Greece Worries, But Housing Strong

While many are laying the blame for the last two days market turmoil (Dow up 125 points one day, down 175 points the next day) on Greece, it should be noted that this is a quadruple witching expiration week (the quarterly expiration of individual stock and index options and futures).

Some have noted that the dealers stripped puts 2 days ago (made them worthless) when the market was up 125 points Tuesday, then yesterday stripped calls (made them worthless) and the market was down 200 points.

There is a lot of debate about whether it would be good or bad forGreek Prime Minister Papandreou to step down and form a unity government... most traders seem to feel that the Greeks have stopped paying taxes in general, so any change would be for the better.

Should there be "private participation" in any debt deal? Most of Europe is opposed to anything that would trigger a default, so some are arguing that bailout funds given to Greece should be used to buy back debt at, say, 70 cents on the dollar, then get some kind of guarantee backing from the EU through the EFSF (European Financial Stability Facility) for new debt at a lower yield.

The dollar is rallying for a second day as the euro plunges toward $1.40.


1) Housing Starts and Building Permits for May were much stronger than expected ... permits up 8.7 percent ... April numbers also revised higher, but little reaction in futures.

2) Kroger up 5 percent pre-open, reported Q1 earnings better than expected and raised their full year guidance (to $1.85-$1.95 from $1.80-$1.92), though much of this was due to the first quarter beat.

3) Southern Union jumps 16 percent after agreeing to be acquired by Energy Transfer Equity for $4.2 billion plus the assumption of $3.7 billion in debt. Southern Union shareholders will get $33 per share in cash, a 17 percent premium from yesterday's close. The combined company would create a giant natural gas pipeline firm.

4) Home furnishing retailer Pier 1 beat already-raised analyst estimates by a penny. Its earnings of $0.12 were at the high end of a recently provided range and were boosted by a strong previously-reported 10 percent jump in comps.

PIR's survival is simple amazing; at $11.18, the stock is just off a 4-year high; at one point (March 2009) the stock was trading for 10 cents.

5) Smithfield Foods beat estimates ($0.85 vs. $0.82 consensus) as it was effectively able to raise prices at its pork processing and hog production units. That offset the meat producer's higher feed costs and helped margins surge by nearly 9 percentage points.

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