Archive for the ‘Market Update’ Category

Is It Soup Yet??

Heavy buying of upside calls in Campbell Soup today, as the stock continues its rebound from the huge drop post earnings in mid May. Continued buyout speculation (KHC most frequently rumored) has played a part in the stock’s rebound, along with a general improvement in the tone of consumer staple stocks (XLP). After hitting a 52 week low of $32.65 on June 7th, the stock is currently at $36.50 as I type this note. The following call options were most notably active today.
>2,000 July 37 calls traded
>3,400 Aug 37 calls traded
>6,000 Aug 38 calls traded
>3,800 Aug 39 calls traded
>5,500 Aug 41 calls traded
Total volume among all call options strikes is >30,000 contracts today.
I bought a position in the July 37 calls at $1.05, with its implied volatility at 28.75, much cheaper than the low to mid 30’s IV on the August calls mentioned above.
Stock volume in CPB is over 10 million shares today, twice its daily average of late of about 5.5 million shares.

Why Did The Fed Raise Rates?

From CNBC: 

The median real GDP forecast rose to 2.8 percent, up from 2.7 percent, for this year. There were no changes for 2019 and 2020, and the longer run median forecast remained 1.8 percent.

Economic activity has been rising at a “solid” rate, the Fed’s statement said, marking an upgrade from “moderate” in the previous statement. The central bank raised its benchmark short-term interest rate a quarter of a percentage point on Wednesday and indicated two more hikes will likely come this year.

 Policymakers also lowered their expectations for the unemployment rate. The median projection for this year fell to 3.6 percent, down from 3.8 percent. For 2019 and 2020, the median expectation for the unemployment rate declined to 3.5 percent, from 3.6 percent.

Inflation expectations rose to 2.1 percent for this year through 2020.

This should not be a surprise.

Rollbacks matter.

Happy Birthday, Again

The lede:   This month, the U.S. economic expansion officially turns nine years old. Last month, it topped what was the second-longest expansion in the 1960s, with only the record 10-year expansion from the 1990s standing in the way.

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More:   For starters, consider that going clear back to the Civil War, the United States has never gone a full decade without a recession (the 1990s expansion straddled the century mark). Is there a chance this could be both the first decade to go without a recession and set the streak for the longest expansion? We like the odds.

As LPL Research Senior Market Strategist Ryan Detrick explained, “Here’s the catch: Bull markets don’t die of old age; they die of excesses. We aren’t even seeing wage growth over 3% yet, and overall inflation remains tame. In our view, this economic recovery could have at least a few years left thanks to strong corporate profits, continued growth in the services and manufacturing sectors, and a tailwind from fiscal policy.”

As always, great stuff from LPLResearch/Ryan Detrick

The Most Expensive

and the least expensive stocks in the S&P 500 Index.  Which would you rather own over the next five years?

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Hat tip Charlie Bilello

First Data (FDC): Last Word

Last post on First Data….just was made aware that the company is hosting an investor conference tomorrow (6-12), which may account for some of the option activity.  Stock has backed off from pre-market levels….$20.30 +$.25 at this writing.

First Data: Follow Up

While I would be the first to admit, that it is hard to decipher the true meaning of most large option block trades (speculation vs hedging vs volatility plays), I do find myself paying extra attention when large volume occurs in names that rarely see any option volume. Such was the case last week when I posted on the buy interest in First Data (FDC) calls in both June, July and August.
Lo and behold….this morning, Goldman Sachs upgrades FDC to buy from neutral and the stock is up $1.00 to $21 (+5%) in the premarket. A coincidence? Perhaps…..but I have been doing this long enough to know that nothing should surprise anyone anymore in terms of uncanny timing.
As we look to expand our blog posts in the coming weeks in conjunction with the pending launch of our new updated website, I will continue to focus readers attention on more such one off type option situations.

Economic Output Continues to Expand

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U.S. economic output expanded at a 2.2% annual pace in the first quarter, down slightly from an earlier estimate and supported by strong business investment.

Hat tip WSJ.com

They’ve All Ended The Same Way

Federal Reserve tightening cycles that is.  Stock market declines followed each of the last 18 rate-hike programs.  Will this one, which began in July of 2016, be different?

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Hat tip Jesse Colombo

NEC Chairman Larry Kudlow Press Conference on G7 and Trade…

 

Unemployment and Recessions

The unemployment rate has reached its lowest levels since the late 1990’s.  Historically a dip below 4% has been a precursor to recessions:

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How long til the next recessions begins?  Considering the length of the current economic expansion, which is approaching an all time record, this is an often asked question.

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But, is the declining employment rate an indication of trouble ahead.  Not exactly.  If the rate continues to drop, which is likely considering the strong GDP projections, the next recession could be a long way off. 

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Key takeaway, timing the next recession, as in the past, is nearly impossible. 

Hat tip Charlie Bilello, Ryan Detrick

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