3 Cheers or Jeers for 3M?
by Houghton and Atkeson 12/01/08
3M Co. (MMM) has bounced nicely from its low of $50.01 to a price in the to mid $60s.
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Option investors believe there might be risk to the stock, as they have bought in-the-money MMM Dec 65 Puts (MMMXM) more than 11,000 times. Although this option activity is notable for its size, it is not unlikely that a long stock holder is hedging the position, particularly going into year-end.
The company is not expected to report earnings again until early January, well after the expiration on Dec. 19. On the other hand, the in-the-money, near-dated nature of these options may be a credible post-it that trouble lies ahead.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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