Futures were pointing towards a significantly lower open this morning as the market seems focused on Europe’s debt issues, this time Italy, instead of the start of 2Q earnings. Not that there is much to get excited about after the close as Alcoa (AA, $15.99, down $0.40) gets the ball rolling.
The European Union (EU) held an “emergency” meeting over the weekend to talk about the ongoing debt concerns which led to a lower open for the European markets. There are growing reports that say Greece may have to default and the Italian stock market is getting hammered for the second day in a row. Here at home, our own debt crisis is reaching a boiling point with President Obama calling for a deal to get done in 10 days.
As far as earnings, Alcoa is expected to report earnings of $0.34 a share on revenue of $6.3 billion. There are 17 analysts who currently cover the stock and their estimates range anyway from 28 cents to 45 cents a share on $5.7-$6.6 billion in revenue.
Last time out, the company announced mixed results as they beat their EPS (earnings per share) number but missed on revs. Aluminum prices are up so most traders are factoring in a higher move for the company but we wouldn’t be surprised to see Alcoa miss by a penny or two.
Shares normally rise into earnings and Alcoa had added nearly 8% since the beginning of the month before today’s 3% pullback. The July 16 straddle is pricing in a 6%-7% move for the stock in afterhours trading. The July 16 calls (AA110716C00016000, $0.35, down $0.20) and the July 16 puts (AA110716P00016000, $0.50, up $0.25) are fairly active as the bulls and bears take positions ahead of the announcement.
As we head to press, the Dow is lower by 140 points to 12,512 while the S&P is down a double-deuce (22 points) to 1,321. The Nasdaq is low by a Grant (50 points) to 2,809.
We would like to see Dow 12,500 hold along with the S&P holding 1,320. Tech needs to hold 2,800 today. Perhaps the U.S. market can rally once the European markets close in about 30 minutes…
Today’s action by the bears is pushing support but we are still expecting a trip to new highs sometime in July and we weren’t surprised by today’s lower open. Time will tell if our jump shots hit nets or if the bricks that were thrown up by the Street on a Wall of worry start to hit the floor.
One thing is for certain, we may be entering one of the best times in a few years to make some massive profits on a blow-off rally or an extreme sell-off. This how serious we think the volatility will be in the coming months and we are fully prepared to profit in either direction the market takes. If you are not yet a current member, we urge to jump on board for the rest of the year.
In fact, we have a NEW TRADE we are releasing right now. Subscribers, check the Members Area for today’s recommendation and updates for our current option trades.