Midday Options Update: Market Mixed Amid Earnings Reports and Mergers

Strategic Insights -

As earnings season continues in earnest, equity markets are experiencing a mixed afternoon, with blue-chip names struggling to break through negative territory, while technology shares hover just above the breakeven mark. The May contract for crude oil has made a slight recovery, rising to $52.20 per barrel after hitting an overnight low of $49.66 per barrel. Adobe Systems' (NASDAQ: ADBE) acquisition of Macromedia has sparked a 9% increase in Macromedia shares, reaching a new annual high, while Adobe shares have declined by over 10%.

Key Takeaways:

  • CV Therapeutics (NASDAQ: CVTX) has seen its shares spike by over 12% following a study revealing its Ranexa drug achieved its goal of reducing weekly angina frequency, with First Albany boosting the stock to a "strong buy" from a "buy" rating.
  • Adobe Systems (NASDAQ: ADBE) has announced plans to acquire Macromedia (MACR) for $3.4 billion, valuing MACR shares at a 25% premium over Friday's close.
  • Bank of America (NYSE: BAC) has posted a 75% increase in first-quarter net earnings, excluding items related to merger and restructuring costs, with revenue spiking up 47% to $14.02 billion.
  • Eli Lilly (NYSE: LLY) has released its first-quarter earnings, with the pharmaceutical concern netting 68 cents per share, or $736.6 million, and targeting second-quarter earnings of 65-68 cents per share.
  • 3M (NYSE: MMM) has seen its shares decline by over 6% following its first-quarter earnings report, with revenue growing by just 4.6% to $5.17 billion, falling short of the 6.5-percent growth expected by analysts.
  • GameStop (GME) has announced its intention to purchase Electronics Boutique (ELBO) for $1.44 billion in cash and stock, valuing ELBO shares at a 34% premium over Friday's close.
  • As of 12:50 p.m., 2,312,090 calls and 1,764,499 puts had traded hands, with the CBOE put/call volume ratio for equity options standing at 0.78.

Statistics:

  • The Dow Jones Industrial Average is currently down 0.20% at 10,067.7.
  • The S&P 500 Index has edged higher by 0.18% at 1,144.62.
  • The Nasdaq Composite is in the plus column by 0.23% at 1,912.7.
  • The CBOE put/call volume ratio for equity options is 0.78.
  • Short interest on CVTX has grown by more than 10% to 6.5 billion shares, constituting more than 18% of the equity's float, with a short-interest ratio of 8.6 days to cover.

Sources:

  • Schaeffer's Midday Options Update
  • Nasdaq.com
  • Yahoo Finance
  • Google Finance
  • Forbes
  • Barron's
  • Schaeffer's Investment Research (www.SchaeffersResearch.com)