Smoking Gun at Webster Financial (WBS)?
by Houghton and Atkeson 09/11/08
Put activity in Webster Financial (WBS) has caught our attention.
Average volume in the options is a mere 150 contracts per day; today's volume is eight times that average. Most of the activity has been in the WBS Oct 15 puts (WBSVC), where 1,000 contracts have traded.
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On Tuesday, this New England bank's headlines contained the phrases "write-downs in Q3," "non-recurring charges," "unrealized losses," "continued pressure in non-performing assets" and "analyst downgrade."
The stock has pulled back 15% from its recent high of $26 on Monday, but is still up 60% from its July 15 52-week low. Although the company might be adequately capitalized, is there a smoking gun here?
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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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