From the Trading Desk

Volume Slips Despite the Market Finding Support at Session Lows; CSCO Soars in After-Hours Trade

Led by a solid rally from the Russell 2000, stocks found support more than once throughout the day. New home builder confidence was better than expected again as consumer prices were below expectations according to government figures. Unfortunately, the economic figures didn’t spark any sort of excitement among institutions. Volume was lower on the day and certainly a black mark on the day, but it was the fact the market was unable to eclipse yesterday’s high that is somewhat concerning. We’ll need to see the market build off today’s gains and have volume flood the market. Not a terrible day by any stretch, it simply just left us wanting a bit more from the market.

In the after-hours session CSCO provided the market with some good news as the stock beat earnings and boosted its dividend. John Chambers is notorious for speaking what he sees (despite seeing a great economy at the end of 2007) and this time his comments weren’t as bad as they were in March. If you remember back in March CSCO’s earnings provided a downside catalyst with its negative view of the economy. This time around it doesn’t appear to be all that bad according to CSCO. The stock is trading more than 80 cents higher in after-hours session.

Friday we’ll get the dreaded monthly options expiry. Volatility did pick up yesterday, but still remains relatively tame. Option expiry weeks are notorious for increasing intraday swings and volume in the market. Thus far, we have not seen either. Perhaps tomorrow will be a different day, but nothing is guaranteed.

Earnings plays like KORS, FLT, and others have provided some good solid profits for those taking advantage of the morning gaps. Tomorrow we’ll get PRGO and ROST reporting earnings and tonight NTES will report. We’ll be paying close attention to these stocks as they open tomorrow and will take advantage if the opportunity presents itself.

Another interesting point to continue to look at is the sell-off in bonds. TLT and TBT are two ETFs to watch but the 10 year has gone from 1.4% to 1.8% in a short time. That is one big move in bonds recently and it will be interesting to see how mutual fund flows react to rising yields. Remember, rising yields are well correlated with stock market returns. Keep an eye on yields.

Now that hump day is over we’ll be looking forward to another fun summer weekend.

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