9:00am (EST)
We’ve got a long way to go and a short time to get there…
There is so much news to cover this morning we feel like Smokey and the Bandit. We have a number of interesting tidbits to go over and the opening bell rings in 30 minutes…but we will get you there in time and tell you what to watch for today.
The Dow fell 7 points on Thursday to close at 10,359 while the Nasdaq slipped a point to settle at 2,249. Bye, bye seven-session winning streaks. The S&P 500, however, squeezed out a point to settle at 1,096.
The market ended flat after being down for much of the session. There were a number of events shaping up nicely for the bears but by the end of the day they couldn’t gain any momentum to hold the market at its lows. The main reason were the rumors surrounding Goldman Sachs (GS, $145.22, up $6.16) which hit the market late in the day. With about 30 minutes left in trading, the indexes made a nice reversal after the market caught wind of the company reaching a possible settlement with the SEC.
Sure enough, after the bell sounded, Goldman announced that it would pay $550 million to settle civil charges after saying they didn’t have their clients’ best interests by selling mortgage securities that were shaky. These CDO’s were “secretly” put together by a hedge-fund to take advantage of the housing market’s collapse and Goldman was betting against those securities. It was the largest fine ever paid by Wall Street but it gets a big monkey off Goldman’s back.
Also, after the close, Google (GOOG, $494.02, up $2.68) reported earnings that fell short of Wall Street’s bar causing shares to drop $20 in extended-trading last night. The company reported a profit of $1.8 billion, or $5.71 a share, versus $1.5 billion, or $4.66 a share in the year ago period. Google took some write-offs due to acquisitions but actually earned $6.45 a share. Analysts were looking for $6.52 so they missed by 7 cents.
As we head to press, Google shares are down $19, to $475.
Turning to Biotech, Vivus (VVUS, $12.11, flat) was halted all of yesterday as it awaited word on a panel’s recommendation concerning its drug Qnexa. The news wasn’t good.
The FDA’s advisory panel board voted 10-6 to reject the company’s obesity drug on safety concerns. This was a bit of a shock to most experts because the drug does work. However, the risks of depression, memory-loss and potential birth defects outweighed the rewards of getting people down to size.
This was tough for us to watch because we sat this one out although we are glad we did. We brought you coverage on this stock at the beginning of 2009 when shares were around $5 and we have slowly watched them double for 18 months now. We have also played call options on Vivus in the past but we decided to hang on the sidelines for this event due to the expensive nature of the options.
The news concerning Qnexa isn’t an official slam-dunk “no” because the FDA will still decide the drug’s fate sometime in October. Vivus also said it expects to have more data from a longer study that could help its case for getting Qnexa approved but they are now probably losing the weight-loss race as two other companies also have obesity drugs waiting approval.
The talk was that Qnexa would gain approval but that there would be some negative votes. In fact, one FDA official said he was surprised by the outcome. Either way, shares are getting walloped as they are down $6.76, or 56%, to $5.35, in early action.
We also got some earnings news from Bank of America (BAC, $15.39, down $0.28) and Citigroup (C, $4.16, down $0.05) this morning. We will touch base on those two companies in our afternoon update. Both stocks are lower before the bell.
Don’t forget today is July option expiration day. If you have any call or put options that are “in-the-money” make sure you close them out. Of course, if they are “out-of-the-money” then you can let them expire worthless.
As we get ready for the open, futures are showing a mixed open. Dow futures are down 23 points, S&P 500 futures are off by 2 and the Nasdaq 100 futures are showing a 3 point pop.
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FedEx (FDX), New Homes Sales Lift Market
Monday, July 26th, 2010
1:05pm (EST)
We mentioned in our Weekly Wrap that the bulls could test the upper end of the recent trading range and they got a couple of golden nuggets this morning to fuel the rally. If you missed the charts from Sunday afternoon, check them out again and you will see how close the bulls are pushing resistance. The one thing we want you to take away from the Weekly Wrap is this:
“We have been seeing 1% moves in a choppy market but now we are starting to see 2%-3% moves, and on a weekly basis, 4%-5% swings. This is telling us something and it could mean we are going to see even bigger price swings in the weeks and months ahead.”
As far as today’s action, sales of new homes jumped last month although it was the second-weakest month on record. New home sales rose to 330,000 in June from May’s revised reading of 267,000, which was nearly a 25% increase. Sales for April and March were also revised downward but the news was better-than-expected.
In corporate news, FedEx (FDX, $83.12, up $4.16) gave the bulls a boost after raising its earnings forecast for the quarter and rest of the year. The company said they were seeing more volume than anticipated in the current quarter and lifted their range to $1.05-$1.25 from a prior range $0.85-$1.05. For the full year, FedEx estimated earnings of $4.60-$5.20 a share, up from a prior view of $4.40-$5.
FedEx looks cheap at these levels and its 52-week high is $97.75. However, we would like to see more volume here in the U.S. before jumping on the bandwagon. We played FedEx earlier this year on the way up and at some point late this year or early next, FedEx will be a $100 stock. We just don’t think today’s news will propel it to new highs over the near-term.
Biotech has gotten hot again and there are a number of names on the move as M&A rumors pick up. Genzyme (GENZ, $66.83, up $4.31) is up another 7% today, adding to Friday’s breakout move from $54 to $62, on takeover chatter. There is speculation that Sanofi Aventis (SNY, $29.61, up $0.26) is looking to acquire Genzyme and there are others that could join the race to get this prized jewel.
As we head to press, the Dow is enjoying a 60 point pop, or 0.6%, and is at 10,484. The S&P 500 is up 9 points, or 0.8%, and is at 1,111. Meanwhile, the Nasdaq is showing a 16 point pop, or 0.7%, and was last seen trading 2,285.
We are watching the 1,110 level on the S&P 500 as a sign to see if the bulls will push 1,125. There are layers of technical resistance from here on up and the bears are still holding the fort down but this clears the way for a test higher.
As volatility picks up, we should get the break we are looking for and we are ready to pounce. While it may appear the bulls are ready to ride the rocket ship again, we remain cautious to the downside. However, we have both call and put options on our Watch List so we will be ready either way. Subscribers, check for the important updates in the Members Area.
Tags: call options, FDX, FedEx, GENZ, Genzyme, how to trade options, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, put options, stock options trading, volatile options
Posted in BioTech, Company Commentary, Earnings, Market Analysis, Market Commentary | Comments Off