The Alcoa Indicator: Majors Rise in After-Hours (BA, CAT, CENX, F, GE, TIE, X)

Alcoa, Inc. is a stock that many investors and traders try to use as a proxy for earnings season for other major companies.  Of the companies which are large end-users of the metal (hence Alcoa’s comments about rising demand), we are watching Boeing Co. (NYSE: BA), Caterpillar Inc. (NYSE: CAT), Century Aluminum Co. (NASDAQ: CENX), Ford Motor Co. (NYSE: F), General Electric Co. (NYSE: GE), Titanium Metals Corporation (NYSE: TIE), and United States Steel Corp. (NYSE: X).  Of course not all of these are directly tied to Alcoa as far as the company itself, but the tie should be fairly evident.

The issue that always comes up for debate is that Alcoa is often a coincidental indicator rather than a leading indicator stock.  It is rare that things would be great or improving for Alcoa without the rest of the biggest companies following suit, but the rest of the universe can still be strong or holding up even if Alcoa is not scoring large gains.

Here are the after-hours reactions from the key DJIA components which would be loosely tied:

• Boeing Co. (NYSE: BA) up 0.7% at $64.34
• Caterpillar Inc. (NYSE: CAT) up 0.5% at $64.61
• Century Aluminum Co. (NASDAQ: CENX) up 3.75% at $9.95
• Ford Motor Co. (NYSE: F) up 1% at $11.21
• General Electric Co. (NYSE: GE) up 1%at $15.08
• Titanium Metals Corporation (NYSE: TIE) up 1.7% at $19.44
• United States Steel Corp. (NYSE: X) up 1.35% at $42.07

JON C. OGG

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Ahead of Alcoa Earnings: Speculators Mount Options Assault (AA)

Alcoa, Inc. (NYSE: AA) is to be the first of the 30 Dow Jones Industrial Average components reporting earnings this earnings season with results due after the close today.  Right after 2:05 PM EST we have shares trading down 0.7% at $10.87 on almost 26 million shares.  The real move is in the speculative options trading, and we’d be looking for those speculative CALLS to be bought even more going into the close when the intraday price trading risk becomes less and less in the stock.

The July options expire this Friday, and the following is what we have seen per speculative strike price along with the volume and open interest:

• 11.00 at $0.28: 14,371 traded vs. 26,091 open interest
• 12.00 at $0.06: 4,416 traded vs. 38,455 open interest
• 13.00 at $0.03: 1,458 traded vs. 41,860 open interest

The 52-week trading range is $9.04 to $17.60, and earnings estimates have come in sharply since the last pre-earnings.  The Thomson Reuters estimates for today are now ‘only’ $0.12 EPS.  The estimates were up at $0.23 EPS about 3-months ago.

After the sell-off we have seen in shares, from $14 to $10 before the latest week’s recovery, today’s stock options do not look too overpriced in a manner which would keep speculators on the sidelines.

JON C. OGG

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