Jim Cramer Blog

Stocks traded higher during the quadruple witch options expiration Friday and, although volume was high, volatility was not. At the end of the day, the Dow Jones Industrial Average ($INDU) had traded within a 68-point range and finished up 29 points. More than 2.1 billion shares traded on the New York Stock Exchange [NYSE] The NASDAQ ($COMPQ), meanwhile, traded in a 15-point range and settled up 3.4 points, with nearly 2.4 billion shares trading on the NASDAQ Stock Market. Yet, although volume rose to its best levels of the week, traders had to look elsewhere for volatility. They didn’t have to look too far. The stage was set for a big rally in the bond pits when the latest inflation data came in below economist estimates. The Consumer Price Index [CPI], a tool used to track the prices consumers pay on a monthly basis, was unchanged in November, according to the Labor Department. Excluding food and energy, the core CPI was also unchanged. Economists, however, were looking for .2% gains in both the CPI and the core index.
The CPI was highly anticipated heading into Friday’s trading session. The anticipation was due to the ongoing uncertainty regarding the Fed’s next move on rates heading into 2007. Consequently, the goose egg from the CPI seemed to suggest that inflation had been conquered and the Fed can move to the sidelines. The news sent bonds ripping higher in early trading. The benchmark ten-year Treasury note tacked on as much as 20 ticks early in the day and it’s yield, which moves opposite to price, fell to an intraday low 4.506%. However, the bond market rally stalled when data on industrial production came in a stronger than expected +.2%. Capacity utilization came in at 81.8%, compared to expectations for a reading of 82.1%. From there, bonds simply lost their bid and sellers never looked back. Heading into the close, the ten-year had given up the morning’s entire move and finished the day unchanged. The yield now sits at 4.6%.
The buck also did an about face on Friday. The greenback got spanked immediately after the poor CPI headline. However, it didn’t take long for the dollar to regain its footing and, after falling to a low of 117.44 against the yen, the dollar now sits at 118.16. Against the euro, the dollar bounced back from 1.3186 all the way to 1.3080 and is near multi-week highs against the European currency.
Yet, the stock market averages seemed unfazed by the happenings elsewhere. General Electric (GE) helped the Dow finish the week on a strong note. Shares gained $1.15 to $37.36 after a Citigroup report said that the disappointing performance of GE’s plastic unit increases the odds that the unit gets sold. The company also announced yesterday that it has signed $950 million worth of turbine contracts.
Etrade (ET) gave the brokerage sector a lift after the online broker said it expects revenues of $2.75 to $3 billion next year, which was better than analyst estimates of $2.68 billion. ET added 43 cents to $23.19 and the AMEX Broker/Dealer Index ($XBD) rose 1.14 to 242.93. Gaming stocks rose on reports that Penn National Gaming (PENN) is making a cash bid for Harrah’s (HET), according to the Wall Street Journal. HET closed up 40 cents to $79.50. Tech stocks got help from Adobe (ADBE). The software maker tacked on $2.00 to $42.81 after reporting earnings of 33 cents a share, which was three cents better than analyst estimates.Overall, the options expiration failed to stir up much volatility in the stock market. The major averages stayed within a relatively narrow range and closed out the week mostly higher. For the week, the industrials added 136 points and the NASDAQ added almost 30. Meanwhile, the CBOE Volatility Index ($VIX), which fell to an intra-day 13-year low of only 9.39, rallied back to finish the day up .08 to 10.05.
By Optionetics.com

Labels: ADBE, ET, HET, PENN