INTC Beats Street 07-13-2010

Cusick’s Corner
I waited to write this commentary until Intel had announced, the reason is because I wanted to see the results and its impact on futures in the after hours. Well, Intel (INTC) beat by .08 and gave upward future guidance for the 2nd half of the year. In this part of the season it’s important to watch the actual results and guidance. Tomorrow, the all important Retail Sales is due out at 8:30 ET. Remember, Retail Sales make up 2/3 of the GDP, so this number will have an impact on this market, especially if we see a negative number. See you Midday.

Major averages finished with solid gains on hopes for the earnings-reporting season. The table was set for morning gains on Wall Street after Alcoa (AA), the first Dow component to release second quarter earnings, kicked off the earnings reporting season with better-than-expected numbers. The company also boosted its outlook for aluminum demand. The results seemed to overshadow the day’s other news, which included the latest Trade Balance numbers. According to the data, the deficit increased to $42.3 billion in May and more than the $39.4 billion gap that economists had predicted. Yet, with earnings season in full swing, the economic data might begin to take a back seat to corporate profit reports. Consequently, Alcoa helped send the Dow Jones Industrial Average for a 147-point gain. The tech-heavy NASDAQ gained 43.7 ahead of earnings from Intel (INTC) Monday at the close.

Bullish Flow
AIG shares rallied and finished the day up $2.42 to $37.99. AIG options volume hit 3X normal, with 38,000 calls and 20,000 puts traded in the name Monday. The stock gathered some upside momentum after Bloomberg reported that AIG is in talks with the Treasury Department about using its stake in Maiden Lane to help pay back the government. The stock seemed to benefit from news that Fairholme Capital has increased its stake in AIG as well. Shares rallied and July 38, 39, and 40 calls saw brisk trading, as some short-term players were apparently positioning for additional upside (the stock hit a high of $38.37) in the days ahead. July options expire at the end of the week.

Bullish order flow was also seen in ADM, Flextronics (FLEX), and RadioShack. (RSH)

Bearish Flow
EBAY shares rose 79 cents to $21.01 and unusual volume was seen in August puts. Total volume hit 3.5X the normal, with 22,000 calls and 45,000 puts traded on the online auctioneer. The August 17 puts were the most actives with 32,800 contracts traded. Open interest is already 36,265 contracts and that’s the third biggest position in the name, therefore some of the action might be closing or offsetting. Nevertheless, some notable blocks traded at the 13-cent asking price and appear to be put buyers, possibly bracing for a post-earnings sell-off when EBAY reports on July 21.

Bearish flow also picked up in Analog Devices (ADI), Citrix Systems (CTXS), and King Pharmaceuticals (KG).

Index Trading
The CBOE Volatility Index (.VIX) snapped its losing streak. Although the S&P 500 Index (.SPX) finished with a solid 16.6 point gain, the VIX – which typically falls when stocks rally – finished the day up .14 to 24.57 and at session highs. It had fallen in the previous seven trading session. The gains in the VIX come amid increased volume in the index market Tuesday. About 852,000 puts traded across the S&P 500 Index (.SPX) and other cash indexes. Some players might be buying some portfolio protection ahead of key economic data later this week, including Retail Sales and the release of FOMC minutes Wednesday.

ETF Trading
Put volume picked up in the Semiconductor HOLDRS (SMH) ahead of earnings from the world’s largest chipmaker, Intel (INTC). Shares of the exchange-traded fund finished up 60 cents to $28.19 and 32,000 puts traded on the day, or almost 3X typical volume. Players were active in the July 28 puts, which traded 17,470X. July 27 and August 28 put options saw action as well. However, it might have been a bad time to buy puts on the fund. Shares are up 3.4 percent in after-market action after Intel posted earnings and revenues that beat Street estimates. The chipmaker also raised guidance for the next quarter.