Faced with more selling overseas in Europe, Japan, and Hong Kong, some bad news from market stalwart Caterpillar Inc. (NYSE:CAT), and nervousness over a speech by Federal Reserve Chairwoman Janet Yellen after the closing bell, U.S. markets struggled once again today to find solid footing.
Caterpillar announced that is will cut 5,000 jobs by the end of 2016, and another possible 5,000 by 2018. The company also announced weaker revenue guidance for 2015 — revising down to $48 billion from $49 billion.
Ms. Yellen is scheduled to speak at the University of Massachusetts after the closing bell on the topic of inflation. Questions will not be permitted after the talk, which probably also had traders on edge.
The Dow Jones Industrial Average was off 0.5%, and the S&P 500 and Nasdaq were both off 0.3%. Sectors were mixed today, with energy, utilities, and some basic materials stocks performing better. Precious metals stocks were strong, including Barrick Gold Corporation (USA) (NYSE:ABX), which was one of the day’s best stocks, along with Netflix, Inc. (NASDAQ:NFLX), and Arrowhead Research Corp (NASDAQ: ARWR).
Netflix, Inc. (NFLX)
Shares of NFLX rose more than 5% today on a report from Goldman Sachs Group Inc (NYSE:GS) stating that both call and put options on Netflix are undervalued and that NFLX should be extremely volatile when it reports third-quarter earnings in mid October.
Goldman is therefore suggesting that traders “straddle” NFLX in anticipation the stock could rise or fall at least 17% on October 14, the day that earnings come out.
The options cited were the October $98.50 puts and calls, but with the stock price having moved up since that call was made, the straddle becomes the strike price closest to the current price. Goldman feels there are historical precedents to show that NFLX is likely to move much higher or lower on earnings release day.
However, the risk to investors is if the stock fails to move very much up or down, most or all of the straddle investment could be lost.
Barrick Gold Corporation (USA) (ABX)
A solid day for gold translated into higher prices across the board for gold and silver stocks, and one of the leading stocks in both price and volume was Barrick Gold. ABX shot up 10% today.
Ever since the Fed failed to raise interest rates last week, the lack of confidence among traders has pushed the value of the dollar lower and led to a bounce in the precious metals sector. ABX stock had recently fallen from $13 to $6 per share, and today was the best day for Barrick since mid August.
Insider Monkey also pointed out that hedge funds that already own shares of ABX stock have increased their holdings by 16.8% to $1.64 billion during the second quarter of 2015.
Arrowhead Research Corp (ARWR)
ARWR stock bolted more than 6% higher today after reporting positive results in a mid-stage trial of ARC-520, their hepatitis B treatment candidate.
In the trial, ARC-520 was shown to significantly reduce instances of the virus in both chimpanzees and humans. It is estimated that ARC-520 could deliver sales up to $4.5 billion by 2020 for Arrowhead, but the company is still competing against another Hepatitis B drug that Gilead Sciences, Inc. (NYSE:GILD) is developing.
ARWR stock touched $10 per share this morning, before pulling back to finish at $7.19. Shares of GILD were off 3%.
As of this writing, Ethan Roberts does not hold a position in any of the aforementioned securities.
