The S&P 500 found support above 1100 after this morning's disappointing jobs report, recovering much of today's losses due to short covering. This market drop shifted some of today's trade into Gold and Treasurys — Gold (GCU10) rose above the psychological $1,200 level and the price of 10-Yr Notes rose, while the yield went down to some of the lowest levels in over a year. The next major event on the economic docket is the FOMC Meeting on Tuesday. Earnings season is still in full swing, so check your underlying stocks and look for some sector related stocks that are reporting. Have a good weekend.
Stocks slumped on disappointing jobs data, but finished well off session lows Friday. The underlying tone of trading turned bearish in morning action after the Labor Department reported that the US economy shed 131,000 jobs in July, which was more than the 87,000 loss that economists were expecting. Making things even worse, June numbers were revised down to -221,000, from -125,000. Average hourly earnings rose .2 percent, and a bit better than the .1 percent increase that was expected. Meanwhile, the rate of unemployed stayed the same at 9.5 percent. Economists were looking for an increase of 9.6 percent. Investors seemed focus on the headline number, however, and at one point Friday, the Dow Jones Industrial Average was down as much as 159 points. However, a late day around of buying interest surfaced in the final two hours and, by the closing bell, the Dow was down just 21 points. The NASDAQ finished off 4.6 points, but 35 points from its worst levels.
Bullish Flow
Elan (ELN), the Irish pharmaceutical maker, added three cents to $5.25 per share Friday. Meanwhile, options volume rose to 4X the recent average daily levels after about 13,000 calls and only 70 puts traded in the name. The top trade was a block of 9,400 September 5 calls at the 45-cent ask price, and appears to be a massive premium purchase. 10,380 traded on the session. January 10 calls saw interest as well. Shares are up the past five days straight and have gained 6.3 percent since the company last reported earnings on July 21. Today's call buyers seem to be anticipating additional gains in the weeks ahead.
Bullish order flow was also seen in Pulte Homes (NYSE:PHM), Fortress Investment Group (NYSE:FIG), and Prudential (NYSE:PRU).
Bearish Flow
Athena Health (NASDAQ:ATHN) shares lost 45 cents to $25.79 and options volume rose to 4.5X the average daily, driven by August - September 22.5 put spreads. For example, in morning trading, a block of 4650 Aug 22.5 puts traded on the 20-cent bid and a block of 4650 September 22.5 puts traded on the $1.00 ask. This appears to be a calendar spread at an 80-cent debit. It might be a bet that shares will hold above $22.5 through August expiration (2 weeks) and then fall from that point forward. Or, it is possibly a roll out of August puts and into a fresh position in September. Either way, it seems to be somewhat defensive and possibly hedging activity after the stock's 22 percent rally off earnings a couple of weeks ago.
Bearish flow also picked up in Cina Yuchai International (NYSE:CYD), Comerica (NYSE:CMA), and Gerdau Ameristeel (NYSE:GNA).
Index Trading
The CBOE Volatility Index (.VIX) hit a high of 23.89 as stocks faltered Friday morning, but finished the day down .36 to 21.74. Although the jobs data stirred up a bit of volatility in morning trading, overall market action has been relatively slow and uneventful for the past few weeks. The 20-day statistical volatility of the S&P 500 (SPX) is now 18.7 percent. Since VIX tracks SPX expected volatility, it makes sense that it is falling back towards 20. That is, the volatility index is easing as market action has become much less volatile during the historically quiet summer period for the equity market. That might change in the weeks ahead, however, as September and October are historically the most volatile months.
ETF Trading
Overall options volume and volatility were light Friday, but there was a noticeable uptick in put activity in the exchange-traded funds. 2.9 million puts and 1.7 million calls traded across all the ETFs, which is 121 percent of the recent average daily volume. Puts on the S&P Depositary Receipts (SPY), or "spiders", were the most actives. For example, 89,745 August 110 puts traded. Another 87,567 Weekly puts, which expire today, also changed hands. Players flocked to puts on the fund to hedge portfolios as the market faltered Friday morning. However, at the end of the day, these put buyers were not rewarded. SPY, which is a fund that holds all S&P 500 stocks, finished down 45 cents to $112.39 and .6 percent above its opening price of $111.57.
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