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Foreign Fear

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US markets are set to trade lower, following a report out of Germany showing the nation's unemployment rate rising to 9.9% as manufacturing orders fell 0.9 percent. Economists expected a 0.5 percent increase. In other world news, Bank of England decided to leave rates unchanged at 4.00 percent.

Futures need more than a Band-Aid

September S&P Futures are lower by 14.70 points to 875, while Nasdaq futures are off by 16 points. Turning to the Dow, the September contract is back under 8300 at 8295, down 95 points. FairValue for the S&P 500, according to HL Camp & Company, is at $.18. That price will not change during the day. Program buying is set at $1.52, while program selling is at $--1.52. FairValue for the NDX 100 is $1.25.

More Chip Downgrades

Bear Stearns downgrades National Semi (NSM) to attractive from buy, cutting their price target on NSM to $28 from $32. CSFB also downgraded NSM and MCRL to hold from buy, stating concerns over the companies second half earnings. The main chip company to watch will, once again, be Intel (INTC). The company will provide guidance after the close tonight.

Econ 101

Economic reports scheduled for Thursday include Initial Claims and a 2Q revised Productivity report scheduled for 8:30. These releases are followed an hour and a half later by a report on Factory Orders and ISM Services. Foreign currency traders will most likely put the most weight on the 2Q productivity figures; however, the initial claims release could provide guidance for Friday's non-farm release and an insight into October's report. Speaking of the dollar, the Greenback weakened against both the Yen to 117.76 from 118.02 and against the Euro, falling slightly to 0.9965.

A Slippery Slope

The Oil Index (XOI) can at times be a solid leading indicator for the blue-chips. Unfortunately, all signs point towards lower valuation for equities, since Oil has failed to hold important retracement levels and continue to come under pressure.

Don't Get Shocked

The Utility Index is holding up relatively better than Oil; however, lower stock and oil prices may be the straw that broke this camel's back. Historically, the Utility Index has led the Dow in almost all major tops and bottoms; therefore, I would not be surprised to see a lot of traders watching the UTY Index for guidance.

John Seckinger
Option Investor


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