9:05am (EST)   

The bulls were back on track yesterday following Tuesday’s sell-off after another batch of good earnings and some reassuring comments from the Fed kept the bears at bay.  However, it wasn’t all smooth sailing.

The market was holding steady but was dealing with another downgrade from Standard & Poor’s.  This time the credit agency slashed its rating on Spain, predicting “a more protracted period of sluggish activity” than they previously assumed.  The reaction was far quieter than on Tuesday, when the market plunged on news that S&P slashed its credit ratings on Greece and Portugal.  All we need now is a cut on Ireland’s debt to complete the sweep on the downgrade of the PIGS. 

The Fed’s decision to keep interest rates stable for an “extended period” provided some relief and helped offset other headwinds the market is facing.  Although the Fed’s statement did say that employers are still reluctant to hire they also mentioned the labor market is showing signs of improvement and they noted that housing starts have edged up. 

As a result, the Dow managed to move higher by 53 points, or 0.5%, and settled at 11,045.  Bank of America (BAC, $17.78, up $0.31) and JPMorgan Chase (JPM, $43.46, up $1.05) led the blue chip Financial rebound and it was a good sign to see the bulls reclaim the 11,000 level following Tuesday’s drubbing.

The S&P 500 added nearly 8 points, or 0.7%, to finish at 1,191 while the Nasdaq finished with only a slight gain and basically ended the day flat at 2,471.  We would have liked to have seen more follow through here but the bulls did well by holding ground.

In M&A news, Hewlett-Packard (HPQ, $53.28, up $0.03) announced after the market closed yesterday that it is acquiring Palm (PALM, $4.63, down $0.02) for $1.2 billion.

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HP has agreed to pay $5.70 a share for Palm.  The total value of the deal is really worth $1.4 billion but they are paying a little less after factoring in Palm’s cash and debt.  We aren’t sure if this will be a match made in heaven or a one-night stand in Vegas that doesn’t turn out so good.

In pre-market trading Palm shares are at $5.82. 

In earnings news, Buffalo Wild Wings (BWLD, $42.30, down $8.71) got clipped on National Wing Day after announcing a disappointing outlook despite beating estimates by a penny. 

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Shares dropped 17% after the company said it earned $10.6 million, or $0.58 a share, versus $8.5 million, or $0.47 a share, a year ago.  Wall Street was expecting earnings of $0.57 a share.

Revenue came in at $152 million, a nice 15% jump, but fell short of estimates for $154 million.

The backbreaker came when the chicken wing chain said the current quarter would very likely be weaker than expected because of declining April same-store sales.  The company said same-store sales at company-owned restaurants fell 3.7% and 2.4% at franchised locations for the month. 

We often like to profile some of the returns that call and put options can make so when new option traders read us they know that the returns you can see with options is real.

Although we did not get into the trade, the BWLD May 40 puts (BWLD10052200045000, $4.00, up $3.20) soared 400% yesterday and could have been picked up for 80 cents on Tuesday.

We were, however, in another earnings trade that should do rather well this morning after the company beat estimates last night and gave a rosy outlook.  We talk about that trade in our Members Area this morning.  Shares were up 9% in after-hours trading last night and those gains are holding this morning which means good news for the call options we recommended.

As we head to press, Dow futures are up 33 to 11,048 while the S&P futures are showing a 7 points pop to 1,197.  The Nasdaq futures are higher by 12 to 2,019.