12:30pm (EST)
After a big surge past resistance yesterday, the market is now testing support as the bears are trying to hold yesterday’s gains to a 1-day rally. The bulls were behind the 8-ball early as futures were weak for much of last night and into this morning. Of course, they got worse after hearing this morning’s lousy economic numbers.
The Empire Manufacturing Survey for June came in negative,-7.8 for June, versus expectations for a print of 10.0. Last month, the report came in at 11.9. The Consumer Price index (CPI) for May increased by 0.2%, which was actually higher than the 0.1% pop that was penciled-in. Core CPI increased by 0.3%, versus expectations for a 0.1% increase. Not bad, but not great either.
In IPO (initial public offering) news, Pandora Media (P, $220.13, up $4.13) made its New York Stock Exchange (NYSE) debut this morning by ringing the opening bell. The company priced 14.7 million shares last night at $16 which raised $235 million.
If we break it down even further, the offering raised about $96 million for the company, while current investors cashed in for $139 million by selling a total of 8.7 million shares.
Demand was strong for a company that is not profitable as shares reached a high of $26 shortly after the open. The IPO price was raised a few times as earlier this month Pandora projected its offering would sell for $7 to $9 a share. Then the range was upped to $10 to $12 a share at the end of last week.
Now that it’s official, Wall Street is giving Pandora a market value of $2.5 billion. That’s a steep price for a company that has lost, oh…$100 million over the last decade? On the other hand, Pandora has nearly 100 million registered users who spend a ton of time listening to music so the advertising revenue is there. Had shares came out at $7-$9 then maybe we would have seen value but not at these levels.
As far as the indexes, the Dow is back below 12,000 as it is currently down 155 points to 11,920. This will likely be the key battle ground going into the close and is a nice round number ahead of tomorrow’s jobs report.
The S&P is off by 19 points to 1,268 which is nearly halfway between the 1,300 resistance level and 1,250 support area. The Nasdaq is showing a decline of 36 points to 2,642 and is dancing around our 2,650 target. The bulls will look for a break above 2,675-2,700 while the bears eye 2,600-2,550.
We mentioned Thursday will be another big day on Wall Street as the market digests the latest Initial Claims and Continuing Claims numbers an hour before the bell. Housing Starts and Building Permits for May are also due out before the open with the Philly Fed Index for June due out shortly afterwards.
As we look ahead to Friday, expect volatility with June “quadruple witching”. This is an event where stock index futures, stock index options, stock options and single stock futures all expire on the same day. Worse yet, for the last 8 years, the week after has not been pretty for the market.
The bulls are trying, we give them that, but the bears have been resilient in testing the lower levels of support that we outlined on Monday morning. In any event, the rest of the week could be explosive and we wouldn’t be surprised by a massive move to the downside – or upside if the employment numbers come in strong.
We will also get a peak at Research In Motion’s (RIMM, $35.26, down $0.50) numbers on Thursday as they will announce their quarterly results. We have been dead-on with the stock’s recent decline and our latest put option recommendation on RIMM is up 80%. Time to ring the register on half.
Subscribers, check the Members Area for the important trade updates and we will see ya’ in the morning with a fresh update.
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