1:30pm (EST)
The bulls got off to a good start on the official first day of the Santa Claus rally as they pushed the market higher at the open. Although we have backed off the highs, the major indexes are showing slight gains ahead of tomorrow’s potential market moving event. We mentioned this morning that Italy will be offering a ton of debt over the next few days and Wall Street is a little worried over the yield on the 10-year notes which could fetch 7% or more when they go to auction.
This will be a short week with the Christmas holiday but it is funny how none of the talking heads are mentioning the start of the Santa rally which consists of the last 5 trading days of the year and the first 2 days of the New Year. We also mentioned that if there is no Santa rally that a bear market typically follows in January so tomorrow’s Italian debt offering WILL BE the catalyst that takes the market higher or lower thru yearend.
One stock that will probably not participate in a possible rally is Sears Holdings (SHLD, $34.98, down $10.87) which is down 24% today. Shares are getting spanked after the company said it will be closing 120 stores following weak holiday sales. We aren’t sure of the mix but there will be fewer Sears and Kmart stores for the world to worry about.
We have been following Sears for years but we are a little disappointed we didn’t get in on the put options. The January 40 puts (SHLD120121P00040000, $7.00, up $5.25) are up nearly 300% on the news.
Elsewhere, Apple (AAPL, $407.06, up $3.73) is trading higher on rumors the iPad 3 will be out in late February. The news isn’t too surprising considering the company released the iPad 2 around the same time last year. In any event, the news has helped Tech which is been the weakest link of late.
We have a lot to cover with our current trades but we wanted to give everyone a quick update on what to expect before the bell on Wednesday. Our hope is things go well with Italy but we are taking half profits in a trade or two to lock in profits just in case.
As we head to press, the Dow is up 15 points to 12,309 while the S&P 500 is higher by 2 points to 1,267. The Nasdaq is showing a gain of 9 points to 2,628.