"In a relatively uneventful day, the markets caught their breath
after yesterday's strong rally," summarized Schaeffer's Senior
Equity Analyst Joe Bell. The
Dow Jones Industrial Average (DJI)
broke higher in the afternoon after a sluggish start, closing the
session at its highest point since December 2007. "Meanwhile, the
CBOE Market Volatility Index (VIX) dropped to its lowest level
since June 2007," Bell noted, "as investors continued to bid the
market higher as the week drew to an end."
Continue reading for more on today's market, including
- A debt-ceiling update, pre-earnings action in Starbucks (
), and some VIX knowledge in our tweet of the day.
Dow Jones Industrial Average (DJI)
closed at its highest level in more than five years, though it
failed to peg a new annual peak on an intraday basis. The index
closed up 54 points, or 0.4%, today, and ended the week 1.2%
higher. Of the 30 Dow components, 22 closed in positive territory,
led by General Electric (
), which rallied 3.5% after a well-received earnings report. The
six losers were paced by Intel (
), which dropped 6.3% after its own earnings news. Microsoft (MSFT)
and Hewlett-Packard (HPQ) were unchanged on the day.
S&P 500 Index (SPX)
reached another new multi-year high at the closing bell, ending the
session with a gain of 5 points, or 0.3%. The
Nasdaq Composite (COMP)
was fractionally lower, off 1.3 points, or less than 0.1%. For the
week, the SPX gained 0.9% while the COMP added 0.3%.
CBOE Market Volatility Index (VIX)
hit a 5-1/2-year low of 12.29, giving back 8.2%, or 1.1 points. On
a weekly basis, the fear barometer shed 6.7%.
A Trader's Take
"There was a worse-than-expected University of Michigan survey
for the first half of January, but it did very little damage to the
overall market," Bell said. "The market also received earnings
reports from Intel (
) and Advanced Micro Devices (AMD) that left little to be excited
about. The technology sector was dragged down as a result but
managed to close slightly higher on a weekly basis."
3 Things to Know About Today's Market
- House Republicans are looking to buy time to hold bipartisan
budget negotiations and will hold a vote next week on an
extension of the debt ceiling. The new measure would reportedly
prolong the government's borrowing authority by roughly three
months. The proposal includes the clause that if a new budget
does not pass by April 15, policymakers will stop receiving their
paychecks. Or simply, according to House Majority Leader Eric
Cantor, R-Va., "No budget, no pay."
- The first reading of the Thomson Reuters/University of
Michigan consumer sentiment index for 2013 slid to 71.3 from 72.9
at the end of December. Not only did this figure fall shy of
economists' expectations of a rise to 75.0, but it marked the
index's lowest reading in more than a year.
- Dow component General Electric (
) reported fourth-quarter earnings of 44 cents per share
(excluding items), exceeding analysts' consensus estimates by a
penny. Revenue came in 4% higher at $39.3 billion, edging out
expectations of $38.74 billion. One analyst
that GE serves as a good bellwether for larger-cap stocks in
general, as it is "attached to so many different verticals in the
... Yelp (YELP) is bolstering its arsenal of information by adding
health-inspector grades to its restaurant reviews. This will be a
gradual roll out; the grades will first be added to restaurants in
the San Francisco area, then New York City. Ratings will vary based
on the system in the municipal area, as New York, for example,
provides letter grades (A, B, or C), while San Francisco rates on a
numerical scale capped at 100.
Today's Top Tweet
"the $VIX is getting hit because it's pricing in a 3 day
weekend. A more accurate reading for downmove is in the vix futures
(Steve Place), 11:50 a.m.
5 Stocks We Were Watching Today
- Facebook (FB) option speculators
used a time spread
to bet on more upside next week ... and even more upside down the
- Google (GOOG) enjoyed a
at Nomura ahead of the open.
- State Street (STT) rallied after its earnings release,
from call buyers.
- Starbucks (
) option bulls
ahead of the company's earnings report.
- QUALCOMM (QCOM) saw call buyers
on a pullback in the shares.
Question of the Day
: What is time value?
: Time value is the reason that a January 2014 call will be more
expensive than its July 2013 counterpart -- because you're buying
more time for the underlying stock to move as you expected.
In-the-money options carry both intrinsic value and time value,
while out-of-the-money options consist solely of time value. The
loss of time value on your option is referred to as
, and it accelerates as the option draws closer to its expiration
date. The rate at which your option will lose time value can be
measured by theta, which is one of the infamous "Greeks."
For a look at today's options movers and commodities
activity, head to page 2.
While crude futures gained 2.1% for the week, the February
contract was little changed in Friday's trading, adding just 7
cents, or 0.1%, to $95.56 per barrel. Gold futures were lower on
the day, with the front-month contract dropping $3.80, or 0.2%, to
settle at $1,687 per ounce. On a weekly basis, the precious metal
was 1.6% higher.
At the end of every market day, the staff at Schaeffer's
Investment Research reviews the trading day in detail, covering
major events and key market developments. Don't miss this
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