Stock market averages rose on a busy day for corporate earnings. Coca Cola (KO), Valero (VLO), and US Bancorp (USB) were among the names moving higher on profit news, while Intel (INTC), IBM and Yahoo (YHOO) are among the company’s reporting after the closing bell today. On the economic front, a report released before opening bell showing Housing Starts falling to annual rate of 654K last month, from 694K in February and well below expectations of 700K. However, Building Starts, which offer a better gauge of future activity, rose to 747K, from 715K and better than the 700K that was expected. Separate data on Industrial Production was unchanged in March and below expectations of +.2 percent. However, European stock market averages scored solid gains, including 2.7 percent advances in both France’s CAC 40 and Germany’s DAX, on diminishing fears about the European debt crisis. Crude oil jumped $1.30 to $104.70 per barrel and gold edged up $1.5 to $1651 an ounce. On Wall Street, the Dow Jones Industrial Average was up 200 points at midday and the gains held into afternoon trading. At the closing bell, the Dow was up 195 points and the NASDAQ gained 54.4.
Walmart (WMT) rose 2.1 percent to $61.87 and was among 30 Dow stocks to score gains Tuesday. None of the components of the industrial average moved lower today. Trading in Walmart was active after 10.6 million shares of the world’s largest retailer changed hands today. Typical volume is about 8 million. At the same time, 34,000 calls and 6,400 puts traded on the stock. May 62.5, which are 1 percent out-of-the-money and expiring in 31 days, were the most actives. 13,900 contracts traded on the day. The largest options trade in WMT was an April 60 – May 62.5 call spread at $1.13, 2000X. That is, the investor sold 2,000 April 60 calls on the stock at $1.78 and bought 2,000 May 62.5 calls for 65 cents. The spread was probably a roll ahead of the expiration later this week. That is, they were selling to probably close a position in the April 60s, which are now $1.87 in-the-money, and opening a new bullish position in out-of-the-money 62.5 calls. The activity seems to express the view that WMT might move beyond $62.5 in the weeks ahead.
Shutterfly (SFLY), a Redwood City, CA Internet company, added $1.03 to $30.19 and options volume was 3X the daily average. 4,175 puts and 275 calls traded on the stock. 90 percent of the volume was due to one spread trade, in which the investor apparently bought 2,000 May 30 puts for $2.45 and sold 2,000 May 25 puts at 70 cents per contract. The spread, for a $1.75 net debit, appears to be a new position in SFLY and is perhaps designed to help hedge recent gains in the stock. SFLY is up 33 percent year-to-date and the spread will offer its best payoff if the stock falls to $25 through the May expiration, or 17 percent loss over the next 31 days.