Midday Options Update: Market Trends and Notable Activity

Strategic Insights -

The Schaeffer's Midday Options Update features an analysis of the most notable market activity, including Berkshire Hathaway, Microsoft, MCI Inc., Neiman Marcus Group, and Hewlett-Packard. The update highlights the stabilizing of the major market indexes after a morning surge, despite crude oil prices continuing to drop. The Institute for Supply Management (ISM) report for April shows a decline in factory activity, and the dollar is up against the euro, yen, and British pound. The New York Times reports that economists and analysts are discussing the possibility of a recession, but not predicting one.

Key Takeaways:

  • The major market indexes stabilized by 10:00 a.m. Eastern time, with the Dow leveling off around 10,250.
  • Crude oil prices continued to drop, with Kuwait's Oil Minister announcing an increase in the country's output capacity to 2.7 million barrels per day.
  • The ISM index fell to 53.3% in April, marking the fifth consecutive month of decline and the lowest level in almost two years.
  • The dollar is up against the euro, yen, and British pound, with the New York Times reporting that economists and analysts are discussing a possible recession.
  • Microsoft was down 13 cents on the news that Bill Gates will join the BRK board.
  • MCI Inc. received a revised bid from Verizon Communications, valuing the company at $8.44 billion.
  • Neiman Marcus Group agreed to a $5.1 billion acquisition by an investment group consisting of Texas Pacific Group and Warburg Pincus.
  • Hewlett-Packard's new CEO, Mark Hurd, has completed his first month, with the company's stock adding 5.5% and NCR Inc. shedding 11.5%.
  • The Schaeffer's put/call open interest ratio (SOIR) for HPQ stands at 0.82, indicating puts outnumber calls, but not by a great margin.

Statistics:

  • The Dow Jones Industrial Average (DJIA) moved ahead by 0.02% at 2:09 p.m. Eastern time.
  • The S&P 500 Index (SPX) lost 0.11% at 2:09 p.m. Eastern time.
  • The Nasdaq Composite (COMP) lost 0.23% at 2:09 p.m. Eastern time.
  • At 2:09 p.m., 1,496,460 calls and 1,192,882 puts had crossed the tape, for a composite put/call ratio (across all six options exchanges) of 0.83.
  • The CBOE put/call volume ratio for equity options stood at 0.92.
  • Kuwait's Oil Minister announced an increase in the country's output capacity to 2.7 million barrels per day.
  • The national average for regular gasoline is $2.238, up almost 23% against the year-ago average.

Sources:

  • Schaeffer's Midday Options Update, May 25, 2005
  • Institute for Supply Management (ISM)
  • New York Times
  • CBOE
  • Schaeffer's Investment Research (www.SchaeffersResearch.com)
  • Forbes
  • Barron's