimate of analysts surveyed by Bloomberg was $4.64 a share.

Pall Corp. slumped 4.8 percent to $38.87. The producer of filters for drugmakers and refineries forecast 2010 earnings excluding some items of $2.05 a share at most. On average, the analysts surveyed by Bloomberg estimated profit of $2.07.

Merger

CF Industries Holdings Inc. declined 3.9 percent to $96.73 after agreeing to acquire Terra Industries Inc. for about $4.7 billion, topping a bid from Yara International ASA and fending off its own hostile suitor during a yearlong takeover battle. Terra agreed to the offer of $37.15 in cash and 0.0953 of a share of CF Industries common stock for each Terra share, the companies said today in a statement.

Terra fell 1.2 percent to $46.33.

Bets against smaller U.S. stocks have reached the highest level in seven months as traders speculate the group’s record valuation will lead to declines.

Investors boosted bearish bets in 2010 even as the shares rallied on signs the U.S. economy is strengthening. More than 8 percent of shares among companies in the Russell 2000 Index have been sold short, the highest level in at least a year.

Benchmark indexes advanced at the start of trading after the Commerce Department said purchases at U.S. retailers increased 0.3 percent last month, compared with a 0.2 percent drop forecast in a Bloomberg survey of economists.

‘Grinding Slog’

“While I don’t have any reason to think the 2010 equity market will be as strong as 2009 was, you can probably have a reasonably close to average year,” said Stephen Wood, who helps manage $176 billion as chief market strategist for Russell Investments in New York. “There’s going to be a measureable, discernable upward bias. It’s going to be a grinding slog, but the equity market will be up higher a year from now than it is today.”

A gauge of S&P 500 retailers advanced 0.6 percent.

Sears Holdings Corp. and Macy’s Inc, the largest U.S. department-store companies, gained at least 1.7 percent.

Makers of construction machinery rallied after Komatsu Ltd. of Japan, the world’s second-largest seller of large dump trucks and excavators, said it expects sales in China to increase 40 percent to 50 percent in the year starting April 1.

Caterpillar

Caterpillar Inc., the world’s largest maker of bulldozers, gained 2.5 percent to $60.36, the second-biggest gain in the Dow. Paccar Inc., a maker of Kenworth, Peterbilt and DAF trucks, rose 3.9 percent to $41.35, the highest since September 2008.

Monsanto Co. rose 1 percent to $72.35. The company, facing antitrust probes into its genetically modified seeds, may benefit from previous court rulings in which intellectual property rights trumped competition concerns, according to antitrust lawyers.

Supervalu Inc. surged 6.6 percent to $17.13 on speculation the second-largest grocery chain will be acquired. Steve Bloomquist, a Supervalu spokesman, said the company wouldn’t comment on market rumor or speculation.

RF Micro Devices Inc. advanced 3.8 percent to $4.91. The maker of semiconductor products rose after it was picked by CNBC’s “Mad Money” television show host Jim Cramer on potential growth and market-share gains.

another tough day for the bears

2010-03-11T16:12:00.000-08:00

It really sucks to be a bear right now. Markets made a new 52-week high today. The markets miraculously closed positive once again. I am sensing a pull back very soon as the bull run seems to be running out of steam. We shall see. With options expiry next week, anything can happen. So far, my only upcoming trade that will expire next week:

sell to open 1 PUT XOM 2010MAR20 65 for $1.18 USD

looks good, although there's not much of a cushion. Tendency wise, XOM seems to move extremely slowly up and down and I should be fine.

Here's today's recap:

U.S. stocks rose, sending the Standard & Poor’s 500 Index to the highest level since October 2008, as Citigroup Inc. led a bank rally and investors speculated that health-care reform will be harder to pass.

Citigroup advanced 5.6 percent as Chief Executive Officer Vikram Pandit said the bailed-out bank should be consistently profitable. Zions Bancorporation rose 4.6 percent after telling investors it would make more money lending this quarter. Coventry Health Care Inc. and Aetna Inc. increased more than 3.2 percent after a Senate parliamentarian made it harder for Democrats to use a process known as reconciliation to bypass Republican opposition to industry reform.

The S&P 500 advanced 0.4 percent to 1,150.24 at 4 p.m. in New York. It fell 0.6 percent earlier after inflation in China accelerated more than economists estimated, spurring speculation the nation will boost interest rates. The Dow Jones Industrial Average rose 44.51 points, or 0.4 percent, to 10,611.84.

“Some people view that 1,150 mark as an important level,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “The economic fundamentals have been improving. It’s good to see that the bad news is unable to shake the market’s confidence.”

The S&P 500 closed at a 15-month high of 1,150.23 on Jan. 19, and then plunged 8.1 percent through Feb. 8 on concern that European nations including Greece will fail to pay back debt and speculation that the Fed will need to rein in emergency stimulus measures as the economy improves. After erasing the loss, the index has surged 70 percent since March 9, 2009.

Government Sale

Citigroup led financial shares to the biggest gain among 10 industries in the S&P 500. The lender surged 5.6 percent to $4.18 for the second-biggest gain in the S&P 500. Pandit said he “wouldn’t be surprised” if the government were considering a sale of its 27 percent stake in Citigroup.

“The stock always bounces a little when there are talks the government won’t be involved anymore,” said Michael Binger, a Minneapolis-based fund manager at Thrivent Asset Management, which oversees about $60 billion. “That would be a good thing for the bank.”

Zions, the best-performing stock on the KBW Bank Index this year, rose 4.6 percent to $21.43. Chief Financial Officer Doyle Arnold said during a conference today that Zions’s net interest margin, the difference between what the bank charges for loans and pays out to gather deposits, improved in the first quarter. Bad-loan write-offs at the company are likely to be stable or slightly better than in the fourth quarter, Arnold said.

Reporting Profits

Synovus Financial Corp. jumped 9 percent to $3.16. The Georgia bank that posted two straight annual losses said it may return to profitability this year. Huntington Bancshares Inc., the third-largest bank in Ohio, gained 2.9 percent to $5.40.

Health-care stocks in the S&P 500 rose 0.4 percent today. Coventry climbed 3.4 percent to $24.55. Aetna increased 3.3 percent to $32.69.

“I’m getting more and more convinced that the health-care reform is completely dead,” said Scott Tapley, a health-care money manager who helps oversee $2.5 billion at 1st Source Investment Advisors Inc. in South Bend, Indiana. “You get a sigh of relief because now they know they’re not going to have radical change in the immediate future.”

GameStop Corp. rose 5.9 percent to $19.35 for the biggest advance in the S&P 500. Trading of bullish options on the world’s largest video-game retailer increased to a record on speculation the company may be acquired. Chris Olivera, a spokesman for GameStop, declined to comment.

Higher Rates

Energy shares had the only decline in the S&P 500 among 10 industries, falling less than 0.1 percent. Higher-than-estimated inflation in China spurred speculation the nation will be forced to raise interest rates, slowing down demand for commodities.

China’s inflation reached a 16-month high, industrial output climbed and new loans exceeded forecasts, putting pressure on the government to cool economic growth.

Consumer prices rose 2.7 percent in February from a year earlier, the National Bureau of Statistics said today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. Production rose 20.7 percent in the first two months of 2010, the most in more than five years.

Premier Wen Jiabao aims to hold full-year inflation around 3 percent after banks flooded the financial system with money to drive a rebound from the global recession. Gross domestic product grew 10.7 percent last quarter and central bank Governor Zhou Xiaochuan said March 6 that anti-crisis policies must end “sooner or later.”

‘Too Far, Too Fast’

“Obviously, inflation is a concern on a global basis,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. “China has led us out of the global recession. If they raise rates too far, too fast, that’s going to slow the world down. I don’t think it’s a problem right now, but there’s always an overreaction from investors.”

Semiconductor companies in the S&P 500 fell 0.5 percent as a group, the most among 24 industries. Christopher Danely, an analyst at JPMorgan Chase & Co., said in a report that “negative data points” have begun to appear for the group, especially Texas Instruments Inc., Xilinx Inc. and Altera Corp.

Texas Instruments dropped 2.1 percent to $24.07. Xilinx declined 1.5 percent to $26.50. Altera retreated 0.4 percent to $24.93.

resilient markets, in my opinion a pull back is in order very soon

2010-03-09T19:37:00.000-08:00

Markets kept on marching higher and higher. There is some good news for the bears though. The DOW marginally finished higher by 11.86 points. The DOW build up a 60 points gain by mid afternoon, but the gains tapered off towards the end of the day. With that said, I expect a good pull back within the next few days. Further, with the VIX still under 18%, premium is relatively cheap and not worth selling at the moment.

Here's today recap:

U.S. stocks rose on the anniversary of the 2009 bear-market low for the Standard & Poor’s 500 Index amid speculation the economy will continue to recover from the worst contraction since the Great Depression.

American International Group Inc. surged 13 percent on speculation the insurer will sell more assets. United Technologies Corp., General Electric Co. and AT&T Inc. led gains in the Dow Jones Industrial Average. Boeing Co. advanced after Northrop Grumman Co. withdrew as a bidder for a U.S. Air Force contract. Benchmark indexes briefly erased gains in the final hour as the S&P 500 climbed within 0.5 percent of its 2010 high.

The S&P 500 rose 0.2 percent to 1,140.45 at 4:10 p.m. in New York. The Dow Jones Industrial Average advanced 11.86 points, or 0.1 percent, to 10,564.38. Six stocks advanced for every five that fell on the New York Stock Exchange and Nasdaq Stock Market.

“It’s happy anniversary day,” said Philip Orlando, New York-based chief equity market strategist at Federated Investors Inc., which oversees $400 billion. “The economy is out of recession, the improvement is sustainable and stocks will continue grinding higher. Investors are waiting for the next catalyst.”

The S&P 500 is up 69 percent since hitting a 12-year low of 676.53 one year ago today, the biggest rally for the index since the 1930s. The main benchmark for U.S. stocks has recovered losses after sliding as much as 8.1 percent from this year’s high amid concern that some European countries’ will fail to pay back debt and speculation the Federal Reserve will need to rein in emergency stimulus measures as the economy improves.

‘Still Cheap’

Improving profits have reduced the S&P 500’s valuation to 18.3 times its companies reported operating earnings, compared with a multiple of 22.9 in December.

“Stocks are still cheap,” said billionaire Kenneth Fisher, who oversees $37 billion as chairman of Fisher Investments Inc. in Woodside, California. “The nature of the beginning of the second year of a bull market is one where people are still climbing the wall of worry and they have ‘acrophobia,’” he said, referring to the fear of heights.

The S&P 500 climbed as high as 1,145.37 today, near the 15- month closing high of 1,150.23 reached on Jan. 19. The rally that day extended the index’s advance from March 9, 2009, to 70 percent.

“I believe we’ll play around that 1,150 level until we decide to go one way or the other,” said James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “We might break through this, but we need catalysts.”

AIG Rallies

AIG led gains by financial companies bailed out by the U.S. government on speculation the insurer will sell more assets after raising $51 billion through deals.

“We’re hearing some rumors AIG might sell more assets,” said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “Their ability to raise capital is a positive thing. Back on the days when they were having all those problems, there was talk of whether or not the company could even be salvaged. Not only they are still around, the companies under their umbrella have value.”

AIG jumped 13 percent to $32.77 for the biggest gain in the S&P 500. Citigroup Inc. advanced 7.3 percent to $3.82 for the second-biggest gain in the index as Fox Business Network said the U.S. may sell its stake in the bank within three months, without saying where it got the information. Fannie Mae climbed 5.9 percent to $1.07, and Freddie Mac increased 7.6 percent to $1.28.

Risk Assets

“We’re poised for risk assets to do well for a few quarters,” said David Darst, the New-York based chief investment strategist at Morgan Stanley Smith Barney, which has $1.6 trillion in client assets. “The interest rate is low, inflation is low and liquidity is enormous. The final positive is global growth.”

United Technologies had the biggest gain in the Dow average, rising 1.4 percent to $71.78. The maker of Pratt & Whitney jet engines and Otis elevators was raised to “outperform” from “neutral” at Cowen & Co.

UAL Corp. rose 3.7 percent to $18.16. The parent of United Airlines said February revenue for each passenger flown a mile increased by between 17 percent and 19 percent.

Boeing, Sprint

Boeing gained 0.8 percent to $67.79. The world’s second- largest commercial-plane maker is the only bidder for the U.S. Air Force’s $35 billion tanker program after Northrop Grumman withdrew because the government refused to alter some of its requirements.

Sprint Nextel Corp. had the third-biggest gain in the S&P 500, jumping 6.5 percent to $3.62. The third-largest U.S. wireless company advanced for a second day after saying it expects revenue growth in the next several quarters and saying it will pay down debt and control expenses.

Sprint, the third-largest U.S. wireless carriers, led a 1.2 percent rally in telephone companies, the biggest advance among 10 groups. Industrial shares climbed 0.8 percent as a group, the second biggest gain of the 10.

Yum! Brands Inc. climbed 3.4 percent to $36.60. UBS AG upgraded the shares to “buy” from “neutral” and raised its price estimate on the shares by 16 percent to $44, saying the stock has underperformed its global consumer peers.

Comerica Inc. retreated 1.6 percent to $35.70. The bank, with a market value of about $5.5 billion, is raising about $800 million by selling shares. BMO Capital Markets cut its rating on the shares to “market perform” from “outperform.”

First Solar Inc. fell 2.2 percent to $106.22. The world’s largest maker of thin-film solar modules was downgraded to “underweight” from “neutral” at JPMorgan. Energy Conversion Devices Inc., also lowered to “underweight” from “neutral” at JPMorgan, fell 8.1 percent to $7.87.

no trades for this week

2010-03-05T16:16:00.000-08:00

No real bargains this week, except for MON which fell today. I already have two positions on it. Markets this week just rallied. Tomorrow is the March 6, 2009 lows anniversary. Beside, the job report, maybe this key date might have fueled today's rally as well. Here are some headlines:

Stocks and commodities rallied while Treasuries retreated and the dollar erased gains after a smaller-than-estimated decrease in U.S. jobs added to evidence the global economic recovery is accelerating.

The Standard & Poor’s 500 Index climbed 1.4 percent to 1,138.7 at 4:14 p.m. for a sixth straight advance, its longest rally since the start of the year. The MSCI Emerging Markets Index rose 1.5 percent to extend its biggest weekly increase since the beginning of December. Russia’s Micex Index jumped for a seventh day, the longest streak since July 2006. Oil and copper surged, while Treasury two-year note yields climbed four basis points to a two-week high of 0.9 percent. The Dollar Index slipped 0.2 percent after gaining as much as 0.4 percent.

Global stocks extended their advance after a U.S. government report showed the country’s unemployment rate held at 9.7 percent in February as the nation lost 36,000 jobs. Economists on average had forecast a decrease of 68,000 jobs and a gain in the unemployment rate to 9.8 percent, according to a Bloomberg survey.

“Today’s employment report was a real win-win,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York, in a note to clients. “If it was considerably negative, it would be dismissed as snow-induced and a snapback in March was all but assured,” he wrote. “On the other hand, if the report was better than expected, and it was, then it demonstrates a strong jobs market in spite of weather related factors.”

Yearlong Rally

The S&P 500 has rallied 68 percent from a 12-year low almost a year ago as the economy returned to growth following a yearlong contraction. The gains have been led by a 144 percent rally in financial shares, while consumer-discretionary and industrial companies have almost doubled. The advance trimmed the S&P 500’s drop from a 2007 record to 27 percent as of yesterday’s close.

European stocks capped the biggest weekly gain since July as investors speculated that the European Union will assist Greece with its finances if required. The Stoxx Europe 600 Index rallied 1.6 percent today and 4.6 percent this week, erasing its loss for the year.

The cost to protect against defaults on U.S. corporate bonds declined to the lowest in more than six weeks. Credit- default swaps on the Markit CDX North America Investment-Grade Index Series 13, which is linked to 125 companies, fell 2.5 basis points to a mid-price of 86.25 basis points as of 11:08 a.m. in New York, according to broker Phoenix Partners Group.

Corporate Bond Rally

Corporate bonds are rallying the most since the beginning of the year as Greece raised 5 billion euros ($6.8 billion) in a sale of 10-year bonds and today’s U.S. jobs report bolstered confidence in the economy.

The extra yield investors demand to hold investment-grade bonds instead of government debt narrowed 3 basis points this week to a one-month low of 165 basis points, heading for the biggest decline since the period ended Jan. 8, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. On Feb. 17, spreads were 171 basis points.

The MSCI Asia Pacific Index increased 0.5 percent as Japan’s Nikkei 225 Stock Average completed its biggest weekly gain this year, rising 2.4 percent over the past five days.

Taiwan’s Taiex Index rallied 1.3 percent, leading gains in Asian stocks after a report yesterday showed a drop in jobless claims in the U.S. and two Federal Reserve Bank presidents said they believe the central bank should keep rates low until the recovery picks up.

The MSCI emerging markets gauge has rebounded to the highest level in six weeks after a selloff sent it down as much as 13 percent from its 2010 peak on Jan. 11. It’s still 1.5 percent lower for the year.

Siegel Is Bullish

“Equity returns around the world are going to be good but they’re going to be particularly good in emerging markets,” Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School of Business, said in an interview on Bloomberg Television in Hong Kong.

Emerging-market equity funds attracted $240 million in the week ended March 3, the third straight week of inflows, EPFR Global said, citing easing concerns about a contagion from the Greece debt crisis and a recovery in exports. Greece sold 10- year bonds yesterday with investors bidding for more than three times the 5 billion euros ($6.8 billion) it sought to raise.

Greek bonds rose, sending the yield on the nation’s 10-year debt down three basis points to 6.07 percent.

Bond Spreads

The extra yield investors demand to own developing-nation debt over U.S. Treasuries declined 13 basis points to 2.72 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index.

China’s Shanghai Composite Index rose 0.3 percent after fluctuating earlier today as Premier Wen Jiabao warned of “latent risk” in the nation’s banks and pledged to crack down on property speculation in a speech to the National People’s Congress. The premier also affirmed an 8 percent economic-growth target, saying that the government will continue its moderately loose monetary policy and proactive fiscal stance.

China’s “government will boost expenditure on increasing the reserves of grain, edible oil, non-ferrous metals, petroleum and other important materials,” the Ministry of Finance said in a 2010 budget plan issued today during the National People’s Congress in Beijing.

Oil rose 1.6 percent to $81.51 a barrel while gasoline climbed 1.6 percent to $2.2704 a gallon in New York and touched $2.2831, the highest since Oct. 3, 2008. Copper for May delivery gained 4.2 cents, or 1.2 percent, to $3.4175 a pound on the New York Mercantile Exchange’s Comex unit. The contract advanced 4.1 percent this week.

no trades so far this week

2010-03-04T16:34:00.000-08:00

With markets inching higher and higher, it is getting very difficult to set up good trades. Further, the VIX is under 19% and therefore this will not help on the option premium front. Tomorrow is the all important monthly jobless report. If the unemployment rate goes above 10%, this might trigger a massive pull back. We are trading cautiously at this stage. I am expecting a pull back soon. The market rallied a good 5% since this year's lows.

no trades for 26/02/2010 and window dressing

2010-02-26T17:19:00.000-08:00

Another thesis of mine, the last business day of the month is "window dressing" day.

What Does Window Dressing Mean?

A strategy used by mutual fund and portfolio managers near the year or quarter or month end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks. These securities are then reported as part of the fund's holdings.

Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. Another variation of window dressing is investing in stocks that don't meet the style of the mutual fund. For example, a precious metals fund might invest in stocks that are in a hot sector at the time, disguising the fund's holdings, so clients really have no idea what they are paying for.

Window dressing may make a fund appear more attractive, but you can't hide poor performance for long.

Here's a recap of today's action:

U.S. stocks advanced, trimming the weekly drop in the Standard & Poor’s 500 Index, as reports showing business activity expanded and gross domestic product topped estimates overshadowed American International Group Inc.’s plunge and home sales that missed projections.

JPMorgan Chase & Co. led bank stocks to the biggest advance among 10 industries groups in the S&P 500 after Barclays Plc recommended buying the shares. Merck & Co. and UnitedHealth Group Inc. rose at least 0.8 percent, leading gains in health- care companies. AIG, the insurer bailed out by the U.S. government, slumped 10 percent after reporting an $8.87 billion fourth-quarter loss.

The S&P 500 rose 0.1 percent to 1,104.49 at 4 p.m. in New York. It dropped 0.4 percent this week and gained 2.9 percent in February. The Dow Jones Industrial Average gained 4.23 points today, or less than 0.1 percent, to 10,325.26. Trading volume on U.S. exchanges was 7.9 billion shares, 11 percent less than the 2010 average, amid a storm that dumped about 21 inches (53 centimeters) of snow in New York City.

“It’s a very brittle recovery,” said Matthew Kaufler, a money manager at Federated Clover Investment Advisors in Rochester, New York, which manages $2.8 billion. “Any sort of sustained growth in consumer spending is a ways off.”

A decline in the Conference Board’s consumer confidence index to a 10-month low on Feb. 23 sent the S&P 500 to its biggest drop in more than two weeks. The University of Michigan today revised its gauge of consumer sentiment to 73.6 for February, from a preliminary reading of 73.9.

2 opening trades for 25/02/2010

2010-02-25T16:34:00.000-08:00

I am in awe and totally shocked. Wow, what a major market reversal today! At around 1 PM today, the DOW was trading at 10,185.83 down by 188.33 points from yesterday's close. Then all of the suddent, the DOW roared back to close down by 53.13 points. I did not see any major news for such reversal, other than a speculation that AAPL might split its stock. Here are some headlines:

U.S. stocks fell, after a late-day rally in the Standard & Poor’s 500 Index failed to erase losses, as Moody’s Investors Service said it may downgrade Greek debt and reports on jobs and manufacturing orders trailed forecasts.

The S&P 500’s retreat shrank as Apple Inc. reversed its drop, rising 0.7 percent amid speculation the iPhone maker will split its stock, and as the euro rose versus the dollar. DuPont Co., American Express Co. and Boeing Co. helped lead losses in the Dow Jones Industrial Average. Coca-Cola Co., the world’s largest soda maker, lost 3.7 percent after agreeing to buy Coca- Cola Enterprises Inc.’s North American bottling division.

sell to open 2 PUT KFT 2011JAN22 25 for $1.16 USD
net premium: $219.55 USD
margin requirement: $4,780.45
strategy used: near 52-week low
probability of success: medium
comments: with KFT closing @ $28.81, there is a downside protection of 13.22%, this trade has a medium chance of expiring worthless. since KFT is a consumer staple, I think it's really unlikely that it will move that much.

sell to open 1 PUT GS 2011JAN22 80 for $1.13 USD
net premium: $101.80 USD
margin requirement: $7,898.20
strategy used: near 52-week low
probability of success: high
comments: with GS closing @ $156.44, there is a downside protection of 48.86%, this trade has a high chance of expiring worthless. GS is the most profitable investment bank since the collaspe of Bear Stearns and Lehman Brothers and Bank of America gobbling up Merrill Lynch.

no trades for 24/02/2010

2010-02-24T16:53:00.000-08:00

After the DOW fell 100.97 points the day before, today it roared back 91.75 points. Good thing I setup some positions yesterday to take advantage of the down draft. It seems we are in buy on the dips mode once again.

Tomorrow, it's the weekly jobless claims and this might be a market mover event. MON and FSLR went down again, but not that much. I am not adding more MON or FSLR to my current portfolio. I am shifting my attention to financials and consumer staples to diversify more my portfolio. I am currently looking at CL, GS, JNJ, KFT, MCD, PG, and WMT and perhaps some ETFs such as DIA, SPY, QQQQ and IWM as good plays. It's not easy to get a nice premium with markets going up most of the time.

4 opening trades for 23/02/2010

2010-02-23T16:46:00.000-08:00

Finally a triple digit loss day on the DOW since February 15, 2010. Today is an excellent day to sell some puts.

sell to open 1 PUT MON 2010OCT16 65 for $3.10 USD
net premium: $298.80 USD
margin requirement: $6,201.20
strategy used: near 52-week low
probability of success: medium
comments: with MON closing @ $75.90, there is a downside protection of 14.36%, this trade has a medium chance of expiring worthless

sell to open 1 PUT MA 2011JAN22 140 for $2.90 USD
net premium: $278.80 USD
margin requirement: $13,721.20
strategy used: near 52-week low
probability of success: high
comments: with MA closing @ $222.02, there is a downside protection of 36.94%, this trade has a high chance of expiring worthless

sell to open 1 PUT FSLR 2010SEP18 100 for $12.70 USD
net premium: $1258.80 USD
margin requirement: $8,741.20
strategy used: near 52-week low
probability of success: very low
comments: With FSLR closing @ $105.78, there is a downside protection of 5.46%, this trade has a very low chance of expiring worthless. I am taking this bet because I find that FSLR is way undervalued. Once demand for solar panels pick up quickly, so will the stock.

sell to open 1 PUT EXC 2010OCT16 40 for $1.80 USD
net premium: $168.80 USD
margin requirement: $3,831.20
strategy used: near 52-week low
probability of success: low to medium
comments: With EXC closing @ $44.14, there is a downside protection of 9.38%, this trade has a low to medium chance of expiring worthless. Utilities are relatively boring stocks, so I do not expect too much movement for the next little while.

1 opening trade for 19/02/2010

2010-02-19T17:04:00.000-08:00

Amazingly, the markets closed positively. I was expecting a triple digit loss today after yesterday's surprise FED anouncement, but investors found some comfort with the inflation news. U.S. stocks, commodities and the dollar gained as lower-than-estimated rise in inflation fueled speculation the Federal Reserve will keep its benchmark interest rate near a record low to safeguard the economic recovery.

The cost of living in the U.S. rose in January less than anticipated and a measure of prices excluding food and fuel fell for the first time since 1982, indicating the recovery is generating little inflation. The consumer-price index increased 0.2 percent for a fifth straight month, led by higher fuel costs, Labor Department figures showed today in Washington. Excluding energy and food, the so-called core index unexpectedly fell 0.1 percent, reflecting a drop in new-car prices, clothing and shelter.

Well my thesis held for this expiration month. The only good trade I found was MON, which was one of the few stocks on my watch list that actually went down today. With these markets, it is extremely hard to predict the movement. I wanted to place this trade and not miss out on any sudden major move to the upside next week.

sell to open 1 PUT MON 2010JUL17 65 for $1.58 USD
net premium: $146.80 USD
margin requirement: $6,353.20
strategy used: near 52-week low
probability of success: medium
comments: with MON closing @ $77.75, there is a downside protection of 16.40%, this trade has a medium chance of expiring worthless

february 19, 2010 option expiration and fed announcement

2010-02-19T03:42:00.000-08:00

Well, well, shortly after the close yesterday, the Federal Reserve Board sent its most explicit signal yet that the emergency supply of liquidity to financial markets is done and the most aggressive monetary policy easing in its 96-year history will eventually reverse. Chairman Ben S. Bernanke and his colleagues at the Board of Governors raised the rate charged to banks for direct loans by a quarter-point to 0.75 percent, effective today. It was the first increase in the discount rate since June 2006.

In Asia, the Nikkei was down 212.11 and the Hang Seng was down 528.13. Oil is down about a dollar and gold is down about 10 dollars. Dow futures are down about 60 points, S&P 500 futures down aboutn 9 pts and Nasdaq-100 futures are down about 11 points as of 6:30 A.M. EST.

Today is option expiration day and we will have to see what today has in store for us. My thesis is: On expiration day, it is usually a neutral day to slightly down or up day, as market makers want to pin to the strike that will the create the maximum pain.

According to the theory of maximum pain, the underlying stock or index will tend to move towards the price where the greatest numbers of options contracts (in dollar value) will expire worthless. It is the point where option owners feel the maximum pain and option sellers reap the most reward. Whether some sort of market manipulation or mere chance causes this to occur is subject to debate, but there is some evidence that the tendency exists. It seems to occur more predictably when there are no major news stories or other market moving events that can otherwise cause a sudden movement in the underlying asset. So, you might think of that maximum pain point as the path of least resistance.

no trades for 18/02/2010

2010-02-18T16:36:00.000-08:00

With the market rallying for the third day in a row, I decided to stay put for today. For my next trades, I am looking into GS, MA, MON and WMT. WMT reported earnings today and did beat expectation, but the company provided guidance that fell fall short of estimates. Nevertheless, the stock did not go down as much as I would like.

4 opening trades for 17/02/2010

2010-02-17T16:32:00.000-08:00

sell to open 1 PUT XLE 2010DEC31 40 for $1.13 USD

net premium: $101.80 USD
margin requirement: $3,898.20
strategy used: near 52-week low
probability of success: very high
comments: with XLE closing @ $56.82, there is a downside protection of 29.60%, this trade has a high chance of expiring worthless

sell to open 1 PUT XOM 2010MAR20 65 for $1.18 USD

net premium: $106.80 USD
margin requirement: $6,393.20
strategy used: near 52-week low and strong support @ $65
probability of success: low to medium
comments: with XOM closing @ $65.76, the downside protection is nonexistent, this trade has a low to medium chance of expiring worthless, if we take a closer look at the graph there seems to be a huge support level @ $65 and further the 52-week low is sitting @ $61.86 - these two factors may play in our favor

sell to open 1 PUT XOM 2010APR17 65 for $1.81 USD

net premium: $169.80 USD
margin requirement: $6,330.20
strategy used: near 52-week low and strong support @ 65
probability of success: low to medium
comments: same as above, more time for the strategy to work - this is called expiration diversification

sell to open 1 PUT XOM 2010JUL17 65 for $3.45 USD

net premium: $333.80 USD
margin requirement: $6,166.20
strategy used: near 52-week low and strong support @ 65
probability of success: low to medium
comments: same as above, more time for the strategy to work - this is called expiration diversification