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Transportation equipment industry

Midday Options Update: Stocks Edge Lower Amid Worries of Rising Global Interest Rates

Strategic Insights

— 2 min read

Stocks have declined this afternoon as investors worry about rising global interest rates, with European shares plummeting after the European Central Bank (ECB) increased its key interest rate to 2.75 percent and the Bank of England maintaining its rates at 4.5 percent. Meanwhile, the Labor Department reported a significant drop in initial claims for unemployment benefits, and the Commerce Department announced a decrease in U.S. wholesalers' inventories, with sales jumping 1.3 percent.

Key Takeaways:

  • Procter & Gamble (NYSE:PG) surged 2.9 percent after reiterating its fourth-quarter sales and earnings forecast, expecting sales growth between 20 and 24 percent and $0.52 to $0.54 per share in earnings.
  • Intel (NASDAQ:INTC) fell over 1 percent after Citigroup cut its earnings estimate due to pricing concerns from Advanced Micro Devices, while keeping its price target at $21.
  • General Motors (NYSE:GM) declined due to a Wall Street Journal report on the potential deal between GM, Delphi, and their unions to offer lump-sum payments of $70,000 to $140,000 to Delphi workers in exchange for leaving the company and their health-care benefits.
  • McDonald's (NYSE:MCD) rose slightly after announcing a 6.2 percent increase in global system-wide sales and 4.5 percent total worldwide comparable sales in May.
  • Cisco Systems (NASDAQ:CSCO) lost nearly 2 percent despite the company's chairman, CEO John Chambers, and the announcement of a $5 billion common stock buyback program, with the July 20 call appearing to be the focus of bulls.
  • The Dow Jones Industrial Average (DJIA) is 0.77 percent lower at 10,847.6, while the S&P 500 Index (SPX) has shed 0.85 percent to 1,245.41 and the Nasdaq Composite (COMP) is 1.54 percent lower at 2,118.6.
  • The CBOE's equity put/call volume ratio was slanted toward the put side at 1.35, with 3,638,261 calls changing hands compared to 4,334,077 puts, resulting in a single-day put/call volume ratio of 1.19.
  • Cisco Systems' July 20 call, CYQGD, appears to be a point of resistance, with heavy/peak call open interest potentially providing a layer of resistance, and the 20 level acting as a significant barrier throughout 2004.
  • The company's 10-week moving average is likely to attempt a bearish cross of its 20-week cohort, potentially signaling further technical struggles.
  • CSCO has a 75% percent of analysts tracked by Zacks who rate the stock with a "buy" or better, a short-interest ratio of 0.76, a Schaeffer's put/call open interest ratio (SOIR) of 0.38, and a Schaeffer's Equity Scorecard rating of 3.0 out of a possible 10.

Statistics:

  • Initial claims for unemployment benefits dropped to 302,000 last week, below expectations of 326,000, and a decrease from the previous week's 337,000 claims.
  • U.S. wholesalers' inventories contracted in March to match the lowest level on record, while sales jumped 1.3 percent.
  • July-dated oil has shed $1.27 per barrel to trade at $69.70.
  • Procter & Gamble (NYSE:PG) rose 2.9% after reiterating its fourth-quarter sales and earnings forecast.
  • Intel (NASDAQ:INTC) fell over 1% after Citigroup cut its earnings estimate.
  • General Motors (NYSE:GM) declined due to a Wall Street Journal report.
  • McDonald's (NYSE:MCD) rose slightly after announcing a 6.2% increase in global system-wide sales.
  • Cisco Systems (NASDAQ:CSCO) lost nearly 2% despite the company's chairman and announcement of a $5 billion common stock buyback program.

Sources:

  • Schaeffer's Investment Research (www.SchaeffersResearch.com)
  • European Central Bank
  • Bank of England
  • Labor Department
  • Commerce Department
  • MarketWatch
  • Zacks

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