Fears about the European debt crisis seemed to weigh on stock market averages Monday. With no domestic economic news to guide the morning trading, steep losses across Eurozone equity markets set the table for weakness on Wall Street. A 3.4 percent slide in Germany's DAX helped pace the decline on uncertainty about French elections and amid rising bond yields in Spain and Italy. In the US, the focus is also on earnings. Conoco Phillips (COP), Checkpoint (CHKP), and Xerox (XRX) were among the names to report after the weekend ahead of a flood of reports are scheduled throughout the remainder week – including results from Apple Computer (AAPL) Tuesday afternoon. Netflix (NFLX), Texas Instruments (TXN), and Big Lots (BIG) are among the company's reporting after the close Monday. However, concerns about Europe seemed to be the primarily catalyst for the increased market volatility to start the trading week. The euro lost .5 percent to 1.315 against the buck and crude oil gave up 80 cents to $103.08 per barrel. The Dow Jones Industrial Average closed down 102 points and the NASDAQ lost 30.
Walmart (WMT) tumbled 4.7 percent to $59.54 on heavy volume of 37.5 million shares and was the biggest loser in the Dow Jones Industrial Average Monday amid allegations the company engaged in bribery in Mexico for years and then covered up the scandal. If the allegations are true, it could potentially tarnish the image of the world's largest retailer. Shares tumbled on the reports and options volume was brisk, as 73,000 calls and 46,000 puts traded in Walmart. The top trades were blocks of January 2013 and January 2014 $40 calls, which are almost $20 in-the-money. Some investors might have been liquidating winning positions in longer-term ITM calls on the news. However, not all of the flow was bearish. May 60 calls, which are .8 percent out-of-the-money and expiring in 25 days, were the most actives. 14,500 traded. May 62.5 and Weekly 60 calls were the next most actives, as some investors might have been taking positions in short-term upside calls on the view that today's sell-off in WMT was potentially overdone.
ARM Holdings (ARMH) is potentially a name worth watching Tuesday morning. The company will release earnings and a large spread traded in the British semiconductor company ahead of the news. Shares lost 28 cents to $27.58 and lost 4.9 percent over three days. In options action, one investor sold 8,150 June 31 calls on the stock at 25 cents per contract to buy a Jun 24 – 27 put spreads for $1. The three-way, for a 75-cent debit, traded multiple times on the day and appears to be new positioning in ARMH. If so, the spread seems to express a bearish view on the stock, as the position offers its best payoff if the stock falls to $24 or less through the expiration, which represents a 13 percent drop over the next 53 days.