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Wall St rebounds but light volume a worry

Wall St rebounds but light volume a worry
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First Published: Fri, Mar 18 2011. 10 31 AM IST
Updated: Fri, Mar 18 2011. 10 31 AM IST
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New York: Wall Street rebounded after three days of declines on Thursday, but the advance could be temporary as concerns about Japan’s nuclear crisis persisted.
The S&P 500 recovered after giving up the year’s gains on Wednesday, but options activity showed traders are increasing hedges against another decline in stocks.
“As the headlines come out of Japan, there are more nervous traders liquidating their long positions in futures put on this morning,” said Steve Leuer, stock-index futures trader at X-FA Trading firm in Chicago.
The recent losses brought out investors looking for bargains. However, volume was lackluster, with just 7.95 billion shares changing hands on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year’s daily average of 8.47 billion and down sharply from Wednesday’s record for the year of 11.1 billion shares traded.
If the market is to refocus on fundamentals, more news from bellwethers like FedEx Corp will help. The world’s largest cargo airline forecast improved revenue on strong demand, lifting shares 3.1% to $87.89.
The Dow Jones Transport average gained 1.4%.
At the close, a total of about 1.23 million option contracts changed hands in the S&P 500 as puts outpaced calls by a factor of 2.17:1, according to options analytics firm Trade Alert. The recent average put-to-call ratio is 1.93.
An index put option conveys the right to sell an index at a certain level.
The Dow Jones industrial average was up 161.21 points, or 1.39%, at 11,774.51. The Standard & Poor’s 500 Index was up 16.81 points, or 1.34%, at 1,273.69. The Nasdaq Composite Index was up 19.23 points, or 0.73%, at 2,636.05.
But the S&P 500 is down 2.3% for the week so far.
Stocks’ recent declines followed a rally of nearly six months. The rally in itself has prompted predictions of a market correction.
From a chart standpoint “I don’t see anything right now that suggests that the near-term decline is over,” said Chris Burba, short-term market technician at Standard & Poor’s in New York.
The CBOE Volatility Index VIX, Wall Street’s fear gauge, fell 10.3% to 26.37 as stocks rose, but the VIX was still high compared with the recent average of about 20.
The market could see greater volatility on Friday as the two-day quadruple witching period ends. Quadruple witching is the expiration and settlement of March stock index futures, single-stock futures, equity options and stock index options.
On Thursday, natural resource stocks helped lead the market as commodity prices rebounded. Tensions in the Middle East and North Africa drove oil prices up sharply. Brent crude for May delivery gained $4.40 to $115.00 a barrel.
Cliffs Natural Resources Inc rose 5.8% to $88.60 while Chevron Corp gained 2.7% to $102.24.
The S&P energy index shot up 3.1% to be the leading sector, even though the prospect of higher fuel costs in general have hurt investor enthusiasm.
A correction at this point could be short-lived, some analysis suggests.
Cleveland Rueckert, an analyst at Birinyi Associates Inc. in Stamford, Connecticut, said in a note: “Since 1945, 5% declines that occur during a broader rally last an average of 41 days and decline 8.29%.
“If the averages hold, the S&P 500 will bottom at 1,232” on March 31, Rueckert wrote.
Advancing stocks outpaced declining stocks on the NYSE by a ratio of about 3 to 1 while three stocks rose for every two that fell on the Nasdaq.
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First Published: Fri, Mar 18 2011. 10 31 AM IST
More Topics: Markets | US | Stocks | Wall Street | DowJones |