Markets on the Move after US Employment Data

Cusick's Corner

Jobs, that is what the market was greeted with this morning, Payrolls up over the 200k mark and Unemployment still dropping, 8.8%. The market tore up on the open and has held into the Midday. The question is how you play the rising risk of inflation and growth. One might look at the emerging markets, EEM, because these markets look to be ending their tightening, look at China (FXI), and the short term commodity pressures in these emerging markets is mitigated with the cycle of growth on the horizon, Brazil (EWZ). Keep an eye on how this market closes; want to see support at these levels, 1330 on the June S&P Future. See you After Hours.

Stock market averages are higher with help from jobs data Friday. The Labor Department reported Friday morning that the US economy added 216,000 payrolls last month. Economists were looking for a 185,000 increase in new jobs. The unemployment eased to 8.8 percent. Economists were looking for it to hold steady at 8.9 percent. Other data showed the ISM manufacturing index down to 61.2 in March, from 61.4 in February and in-line with expectations. Construction spending declined by 1.4 percent in February, which was twice as bad as expected. However, the jobs numbers overshadowed the day's other economic news. Meanwhile, a merger was announced after NASDAQ OMX Group (NDAQ) and InterContinental Exchange (ICE) said they're teaming up to bid for NYSE Euronext (NYX). At the end of the day, the jobs and merger news was enough to keep the rally on Wall Street alive. The Dow Jones Industrial Average has added another 81 points and the tech-heavy NASDAQ gained 16.5. Overall options volume is picking up a bit on the first day of the second quarter, with 5 million calls and 4.2 million puts traded through 11:30 central time.

Bullish Flow

Ford Motor (F) shares are up and options actively traded ahead of monthly auto and truck sales numbers. The automakers are due to release their March results Friday. Ford is up 37 cents to $15.28 midday and options volume includes 130,000 calls/48,000 puts. April 16 calls, which are now 4.7 percent out-of-the-money, are the most actives. 36,500 have changed hands. In addition, with 83 percent traded at the ask, some investors appear to be buying these calls and looking for the stock to recapture $16 before the April expiration, which is two weeks from today.

Citigroup (C) is trading up 6 cents to $4.47 and call options on the bank are busy Friday morning. 185,000 contracts traded, which isn't unusual for Citi, but it compares to only 70,000 put options. April 4.5 calls, which are now at-the-money, are the most actives. Volume is approaching 40,000. May 5, September 5, and September 5.5 calls are seeing active trading as well. Some investors might be taking positions in anticipation of earnings, which are scheduled for April 18. Citi will also initiate a one-for-ten reverse split on May 6.

Bearish Flow

Put volume is picking up in tax preparation company H&R Block (HRB) today. Shares have been performing well lately HRB is up 65 cents to $17.39 today and has now rallied 46 percent year-to-date. Meanwhile, in options action, 22,000 puts and 5,200 calls have traded in the name so far. The action includes a spread in the January 2012 puts, in which the investor bought 10,000 January 15 puts and sold 10,000 January 10 puts. They paid $1.09 for the spread and might be looking for the stock to reverse some of its recent gains, as the max pay-out happens if the stock falls to $10 per share through January 2012. A shareholder might have initiated the trade as a hedge.

SPDR Technology (XLK), which is an exchange-traded fund that holds all of the information technology names from the S&P 500, is up 4 cents to $26.10 and one investor apparently sells the XLK January 26 straddle at $3.72, 10000X. That is, they sold 10,000 January 26 puts at $1.88 apiece and sold 10,000 January 26 calls at $1.84 per contract. If so, it's not necessarily a bullish or bearish play. Rather, it's a bet that shares will hold around $26 through January 2012.

NYSE Euronext (NYX) options volume is running 5X the (22-day) average, with 109,000 contracts traded and call volume accounting for about 83 percent of trades.
F5 Networks (FFIV) options volume is 2X the average daily, with 48,000 contracts traded and call volume representing for 60 percent of the activity.
Wynn Resorts (WYNN) options volume is running 2.5X the average daily, with 34,000 contracts traded and call volume accounting for 72 percent of the activity.
Increasing options activity is also being seen in Nabor's Industries (NBR), the Limited (LTD), and SRA International (SRX)

Implied volatility Mover
CBOE Volatility Index (.VIX) is down 1.02 to 16.72 and returning to levels not seen on February 18, when the S&P 500 rallied to 52-week highs. The S&P 500 then tumbled from February 22 through March 16, but has been rallying since mid-March and is now within striking distance of those 52-week highs set in February. Meanwhile, the volatility index has plummeted 48 percent from the peak levels of 31.28 seen on March 16. The decline in the VIX, and the rally in the S&P 500, reflect the dramatic change in sentiment seen on Wall Street in just two and a half weeks.