The bearish underlying tone continued on Wall Street Friday morning after the Labor Department's latest jobs report showed the economy shedding more payrolls in January. After sliding 269 points Thursday, the Dow Jones Industrial Average saw lackluster morning action after the Labor Department said the US economy lost 20,000 jobs in January. Economists were looking for an increase of 13,000. While the unemployment rate unexpectedly fell to 9.7 percent, from 10 percent, December numbers were revised to show a loss of 150,000, from an initial reading of -85K.
The morning selling intensified as the Dow broke through 10,000 and fears of widening credit spreads weighed on Europe's equity markets. The dollar moved up and crude oil reversed early gains, trading back down towards $70 a barrel. Meanwhile, cyclical names, like GE and Boeing (BA) led the Dow to 42 point loss. However, heading into the final hour, the Dow has now come well off its lows and the Nasdaq is back into positive territory.
Nevertheless, trading remains defensive. The CBOE Volatility Index (.VIX) added another 1.70 to 27.78. Approximately 9.4 million puts and 7.7 million calls traded (a ratio of 1.22, compared to a 22-day average of .78.)
Bullish FlowTyson (TSN) touched a new 52-week high and traded up 92 cents to $14.91 early after the food company reported a quarterly profit of 42 cents per share, which trounced analyst estimates of 18 cents. There was an interesting flurry of call buying seen in TSN late yesterday ahead of the news. It started about 25 minutes before the closing bell and included lots of Apr 15 calls at the asking price of 55 and 60 cents per contract. 7146 traded total (84 percent Ask) and 6147 contracts of new interest was created to a total of 15.3K — making the April 15 call the largest open interest position in the name.
SmithFields (SFD) is up 21 cents to $15.17 on the heels of Tyson's strong results In the options market, one player bought to open 5060 July 17.5 calls at 90 cents on ISE, according to ISEE data. More than 7,000 now traded vs. 462 in open interest. SFD is due to report around Mar 11.
Bearish FlowiShares Emerging Markets Fund (EEM) is down 88 cents to $36.74 following another round of volatility in global equity markets Friday. In the options, one player appears to be bracing for additional fallout. They apparently opened a Jan11 30 - 36 (2X1) put ratio spread at even, 20000X on AMEX. 20000 Jan 36 puts were bought at $4.46 and 40000 Jan 30s sold at $2.28. Looks like a new position and probably a hedge, as it makes its best profits if EEM falls to $30 (18.1 percent) by the Jan 2011 expiration.
Implied Volatility Movers14000 calls traded on Human Genome Sciences (HGSI) in the first two hours of trading, which represents 4X the expected and almost 10X the number of puts. Trading is scattered across a number of contracts — Febs at the 28, 30, 31, and 32 strikes are the most actives. Shares are up 34 cents to $26.44 and implied volatility rose about 5 percent to the mid-50s.
Unusual Volume MoversPowerShares Dollar Fund (UUP) is seeing 10X average daily trading volume, with 304,000 contracts traded and call volume representing about 99 percent of today's activity.
Fannie Mae (FNM) is seeing 56X average trading volume, with 237,000 contracts traded and puts representing 99 percent of today's trading activity.
Nokia (NOK) is seeing 3X normal trading volume. 109,000 contracts traded, with call options representing about 56 percent of today's volume.
Unusual volume (two times or more than normal average volume) is also being seen in Dell Computer (DELL), Visa (V), and eTrade (ETFC).
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