"Stocks got a bit of a boost as news from Washington indicated a
three-month extension of the debt ceiling would be welcomed by the
White House," noted Schaeffer's Senior Equity Analyst Joe Bell.
"Existing home sales were below expectations, but most of this
morning's earnings reports met expectations," Bell continued. The
Dow Jones Industrial Average (DJI)
managed to top the 13,700 level on its way to a new annual zenith,
while other notable indexes reached their own multi-year peaks. By
the close, the major indexes were all modestly higher as investors
looked ahead to some major earnings reports.
Continue reading for more on today's market, including
- The ups and downs of existing home sales, bearish speculation
on Intel (
), and a decades-old trading tip in our tweet of the day.
Dow Jones Industrial Average (DJI)
notched a new annual peak of 13,712.13, which also marked the
index's closing value. The Dow settled up 62 points, or 0.5%,
higher, for its first close north of 13,700 since October 2007. Of
the Dow's 30 components, 22 finished in the black, led by
UnitedHealth Group (
), which gained 2.7% today. Pacing the underperforming minority was
), off 1.5%.
S&P 500 Index (SPX)
advanced right into the close, notching another new multi-year
milestone before settling up 6.5 points, or 0.4%, closing at its
intraday peak. The
Nasdaq Composite (COMP)
rose 8.5 points on the day, gaining 0.3%. The tech-rich index
remains more than 50 points south of its own annual high.
CBOE Market Volatility Index (VIX)
closed off a fraction despite spending most of the day in positive
territory. By the close, it had settled down 0.2%, or less than 0.1
A Trader's Take
"This morning got off to a bit of a lackluster start, but buying
pressure picked up throughout the day, and we actually had a pretty
nice session with low volatility," observed Bell. "Many market
participants will be looking forward to the slew of earnings
reports after the close, most notably Google (
) and IBM (IBM)," he said.
3 Things to Know About Today's Market
- The National Association of Realtors said existing home sales
dropped 1% in December on a month-over-month basis to a
seasonally adjusted annual rate of 4.94 million. This was below
the 2% rise predicted by several economists, but was still 12.8%
higher than the December 2011 reading. What's more, the monthly
sales pace was the second-highest since November 2009. Finally,
overall home sales in 2012 were the highest in five years,
according to the National Board of Realtors, with 4.65 million
homes sold in total - the highest since 5.03 million were sold in
- The White House today said it would be open to a short-term
(roughly three-month) extension of the U.S. debt ceiling. House
Republicans had previously threatened to link the debt ceiling
debate with possible spending cuts, but proposed a short-term
extension last week to allow for more time to hold bipartisan
budget negotiations. The proposal to be voted on in the House
this week includes the clause that if a new budget does not pass
by April 15, Congress will withhold the pay of policymakers.
- The investigation into Dow component Boeing (BA) widened
today, with the Federal Aviation Administration
Japanese aviation regulators both looking at different aspects of
the new lithium battery system on the aircraft maker's Dreamliner
787. All 50 planes currently in service in Japan and the U.S.
have been grounded during the investigation. Now, officials from
each country are not only looking at the new battery system and
the maker of the lithium that powers the electric sources, but
how they are connected to the plane's newly-designed electrical
grid. The company's stock continued to struggle, falling 1.2% on
the day to close at $74.16.
... There may be another player in the mix when it comes to a
potential leveraged buyout of Dell (DELL) -- Microsoft (MSFT). The
software giant reportedly has plans to invest up to $3 billion in
the PC maker, which remains one of the largest companies to include
MSFT software on its machines. The precedent for this move is a
good one - in 1997, MSFT invested $150 million in a struggling tech
company called Apple (AAPL). DELL responded favorably to these
reports today, adding 2.2% to end the session at $13.12.
Today's Top Tweet
"'Never talk about a profit until you have two sides to a
transaction,' my Dad, late 1970s."
(BCarter), 9:17 a.m.
5 Stocks We Were Watching Today
- Intel Corporation(
) option speculators
saw short -term struggles ahead
, with a big run on puts following last Friday's
disappointing earnings results
- American Express (AXP) earned a
from FBR ahead of the open.
- Apple Inc. (AAPL) saw its price target cut from UBS following
a rough start to 2013, but call buyers are
still out in full force
- Microsoft Corporation (MSFT) saw an uptick
in options trading today
in advance of the company's earnings release later this
- Johnson & Johnson (JNJ) saw option speculators
hedge their bets with both puts and calls
after an earnings estimate for 2013 came in below Wall Street
Question of the Day
: What does "buy to open" mean? What about "sell to open"?
: Every new option position must be opened. If a trader is opening
a new long position (e.g., buying a call because of a bullish
outlook), he will be
buying to open
. A trader taking the short side of a trade (e.g., selling a call
because downside is expected), is
that option to open. At the other end of the trade -- when
positions are being exited -- the terminology is easy. Traders who
bought to open will sell to close and those who sold to open will
buy to close. In other words, the two transactions will offset one
another at the end of the trade.
For a look at today's options movers and commodities
activity, head to page 2.
Crude futures gained ground on Tuesday to notch a four-month
high, amid hopes the Bank of Japan's more accommodative monetary
policy would spur increased oil demand. The expiring February
contract was up 68 cents, or 0.7%, to settle at $96.24 per barrel.
Gold futures also moved higher thanks to hopes out of Japan, with
the February contract gaining $6.20, or 0.4%, to close at $1,693.20
At the end of every market day, the staff at Schaeffer's
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major events and key market developments. Don't miss this
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