It's been one of those up, then down, then back up again type of sessions as the major market averages traded higher at the open, only to give back those gains and dip into the red only to bounce back and trade just below their session highs.
Sector action is decidedly positive with all but three of the indexes I follow on a daily basis showing gains. Early weakness in the Broker/Dealer Index (XBD.X) 418.61 -0.54%, which traded down as much as 2.6% early on has shrugged off some bearish morning comments from Salomon Smith Barney and downgrades on a string of stocks in the group due to valuation concerns and belief that the third quarter will be considerably weaker than recent quarters. Salomon noted that debt markets are no longer supporting the broker earnings due to widening credit spreads and a dearth of new issuance.
Companies affected by Salomon's comments have Bear Stearns (NYSE:BSC) $65.26 -1.3%, Morgan Stanley (NYSE:MWD) $45.18 -1.18%, Merrill Lynch (NYSE:MER) $37.14 -0.77%, Goldman Sachs (NYSE:GS) $79.41 -1.36% and Lehman Bothers (NYSE:LEH) $59.16 -3.3% trading off their lows, but weighing on the group.
Precious metals stocks as depicted by the Gold/Silver Index (XAU.X) 61.76 -2.06% lead today's sector losers. A firming U.S. Dollar, combined with recent economic data that lacks signs of inflation continues to weigh on this sector.
Sector gainers today has the Networking Index (NWX.X) 133.87 +5.0% leading a technology charge today. However, it is notable that this group looks to be playing catch up with the broader market averages as it pushes it was toward its 50-day simple moving average just above at 138. Sector bellwether Cisco Systems (NASDAQ:CSCO) $14.98 +1.69% along with beaten down telecom equipment names like Lucent (NYSE:LU) $1.50 +4.89% and Nortel (NYSE:NT) $1.14 +11.76% help skew upside sector results.
Shares of Lockheed Martin (NYSE:LMT) $64.44 +1.43% trade right at their 50-day simple moving average ahead of tonight anticipated launch of its newest rocket, the Atlas 5. Tonight's launch may well usher in a new era of heavy-lifting U.S. launch vehicles for next-generation satellites.
Analysts point to tonight's launch as a potential "company maker or breaker" as competition in this market is deemed fierce and LMT looks to have an upper-hand on launch date to main rival Boeing (NYSE:BA) $37.50 -0.87%. Industry observers feel that a successful launch for Lockheed's A5 gives the company front runner position for prime follow on contracts with satellite vendors. However, a glitch in the launch could be a major setback for Lockheed as the company has invested more than $1 billion of its own money in the rocket, which is a significant bet by the company. Lockheed hopes to prove that an error free launch of the A5 is proof that the company can deliver satellites to space and significantly reduce any type o launch pad logjams, where a problem with one payload rocket already on the pad means a delay for clients downstream as well.
The Lockheed A5 is designed to withstand hurricane-threshold winds and to launch from a "clean" pad, one without steel-girder launch towers seen since the dawn of the space age.
The "stripped-down" A5, like the one scheduled for launch tonight with a Eutelsat communications satellite, can carry a 28,000 pound (12,600-kg) payload into Earth orbit.
Beefed up with five strap-on solid-fuel boosters and a second Centaur engine, the new Atlas A5 can lift 45,000 pounds (20,250- kgs), nearly twice the capacity of the last generation Atlas rockets.
Lockheed Martin (LMT) - $1 box
Two years ago, a friend of mine retired from a senior management position at Lockheed Martin (LMT) when the stock was trading below $20. Oh what a break of longer-term downward trend can do to hint that demand is building for a stock longer-term.
A successful launch of the A5 tonight could have the stock trading $87 by year's end, which is the currently bullish vertical count. A failure in tonight's launch could easily have the stock falling back to earth at tomorrow's opening and bullish support of $46.
Investors currently long or short the underlying shares of LMT sense a lot is riding on tonight's launch. The MARKETS will be closed so no trades will be allowed.
Option traders may look to implement a straddle in the December $65 calls (LMTLM) $5.20 and the September $65 puts (LMTUM) $2.90. The trader needs a move greater than $8.10 away from the $65 level, but tonight's launch outcome from the A5 may be such a catalyst for the move.