Bears Sneak Up On the Bulls Into the Bell

Equities skated out of the gate to trade higher, but a reversal in the euro, crude oil and gold, which all erased early gains and fell into the red, seemed to weigh on the market as well as an insider trading report.
By Jill Malandrino ,

Stocks closed mixed as the Dow turned negative in the final minutes of trading Tuesday.Equities opened strong and were trading higher after President Obama defended his tax cut compromise with Republicans, but a report from Reuters at 3:00 p.m. EST stating that the Federal authorities are ramping up Wall Street insider trading probes, spooked the market into the close. There were pockets of selling and shorting, but nothing aggressive. Volumes were high, but were skewed by Citigroup (C) - Get Report which traded more than 2.6 billion shares.

Equity sectors traded mostly mixed with industrials a clear leader, while the rest of the cyclicals space traded inline and defensives were mixed. Staples were up on the grocers and telecom traded higher thanks to positive flow in Sprint (S) - Get Report, AT&T (T) - Get Report and Windstream (WIN) - Get Report. Meanwhile, the tech and financial sectors traded slightly below the tape.

The Dow Jones Industrial Average ended down 3.03 points, or 0.03%, to close at 11,359. The S&P 500 was flat, to close at 1223, and the NASDAQ was up 3.57 points, or 0.14%, to finish at 2598.

The CBOE Volatility IndexI:VIX traded to $17.13 intraday, as traders priced in less risk on extended tax cuts. However, a reversal in the euro, crude oil and gold, which all erased early gains and fell into the red, seemed to weigh on the market as well as the insider trading report from Reuters, erasing most of the loss on the VIX to close down 0.17%, at $17.99. Overall put volume of 127,000 contracts compared to 244,000 call contracts, with February 35 calls as the most active series on 40,600 contracts.

Even though the SPDR S&P 500 ETF (SPY) - Get Report touched a 52-week high intraday, to only closed up $0.07, at $122.83, as it came back in with the rest of the market. Total put volume of 1.15 million put contracts compared to 778,000 calls as traders adjusted their positions for time duration changes and additional cash flows on the tax break extension. Active put volume is attributable to newly minted bullish traders selling puts and other bearish traders purchasing puts on 'sell the news' theme.

The Power Shares QQQ Trust (QQQQ) also touched a 52-week high to close up $0.04, at $53.88, with January 57 calls as the most active series, trading 135,400 contracts. Overall put contract volume of 270,000 compared to 321,000 call contracts on hopes that the extensions of tax breaks will result in investors bidding up the Qs to record highs in January. December call option implied volatility is at 16 and January is at 17, compared to its six-month average of 23.

The earnings calendar is quiet Wednesday with the following notable company reporting before the open: COST; earnings after the close: CMTL, DMND, OXM, SAI and MCD sales numbers. Economic data expected to be released include: MBA Purchase Applications due out at 7:00 a.m. EST, Quarterly Services Survey at 10:00 a.m. EST and the EIA Petroleum Status Report at 10:30 a.m. EST. The 10-year treasury auction will take place tomorrow at 1:00 p.m. EST.

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