Earnings season has started. In day one, the theme is solid reports paired with warnings of slowing global growth. Alcoa (AA) and Cummins (CMI) both described global demand as weakening – AA cut its outlook for global aluminum demand growth to 6% from 7% and CMI lowered its Q3 and FY12 guidance.
Yum! Brands (YUM – Taco Bell, KFC and Pizza Hut) and Costco (COST) beat earnings and raised guidance. These companies are less exposed to slowing global growth. The next big reports this week will come from JPMorgan Chase (JPM) and Wells Fargo (WFC) on Friday.
The S&P 500 is trading about where it was on September 7. With the elections coming in about a month, it would not be a surprise to see the market remain range bound for the next month. The floor is provided by monetary easing and the ceiling is held in place by slowing global growth.
Most of the unusual flow yesterday was on the put side. This could easily be a reflection of hedging going into earnings season rather than a change in sentiment. Some of the big trades were in TICC Capital Corp (TICC) where 1700 May 7.5 puts were bought. This was 57x normal volume. In Celldex Therapeutics (CLDX), there was a buyer of 4,000 Dec 5 puts. This was 7x normal volume. In CTC Media (CTCM) there was a buyer of 5000 Nov 7.5 puts which was 12x normal volume.