Options In Focus: Amazon and Long-Dated Bonds Stumble As ISM Report Stokes Inflation Worries, Stocks Advance

For their part, option traders appear to be net protective buyers of premium. Intraday and with the ATM February 115 priced around 47% IV, prices jumped about nine points above Friday’s ATM levels near 39%. Current levels aren’t steep compared to recent range highs that tested 60%. However, earnings have been accounted for with last week’s report, removing one potentially strong catalyst for Monday’s option buyers.

Additionally, with 10- day and 20- day underlying (SV) movement that’s fairly steady around 30%, traders actions in the options are collectively pricing in further elevated price swings to come before February expiration. Without seeing more generous price volatility like Monday’s; a limited risk straddle, while comforting on one level, could also be very expensive when all is said and done. [Read the full article]

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Inflation concerns pushed prices on 30-year Treasury bonds down more than a point as stocks gained after the Institute for Supply Management reported accelerated growth in the factory sector last month.

The ISM data also showed a surge in price pressures due to improving demand for manufactured goods as well as an expansion in factory payrolls. The spike in the prices paid index to its highest in five years unsettled expectations that inflation will stay tame and the Federal Reserve will be able to stick to its near-zero interest rate policy for an extended period.

“The cost structure surge from an inflation perspective is not particularly good for bonds,” said Jay Mueller, senior portfolio manager at Wells Capital Management.

The price of the 30-year bond, which is vulnerable to a pickup in inflation worries, fell 1 4/32 to 96.31. Its yield, which moves inversely to price, was 4.56%, up from 4.49% late Friday. [Read the full article]

Not that Peru is bigger than Brazil. It pales by GDP size in comparison with Latin America’s biggest economy. But by GDP growth, Peru is the China of Latin America.

Adjusted for inflation, real GDP surged 8.9% in 2007 and 9.8% in 2008, according to the CIA Factbook. Higher prices for metals, Peru’s biggest export sector, fueled the boost in the country’s stellar growth.

Those results chilled to just 1% growth last year, according to estimates. Well, as bad years go, Peru fared far better than some other countries. Like the U.S. (-2.5%).

At least one analyst is very upbeat on Peru. He cites investment in mining and energy projects. He also sees a rebound in infrastructure and real estate.

“The leverage of industry and government is very low,” said the analyst, who spoke on condition of anonymity. “This is why Peru will rebound faster than Brazil.”

And that’s saying something. [Read the full article]

It’s not a bank, but let’s face it, it probably identifies with one of the buzzwords of our time: “too big to fail.”

That expression usually means the government will save the firm if all goes south. But Wal-Mart won’t need that. By being so big, it’s cornered the market in low prices. That is, low prices on the products it sells and on its stock.

Today shares are trading at about the same level they were a decade ago. That, plus its record dividend, has given investors an interesting proposal.

Its earnings growth isn’t huge, but it’s picking up. One thing that’s great to see with any stock is accelerating earnings. Wal-Mart has done that the past two periods as profit growth has jumped from 1% to 2% and, most recently, 9%. That’s not great, but at least it’s accelerating.

The oversized retailer that thrives in suburban America has attracted a number of institutional investors, including City National Bank’s Richard Weiss, who oversees about $50 billion in investments. [Read the full article]

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