US equity market futures fluctuated between gains and losses this afternoon as a number of futures and options contracts get ready to expire.
‘The story today is quadruple witching, but we may not see as much volatility as usual, since most activity already took place this week,’ explained Peter Cardillo of Avalon Partners. ‘It’s going to be a sideways market today with nothing really happening. The market will take a pause with averages slipping in and out of positive territory.’ [1]
Quadruple witching occurs on a day on which stock index futures, stock index options, stock options and single stock futures expire. This phenomenon occurs on the third Friday of March, June, September and December and tends to create some market volatility.
Market sentiment in general was tempered by concerns over fears about the six-month stock market rally coming to an end, disappointing results from Palm and a drop in industrial metal prices.
Palm Inc was in the limelight today after unveiling a wider loss despite a jump in the company’s smartphone sales; the company reported a first-quarter net loss of $161.1 million, or $1.17 a share - worse than the prior year’s comparative loss of $39.5 million, or 39 cents a share.
First quarter revenues, meanwhile, fell to $68 million from $366.9 million a year ago. However, after adjusting for certain items, revenues would have come in at $360.7 million, beating Thomson Reuters’ $297.7 million forecast by 21%.
The disappointing part came when Palm said it expects second-quarter non-GAAP revenue to come in between $240 million and $270 million, nevertheless. This estimate trailed Reuters’ average forecast for revenue of just over $345 million. Palm’s share price sagged 1.5% to $14.22 during the pre-market session.
US miners were also in the red during pre-market trading today, with Freeport-McMoRan Copper & Gold down by around 0.4% to $71.21 and Southern Copper 1.6% lower at $29.23 after copper inventories monitored by the London Metal Exchange increased by 1% to 327,700 metric tons, the highest level since May.
Airline companies were eyed as well today after sources told Reuters News that American Airlines will team up with British Airways and Qantas to offer fresh capital to Japan Airlines.
There were also a few upgrades today. Procter & Gamble advanced 2.5% to $55.53 during the pre-market session after Citi upgraded the company from ‘hold’ to ‘buy’. In the meantime, housebuilders KB Home and Toll Brothers jumped 3.35% to $20.35 and 3.2% to $22.22 after JPMorgan upgraded the companies from ‘neutral’ to ‘overweight’. The broker reduced its rating on MDC Holdings to underweight, however. [2]
Elsewhere, Citigroup gained 0.7% to $4.45 in the pre-market session after responding to rumours that one of its traders was entitled to a pay package of $100 million; the bank said that $100 million was too much to pay an employee given the banks circumstances.
[1] Source: CNN Money (18 September 2009)
[2] Source: Wall Street Journal (18 September 2009)
By Anthony Grech, Research Analyst, IG Index.
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