It's another Monday affording a couple beefy-sounding props, but last week's handsome rally is keeping bulls contained. As of 10:55 ET the SP-500 (SPY) is up a mild but somewhat "sell-e-bratory" 0.15% on lesser levels of excitement.
A year ago the market was in the grips of a credit contagion and investor perception was, well, less than optimistic on more than a few companies' financial survival, let alone future prospects. In more recent weeks and months and Monday's in particular, that cloud has lifted and been replaced by almost token Merger Monday headlines, to which today is no different.
In Monday's latest chapter of M & A revival, insurance giant AIG (AIG) has surprised the Street for a second straight week in announcing the sale of its American Life Insurance unit or Alico for $15.5 billion to MetLife (MET).
The cash / equity asset sale will allow MetLife, the US' largest life insurance, to challenge the world stage with Alico's life, health, accident and retirement products in more than 50 countries, including many emerging markets with strong growth prospects.
Bulls see the corporate handshake as good news for both companies, which will leave AIG as MET's second-largest shareholder with its stake in excess of 20%. Intraday, AIG is seeing gains of 3.25, while MET tacks on an additional 4.25% for its shareholders.
Dow component and the world's largest provider of daily beef to the masses, McDonalds (MCD) is helping bulls continue to nibble at the market's current menu of offerings. The company posted a 4.80% rise in existing same-store sales for February.
Overseas results for the fast food goliath took up the slack for soft US sales of just 0.60% hampered by weather and persistently high unemployment according to analysts. McDonald's strongest results came from the Asia/Pac, Middle East and Africa or APMEA region with sales growth of 10.50%.
Intraday, shares of MCD are up 2.00% at 64.95. Technically speaking and for today's bulls, the price action represents a third stab at breaking out of a two and one-half month long ascending triangle base which began back in mid November.
Aiding and abetting mostly constructive-looking profit-taking in the SP-500, while putting the tech-heavy Naz' into a position of modest relative strength-shares of RIM (RIMM) are on the percentage and point gainers lists for the first time in a long while.
One of 2009's most visible laggards within the large cap tech arena, RIMM is up a solid 4.25% at 72.80 on heavier-than-normal volume. The stock is technically clearing what looks most like a low-level double cup or "W" base with handle and shares now inside a very large gap area.
Monday's incentive by bulls comes on the heels of an upgrade from BMO Capital Markets. Analysts upped shares to "Outperform" from "Market Perform" while also raising its price target to $88, citing their expectation for a "meaningful beat and raise" when RIM reports its results on March 31.
BMO's earnings estimates are currently five cents above consensus views for the February quarter and $0.14 above forecasts for the quarter ending in May as the firm sees strength in all regions, its 9700 and 8520 products and less threatening competitive pressure near.
Checking in on that sometimes accurate heat-seeking option action, RIMM implieds are spiking up to one month highs near 44% to 45% in the April contract. April is the earnings front month play and coupled with the large technical gap and laggardship of the past year, could be providing incentive for traders to bid premiums in front of its typical earnings-related "volatility rush."
Seeing RIMM's heaviest option volume by a substantial margin though, is the March contract. That's not entirely surprising given two weeks left until expiration and those contracts sporting substantially higher levels of open interest than April.
Currently, with shares around 72.50 the most heavily-traded contract is the March 70 call on volume of more than 16,000 contracts. Priced at $3.25 on implieds of 36%, a naked purchase would require an additional push of about 6% from shares of RIMM in order to realize a double or 100% profit at expiration.
Chris Tyler
Senior Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
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