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12:20pm (EST)
The market opened lower and the selling pressure was intense as the bears once again pushed the major indexes down to recent support levels. However, Wall Street got a couple of favorable economic reports which helped move the market off its lows.
The Dow was down triple-digits before the Chicago Purchasing Managers Index report came out and started to rebound after hearing a reading of 62.5 versus expectations for a print of 59.9. Elsewhere, consumer confidence jumped to a five-month high of 54.1 in November from 49.9 in October. Expectations called for an increase to 53.0. Although this was good news, a reading over 90 indicates a healthy economy and the index hasn’t been that high in 3 years.
In earnings news, Barnes & Noble (BKS, $13.68, down $1.19) is down 7% after reporting a wider-than-expected loss for its most recent quarter. The company reported a loss of $12.6 million, or $0.22 a share, versus $24 million, or $0.43 a share, in the year ago period.
This was another tough quarter for the struggling book chain as the company itself didn’t even know what it would earn for the quarter. Wall Street was expecting a much smaller loss of $0.08 a share while B&N expected anywhere between a profit of $0.05 a share to a loss of $0.25 a share for the quarter.
Revenue also came in short at $1.9 billion versus expectations for $2 billion. This represented a rise of just 1% and revenue in stores open at least a year fell over 3%. The figure is considered key because it excludes results from stores that were opened or closed during the year. This doesn’t paint a pretty picture going forward.
Today’s action is similar to Monday’s but we like the strong showing the bulls are displaying as they hold major support levels. There are numerous headwinds facing the market but all indications are the bulls are going to try to push the indexes to new highs by the end of the year.
As we head to press, the Dow is lower by 36 points to 11,016 while the S&P 500 is down 6 points to 1,182. The Nasdaq is showing a decline of 25 points to 2,500.
We have a lot to cover in our Members Area including 2 NEW TRADES!!!
Housing Numbers Disappoint, Market Falls to Support
Tuesday, August 24th, 2010
12:30pm (EST)
Futures were pointing towards a significant sell-off at the open and the bears were ferocious in their attack. The bulls have recovered somewhat as the market is well of its lows but we doubt things are going to get any better.
The major indexes hit their lows shortly after the existing home sales came out at 10am (EST). There was no surprise here as existing home sales fell more than 27% from the prior month to an annual rate of 3.8 million units, marking a 15 year low. Wall Street was expecting sales to fall 12% to a 4.7 million units.
As a result, the Dow is down 85 points to 10,088 but has traded to a low of 9,999. Although the index has recovered from its triple-digit loss, the bears will now target 9,800 over the next few days.
The S&P 500 is lower by 9 points to 1,058 but has touched a low of 1,048. We have been mentioning 1,050 would come into play and all signs are pointing to a test of 1,000.
The Nasdaq is showing a decline of 21 points to 2,138 and is below our 2,150 target. Next stop should be 2,050 but 2,100 could provide a little support. The index has kissed 2,113 today.
In earnings news, Barnes & Noble (BKS, $14.63, down $0.37) continues to unravel like a cheap sweater after reporting earnings that missed analyst’s expectations. They also have no clue what earnings will be going forward as online sales continue to trump brick-and-mortar sales.
The company reported revenue of $1.4 billion but lost $1.02 a share in the quarter. Wall Street was expecting sales of $1.42 billion and a loss of $0.80 a share. Online sales were up over 40% from a year ago, but retail store sales were down 2%.
Looking ahead, Barnes & Noble said for the current quarter they could post a profit of $0.05 or a loss of $0.25 a share. Analysts were expecting a profit of $0.15 a share.
Tomorrow will be another important day for economic news as we get an update on durable goods orders. The bulls will be anxious to see if a slowdown in manufacturing was only temporary but if it wasn’t, then you can almost bet the bears will pounce.
We are releasing our 1pm market update a little early today because we have an important trade update. One of our positions is up over 160% and we are closing half of the trade today so subscribers can lock in profits. We are going to let the other half ride for possible bigger gains but by closing half, we are locking in a nice return even if the other half of the trade were to expire worthless.
We got our subscribers into the put options at $1.03 less than 2 weeks ago and they have hit a high of $3.20 today. Time to ring the register.
We are licking our chops at the current market conditions and we are going to ride the bears’ backs if we continue lower. A number of our other trades are also showing some solid gains but we need to be careful of any positive news. We doubt there will be but something good could lead to snap-back rally which would keep us in this trading range.
We will be back at 9am (EST) Wednesday morning and you can expect a few more trades this week. Subscribers, check the Members Area for the important updates.
Tags: Barnes & Noble, BKS, option picks, RIMM, stock options trading
Posted in Company Commentary, Earnings, Trade Update, Trading Psychology | Comments Off