Retail Sales Strong 03-11-11

Cusick's Corner
The market was relatively strong into the Midday in the face of the tragedy in Japan, but support is now resistance. 1300 is that S&P level where support was holding up until the last two sessions. The market will need to do some work into the After Hours in order for the bulls to gain more comfort going into the weekend. Creating a positive tone on this market this morning, the Retail segment was strong and if the consumer is still strong this could be the catalyst that the market needs to whip back over the resistance, which is right now at 50-Day Moving Average for the major indices. See you After Hours.

Stock market averages are holding modest gains, as focus has shifted from oil and the European Debt Crisis to the massive earthquake in Northeast Japan. The Dow Jones Industrial Average lost 228 points yesterday after disappointing economic news, a Moody's credit rating cut of Spain, and escalating violence in Saudi Arabia combined to trigger an uptick in market volatility. Today, some of the early focus was on a report on Retail Sales, which showed a 1 percent increase in February and was in-line with economist estimates. A separate report released later showed the University of Michigan Sentiment Index unexpectedly falling to 68.2 in March, from 77.5 in late February and well below expectations of 76.5. The earthquake in Japan is getting more attention, however. While the true economic impact from the event is difficult to quantify, it seems to have eased some of the concerns about high oil prices. WTI April Crude hit a low of $99 a barrel and was recently down $1.61 to $101.09. Prices are down nearly 6 percent from the highs seen Monday. Some of the cyclical names, like 3M (MMM), Alcoa (AA), and Caterpillar (CAT), are showing leadership within the Dow Jones Industrial Average. The Dow is up 31 points at midday. The tech-heavy NASDAQ added 11. The CBOE Volatility Index (.VIX) lost 1.55 to 20.33. Trading in the options market remains active, with 4.7 million calls and 4.7 million puts traded through 12:30pm ET.

Bullish Flow
Clean Energy Fuels (CLNE) shares are rallying. The stock opened higher after the company reported a quarterly profit of 17 cents per share on $83.2 million in revenues. Analysts were looking for 16 cents on $70.2 million. Then, the rally in CLNE shares gathered additional momentum midday after President Obama mentioned T Boone Pickens, who owns a large stake in CLNE. Shares are now up $1.50 to $14.50. Options volume is running 3X the average daily for the name. 8,000 calls and 3,000 puts traded. March 12 and 13 calls are the most actives. Some investors might be banking profits after today's move. Both contracts are in-the-money and expire at the end of next week.

Jackson Hewitt (JTX) is down 18 cents to 56 cents and has plummeted 55.2 percent since earnings were reported Thursday morning. As noted in yesterday's midday report, trading was heavy in JTX put options Thursday. Today, the April 1 calls are the most actives. 3,454 traded and, with 96 percent trading at the ask, some investors might be buying calls as a “cheap” way to play the stock for a rebound. However, Mar 1.5 and July 1 puts are busy today as well.

Bearish Flow
Put volume picked up in the iShares Japan Fund (EWJ) Friday morning, as shares of major Japanese companies moved broadly lower following a massive earthquake Northeast of Tokyo. It hit during the final hour of trading on the Tokyo Stock Exchange and sent Japan's Nikkei sliding 100 points before the close. EWJ, which is an exchange-traded fund listed on US markets, is down 21 cents to $10.79. Today's options volume includes 12,000 puts and 3,600 calls. March and April 10 and 11 puts are the day's most actives.

Questcor Pharmaceuticals (QCOR), a Union City, CA biotech, is trading down 24 cents to $13.49 and put volume is picking up in the name. Volume is approaching 4,000 contracts. Average daily is less than 100. Most of the focus is on July 14 puts. 3,438 and, with 85 percent trading at the ask and open interest of 403, it looks like some investors are paying up to $2.55 per contract to open new positions in these in-the-money puts.

Unusual Volume
SPDR Energy ETF (XLE) options volume is running 5X the (22-day) average, with 224,000 contracts traded and put volume accounting for 92 percent of the volume.

Amgen (AMGN) options volume is 3.5X the average daily, with 52,000 contracts traded and call volume representing for 77 percent of the activity.

International Coal (ICO) options volume is running 3.5X the average daily, with 17,000 contracts traded and call volume accounting for 97 percent of the activity.

Increasing options activity is also being seen in Ann Taylor (ANN), Rackspace (RAX) and Aeropostale (ARO).

Implied Volatility Mover
Ann Taylor (ANN) shares are trading up and implied volatility is down after the retailer reported earnings that beat Street views. Shares gapped higher at the open and are up 12.4 percent to $27.20 at midday. Trading in the options market is active, with 7,700 calls and 4,150 puts changed hands in ANN so far. Implied volatility is down about 20 percent to 46, now that the earnings news is out.