A mixed day in many stocks, though this actually worked out to be an acceptable day despite the end of day selling that took away many of the gains. To show how the markets were mixed continually, the S&P 500 Index closed up marginally for May while the DJIA closed slightly down for the month. We also saw income and spending fall, although the numbers weren't quite as bad as expectations. This was also when the University of Michigan gave the crummiest reading in 28 years. Here are the unofficial closing bell levels:
Anheuser-Busch Companies Inc. (NYSE: BUD) saw highly unusual options activity and strong equity trading as more speculators believe a deal with Belgium's InBev may be imminent. Shares rose almost 2% and were up at $57.58 in the final minutes of the day.
Marvell Technology (NASDAQ: MRVL) shares are trading higher after the company posted a first-quarter profit of $69.9 million, or 11 cents per share. Excluding one-time items, MRVL earned 24 cents per share, well above analysts' estimates of 13 cents per share. After earnings were announced, an analyst at Oppenheimer upgraded the stock to "Outperform" from "Perform." If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MRVL.
After hitting a one-year high of $20.04 in July, the stock hit a one-year low of $9.77 in January. MRVL opened this morning at $16.95. So far today the stock has hit a low of $16.82 and a high of $17.47. As of 12:50, MRVL is trading at $17.35, up 3.27 (23.2%). The chart for MRVL looks bullish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $12.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in eight months as long as MRVL is above $12.50 at January expiration. Marvell would have to fall by more than 27% before we would start to lose money. Learn more about this type of trade here.
MRVL has been below $12.50 as recently as April but has shown support around $14 over the past month. This trade could be risky if the slowing US economy puts a damper on the next two earnings reports from MRVL but even if that happens, that position could be protected by support the stock might find from its 50 day moving average, which is currently around $12.50 and rising. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MRVL.
Marvell Technology (NASDAQ: MRVL) reported late Thursday a first-quarter profit, beating analyst estimates. Revenue rose 27%. MRVL shares are up nearly 17% in premarket trading. J.P. Morgan upgraded Marvell from Neutral to Overweight and Oppenheimer from Perform to Outperform with a target price of $21.
J. Crew (NYSE: JCG) shares, on the other hand, are dropping over 18% after it said late Thursday it cut its full-year earnings outlook. Seems the high-flying retailer is not immune to weak U.S. consumer spending. Citigroup downgraded JCG from Hold to Sell and cut the target price from $42 to $34. Wachovia downgraded JCG from Outperform to Market Perform.
Ford Motor Co. (NYSE: F) shares are up over 1.3% this morning after Tracinda Corp., the investment arm of billionaire activist investor Kirk Kerkorian, said Friday it will waive a condition on its $170 million cash tender offer that the market price of Ford shares does not fall by 10% or more from its May 8 close of $8.20. Since the time of the offer to buy up to 20 million shares at $8.50 per share -- at the time a slight premium -- shares have fallen 18%. The offer expires June 9.
MOST NOTEWORTHY: Credit Suisse, Masimo and Marvell Tech were today's noteworthy upgrades:
Bear upgraded Credit Suisse Group (NYSE: CS) to Peer Perform from Underperform as they believe the company's balance sheet will stabilize and the company's Private Banking business is holding up well in difficult conditions. Goldman, which raised shares to Neutral from Sell, believes the worst is over regarding the market downturn.
Citigroup upgraded Masimo Corporation (NASDAQ: MASI) to Buy from Hold citing expectations of a strong Q1 report, expected FDA approval for hemoglobin monitoring in 2H08, and valuation.
Marvell Technology Group Ltd (NASDAQ: MRVL) was raised at Friedman Billings to Outperform from Market Perform based on valuation and improved business conditions.
Marvell Technology Group Ltd. (NASDAQ: MRVL) shares are trading higher after tech bellwether Intel (NASDAQ: INTC) reported a first quarter profit of $1.44 billion, or 25 cents per share, in line with analysts' estimates. While many investors were expecting weak results, INTC noted in a press release that microprocessor sales were in line with seasonal trends, which could be a good sign for MRVL. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MRVL.
After hitting a one-year high of $20.04 in July, the stock hit a one-year low of $9.77 in January. MRVL opened this morning at $10.76. So far today the stock has hit a low of $10.53 and a high of $10.95. As of 12:30, MRVL is trading at $10.91, up $0.41 (3.9%). The chart for MRVL looks bullish but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $7.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just four months as long as MRVL is above $7.50 at August expiration. Marvell would have to fall by more than 30% before we would start to lose money. Learn more about this type of trade here.
Broadcom Corp. (NASDAQ: BRCM) stock is falling after fellow chip manufacturer Marvell (NASDAQ: MRVL) indicated an outlook for the first quarter of this year that investors did not like the looks of. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BRCM.
After hitting a one-year high of $43.07 in October, the stock has hit a new one-year low today. This morning, BRCM opened at $17.75. So far today the stock has hit a low of $17.35 and a high of $18.73. As of 12:30, BRCM is trading at $17.66, down 93 cents (-5.0%). The chart for BRCM looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a May bear-call credit spread above the $22.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in two and a half months as long as BRCM is below $22.50 at May expiration. Broadcom would have to rise by more than 27% before we would start to lose money.
BRCM hasn't been above $22.50 since January and has shown resistance around $20 recently. This trade could be risky if the economic situation turns around, but even if that happens, this position could be protected by resistance BRCM might find at its 50 day moving average, which is currently around $23 and falling.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in BRCM.
Stock futures were lower early Friday morning, but have since changed direction and are now (7:30 a.m.) higher, indicating a positive start on Wall Street. While the same concerns over the credit situations are unchanged, investors will focus much of their attention on upcoming data, specifically the government's monthly jobs report. Futures may still change direction depending on the report.
[Update 9:00 a.m.: U.S. nonfarm payrolls fell by a large 63,000 in February, the second straight decline in employment. This is a clear sign of a recession. Stock futures are declining, suggesting another down day ahead of us on Wall Street.]
On Thursday, U.S. stocks sold off as the dollar hit new lows and oil reached new highs and mounting concerns about the finance sector. An announced default at Thornburg Mortgage didn't help matters. The Nasdaq Composite declined 52 points, or 2.3%, and S&P 500 dropped 29 points, or 2.2%, both hitting their worst levels since 2006. . The Dow Jones Industrial Average lost 214 points, or 1.75%.
At 8:30 a.m. EST, an hour before the opening bell, the government will release February's jobs report. According to estimates from Bloomberg, analysts expect the unemployment rate rose in February to 5%, a two-year high, as firing at builders and manufacturers increased. Nonfarm payrolls probably rose by 23,000. While the rise would be an improvement after last month's decline, it is still weak compared with an average 95,000 a month last year. Investors will dissect the numbers for any signs the economy is in a recession.
Marvell Technology Group Ltd. (NASDAQ: MRVL) stock is falling today after the company posted a third-quarter loss of $6.4 million after the close yesterday. While MRVL's revenue rose 46% to $758.2 million and EPS beat estimates, this revenue made its fourth-quarter guidance look weak. Wall Street was looking for 6% sequential growth rate in the current quarter; MRVL's forecast translated to 3% sequential growth. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on MRVL.
After hitting a one-year high of $21.85 in December, the stock hit a one-year low of $14.50 today. This morning, MRVL opened at $15.59. So far today the stock has hit a low of $14.50 and a high of $15.59. As of 10:50, MRVL is trading at $15.02, down $1.63 (-9.8%). The chart for MRVL looks bullish but deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
The Wall Street Journalreported [subscription] that a prominent investment banker suggested a merger between Citigroup (NYSE: C) and Bank of America (NYSE: BAC) about a month ago. While Citi reportedly rejected the proposal, and while the Journal says that Bank of America denied ever authorizing such an approach, Wall Street seems to like the report, lifting Citi shares further. Citi shares are up 0.8% in premarket trading and BAC shares up over 1.4%.
France Telecom (NYSE: FTE) will launch Apple's (NASDAQ: AAPL) iPhone today in late-night openings at 12 of its Orange stores. The rest will open stores rom 6:30 pm onwards. It will charge between €49 ($72) and €119 a month and €399 for the iPhone itself. iPhone will be sold for €549 if customers don't wish to sign up for a plan. The cost of unlocking the handset is €100.
Marvell Technology Group Ltd (NASDAQ: MRVL) shares are plunging 8.4% in premarket trading after the chipmaker reported a narrower-than expected quarterly net loss after the close Tuesday amid higher R&D costs. The company said it planned to cut operating costs to help meet financial targets by eliminating about 400 jobs, or 7% of its workforce mainly in the United States and Israel. Excluding one-time items, Marvell reported a profit of 14 cents per share, beating the consensus forecast of a profit of 8 cents a share.
Analog Devices (NYSE: ADI), a semi-conductor company is expected to report 3Q EPS of 39 cents, according to Thomson First Call. ADI call option volume of 4,600 contracts compares to put volume of 3,460 contracts. ADI December option implied volatility of 48 is above its 26-week average of 33 according to Track Data, suggesting larger price risks.
Marvell (NASDAQ: MRVL) is expected to report Q3 EPS of .08 cents tonight according to Thomson First Call. MRVL, a manufacturer of chips for hard disk drives and networking gear, is recently up 29 cents to $16.28. MRVL call option volume of 95,527 contracts compares to put volume of 14,814 contracts. MRVL December option implied volatility of 68 is above its 26-week average of 45 according to Track Data, indicating buyers of calls are hedging for upside share price gains.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
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Stock futures were lower early Friday morning, but have since changed direction and are now (7:30 a.m.) higher, indicating a positive start on Wall Street. While the same concerns over the credit situations are unchanged, investors will focus much of their attention on upcoming data, specifically the government's monthly jobs report. Futures may still change direction depending on the report.
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