1:05pm (EST)
Wall Street was bracing for a big move today but we knew this morning when the initial claims report came in at 450,000 we could have a flat day. Although the bears had the early edge, the bulls have used the better-than-expected PPI number to battle back. We said the 450,000 number was a meet-me-halfway figure and it is showing.
The Dow is currently down 11 points to 10,561 while the S&P 500 is off by 4 points to 1,121. The Nasdaq is showing a decline of8 points and is at 2,293.
There are number of interesting stories developing and they will be a factor in the coming weeks. One of the bigger storylines is President Obama’s administration announcing they were taking a harder stance on the Chinese government’s trade and currency policies. This has been a touchy subject since June and could get heated after strong statements from Treasury Secretary Timothy Geithner hit the fan.
South Park “Timmy” plans to acknowledge that China has kept the value of its currency artificially low to help its exports and hasn’t followed through on promises to improve the situation. We have always lived by the motto “don’t bite the hand that feeds you”…and how much U.S. debt does China own?
In earnings news, FedEx (FDX, $82.75, down $3.19) shares are down 4% after the company reported a profit of $380 million, or $1.20 a share, versus $181 million, or $0.58 a share, in the year earlier period. Analysts were looking for $1.21 a share. Revenue came in at $9.5 billion which was slightly better than a forecast of $9.4 billion.
For the current quarter, the company said earnings would be between $1.15-$1.35 a share, which was below analysts’ expectations, but FedEx lifted their earnings forecast for 2011 to a range of $4.80-$5.25 a share, up from $4.60-$5.20.
There were a lot of bets being made yesterday that the global shipping giant would smash earnings but we told you there could be some issues that cause concerns for analysts. The main one is the company’s trucking unit which continues to lose money hand-over-fist in the face of overcapacity and weak pricing.
Although shares are off their lows of the day, we expect FedEx to slip below $80 and towards the lower $70’s if the market retreats from here.
Elsewhere, all eyes (and ears) will be on Research In Motion (RIMM, $46.03, up $0.53) after the closing bell today as the company updates Wall Street on its numbers for the quarter. Again, big bets being made here as a number of analysts have jumped on our bandwagon on riding RIMM lower. We profiled a put option trade on RIMM in mid-August when shares were at double-nickels ($55) and we said the stock looked poised to break through its 52-week low, which was $48 and change at the time.
The put options were at $1.03 and our subscribers took profits at $2.70 and $2.25 for a sweet 140% return two weeks later. Since then, shares have touched a 52-week low of $42.53.
We aren’t exactly sure what RIMM has to say today, but, we are expecting a 10% move in the stock and maybe even a 15% move depending on the severity of the news. A 10% move is about $4.50 which puts the stock at $41ish or $50ish. If we think outside the box and factor in a 20% move then shares could trade at $55 (double nickels) or $37 in after-hours.
We will be back in the morning with a full update but we can’t wait for the news from RIMM today! Subscribers, check the Members Area for more of our thoughts on what to expect and how to manage our current trade.
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