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Goldman Sachs Group Inc. (NYSE: GS), Citigroup, Inc. (NYSE: C), and The Charles Schwab Corporation (NASDAQ: SCHW) have all reported earnings. All came in above or in-line with estimates and there is not really anything wrong with the numbers when you compare them to expectations, yet there is some disappointment on the trading floors. We noted yesterday how JPMorgan Chase & Co. (NYSE: JPM) set the bar extremely high for the rest of the financial leaders. As a result, the common theme here is profit taking in all of the majors. There is even enough profit taking that the highly volatile triple-leverage Direxion Daily Financial Bull 3X Shares (NYSE: FAS) ETF is selling off as well.
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Posts for Ticker ‘FAS’
The Financial Leader Theme: Profit Taking (GS, C, SCHW, JPM, FAS)
Top Day Trader Alerts (ACPW, JPM, FAS, BMTI, INTC, DRYS, MESA, CNO)
These are this morning’s top day trader and active trader alert stocks. We have much more detailed analysis on most with links through to each stock over at VSInvestor.com:
Active Power, Inc. (NASDAQ: ACPW) is surging over 30% on news that it has received a second multi-million dollar order.
JPMorgan Chase & Co. (NYSE: JPM) is doing well enough that it is running the highly volatile triple-leverage ETF Direxion Daily Financial Bull 3X Shares (NYSE: FAS) by more than JPMorgan.
BioMimetic Therapeutics, Inc. (NASDAQ: BMTI) is changing to a big gain after showing a big stock drop last night.
Intel Corporation (NASDAQ: INTC) is up over 4% but off last night’s highs after beating earnings estimates.
DryShips, Inc. (NASDAQ: DRYS) is running again but up close to previous resistance levels.
Mesa Air Group Inc. (NASDAQ: MESA) is a penny stock up 16% on trader chat. As always, you are on your own in the world of penny stocks.
Conseco, Inc. (NYSE: CNO) is up 20% on word that Paulson & Co. took a stake in a secondary offering.
You can join our open email distribution list to get updates each morning on analyst upgrades and downgrades, top day trader alerts, IPO’s and secondary offerings, Warren Buffett and other guru activity, M&A and more.
JON C. OGG
JPMorgan Sets Very High Bar For Financial Peers (JPM, FAS)
J.P. Morgan Chase & Co. (NYSE: JPM) has just posted very impressive earnings. The cleanest bank in America reported earnings of $0.82 EPS and revenues were $26.62 billion versus $0.52 EPS and almost $25 billion in revenues. To compare these earnings, this translates to $3.6 billion in net income versus $527 million a year ago. The results are strong enough that it has set a very high bar for its peers and the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is soaring on the news.
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Top Financial Earnings on Deck (JPM, GS, C, BAC, PRSP, FAS, FAZ)
This week is the week we have 6 DJIA components reporting earnings as the first real week of earnings season, but the big financial stocks reporting will set the tone for how the rest of the financial sector’s earnings are going to be received. In banking we have the cleanest bank in JPMorgan Chase & Co. (NYSE: JPM) reporting and the cleanest brokerage firm, ergo bank holding company with no bank, in Goldman Sachs Group Inc. (NYSE: GS). We also have Citigroup Inc. (NYSE: C) on Thursday and Bank of America Corporation (NYSE: BAC). While Prosperity Bancshares Inc. (NASDAQ: PRSP) is far from any national leadership bank, it is deemed by the investment community as one of the cleanest regional banks out there and its earnings are due Friday morning.
These earnings also going to have a direct impact each day in the trading of the highly volatile Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and Direxion Daily Financial Bear 3X Shares (NYSE: FAZ). Be advised that Direxion has been making its own disclosures that these triple-leverage ETFs target effective moves during the trading session rather than how they trade through time and from closing bell to opening bell the next day. Our take is that you could easily see double-digit percentage moves in these two ETFs on Wednesday, Thursday, or Friday because of the sector volatility.
More Official Warnings on Leveraged ETFs (FAS, FAZ, UYG, SKF, SDS, SSO)
The Financial Industry Regulatory Authority and the Securities and Exchange Commission decided to issue an Investor Alert yesterday called “Leveraged and Inverse ETFs: Specialized Products with Extra Risks for Buy-and-Hold Investors”…. This warning was meant to warn retail investors of the added risks in leveraged ETF investments that exist above and beyond the traditional world of investment products. This follows a recent FINRA regulatory notice reminding securities firms and brokers of their sales practice obligations relating to leveraged and inverse exchange-traded funds.
While this is not against any single leveraged ETF (or inverse ETF), it may have at least some influence on leveraged ETF and reverse-leveraged ETFs. The two key ETFs for leverage and high volume and high volatility are the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) as they are the triple-leverage financial sector ETFs.
A handful of the other active leveraged and inverse-leverage ETFSs are as follows: Ultra Financials ProShares (NYSE: UYG) seeks twice the daily performance of the Dow Jones U.S. Financials index. UltraShort Financials ProShares (NYSE: SKF) seeks twice the inverse of the daily performance of the Dow Jones U.S. Financials index. UltraShort S&P500 ProShares (NYSE: SDS) seeks twice the inverse of the daily performance of the S&P 500 Index. Ultra S&P500 ProShares (NYSE: SSO) twice the daily performance of the S&P 500 Index.
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Bove’s Sour Bank Call Cautions Recent Gains (BAC, C, FAS)
What happens when a sector loses a key bull, even if it is temporary? Often nothing, but if it is a big enough market pundit then it can have an impact. That is what we are seeing today in the money center banks. Rochdale Securities’ Richard Bove said that the fundamentals of the banks have not improved from the first recovery wave and he even noted that many of the banks will post losses in both Q3 and in Q4. As Bove had been active in both Citigroup Inc. (NYSE: C) and Bank of America Corp. (NYSE: BAC) for some time, those are the first two to look at. This call has larger implication for the most leveraged ETF, the Direxion Daily Financial Bull 3X Shares (NYSE: FAS).
Brokerage Giant Restricts Leveraged and Inverse ETF Products (FAS, FAZ, UYG, SKF, SDS, SSO)
The movement against, or at least a move to better quantify, leveraged ETFs is still going. In fact, it is becoming more clear. While this is not against any single leveraged ETF (or inverse ETF), this does have at least have a continued influence on leveraged ETF and reverse-leveraged ETFs such as the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ). Those are triple-leverage financial sector ETFs. A handful of the other active leveraged and inverse-leverage ETFSs are as follows: Ultra Financials ProShares (NYSE: UYG) seeks twice the daily performance of the Dow Jones U.S. Financials index. UltraShort Financials ProShares (NYSE: SKF) seeks twice the inverse of the daily performance of the Dow Jones U.S. Financials index. UltraShort S&P500 ProShares (NYSE: SDS) seeks twice the inverse of the daily performance of the S&P 500 index. Ultra S&P500 ProShares (NYSE: SSO) twice the daily performance of the S&P 500 index.
This morning came an announcement from Morgan Stanley Smith Barney that it has placed certain restrictions on the sale of leveraged, inverse, and leveraged inverse exchange traded funds. The reason even started out as “In response to concerns raised by regulators about these securities…”
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Mass. Inquiry on Leveraged ETF’s (FAS, FAZ, UYG, SKF, SDS, SSO)
There may be some misconceptions out in the market over an inquiry into the leveraged ETF universe. The Massachusetts Secretary of State has inquired into the sales, marketing, and disclosure practices of leveraged ETF’s. This issue will bring more attentionon some top volume leveraged-ETFs. The two most active before the reverse splits were the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) in the triple-leverage. Others are as follows:
Ultra Financials ProShares (NYSE: UYG) seeks twice the daily performance of the Dow Jones U.S. Financials index. UltraShort Financials ProShares (NYSE: SKF) seeks twice the inverse of the daily performance of the Dow Jones U.S. Financials index. UltraShort S&P500 ProShares (NYSE: SDS) seeks twice the inverse of the daily performance of the S&P 500 index. Ultra S&P500 ProShares (NYSE: SSO) twice the daily performance of the S&P 500 index.
There are many other issues from leveraged ETF families out there. These are just some of the top leveraged exchange traded funds by trading volume. But there are some considerations here that are a part of the Mass. Secretary of State inquiry.
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ETF Reverse Splits Have Arrived… More Looming? (FAS, FAZ)
When we first floated the notion that Direxion may need to consider conducting a reverse stock split on its two Triple-Leverage cult ETFs for the financial sector, this was a notion that was not that popular despite the company’s hint that a reverse split was likely before the market temporarily interrupted that need. Now this morning we are seeing the Direxion Financial Bull 3X Shares (NYSE: FAS) and the Direxion Financial Bear 3X Shares (NYSE: FAZ) have adjusted prices to be based around reverse splits. It is the ex-date.
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Quantifying Triple Leverage ETF Performance vs. Target Index (FAS, FAZ, BGU, BGZ, ERX, ERY)
Direxion has issued its semi-annual report for its triple leverage ETF holders and there are some interesting revelations here. While there are many others covered, we wanted to demonstrate some of the differences among the Direxion Daily Financial Bull 3X Shares (NYSE: FAS), Direxion Daily Financial Bear 3X Shares (NYSE: FAZ), Direxion Daily Large Cap Bull 3X Shares (NYSE: BGU), Direxion Daily Large Cap Bear 3X Shares (NYSE: BGZ), Direxion Daily Energy Bull 3X Shares (NYSE: ERX), and the Direxion Daily Energy Bear 3X Shares (NYSE: ERY).
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More Triple-Leverage ETF Competition (UPRO, SPXU, FAS, FAZ)
ProShares already has double leverage ETFs for investors and traders alike. It now has launched two new Triple-Leverage ETFs. The UltraPro S&P500 (NYSE: UPRO) is meant to offer 300% of the daily return for the S&P 500 Index. The UltraPro Short S&P500 (NYSE: SPXU) is meant to offer the 300% inverse of the daily return of S&P 500 Index. While these are not exactly the same as Direxion’s Triple-Leverage ETF’s, they are meant as competition to the 20 Triple-Leverage ETFs run by Direxion.
The Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) track the Russell 1000 Financial Services Index rather than the S&P 500 Index. But with the two offsetting funds from Direxion frequently trading 450 million shares combined on many trading days and with the SPDRs (NYSE: SPY) trading over 250 million shares on most days, it is not hard to imagine why ProShares wants to launch these.
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More Reverse Splits, or Just Closure, Possible or Needed in ETFs (FAS, FAZ, UYG, BAC, BHH, ARBA, IIH, AKAM, VRSN, UNG, USO, GLD, SDS, SPY, NYX, NDAQ)
We have been large fans of exchange-traded funds, exchange-traded notes, and other exchange-traded instruments which are open for trade throughout the day that are allowed to be invested in just like a stock. But with all new and growing markets, there are risks that need to be kept in check. There are some leveraged ETF’s and their inverse counterparts which might need to see reverse share splits in the near future. The notion of so many low-priced shares being so active may wreak havoc as the funds managing each ETF try to keep up with appropriate derivatives and in buying and selling shares of the components that are supposed to be the underlying securities. There are even a few ETF’s which should probably just be closed down entirely and liquidated to holders. Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and The Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) are both prime examples of ETFs which skew total daily exchange trading volume numbers because of low share prices today and massive trading volume. This is not meant to pick on the fund groups because they created trading vehicles which they did not expect to see some of these moves. There are many more ETFs and ETNs to consider here.
Direxion just announced a reverse split for another ETF yesterday, but not its two financial triple-leverage ETFs. Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is now back down close to $8.00 per share, yet it trades 250 million shares on an average day. The Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) is barely above $5.00 and trades more than 200 million shares on an average day. So between the FAS and FAZ, you have an average of more than 450 million shares, and at today’s prices that is close to $3 billion worth of nominal value.
This review discusses a portion of the ETFs and ETNs and the ones under discussion today, along with underlying key companies, are Ultra Financials ProShares (NYSE: UYG), Bank of America Corporation (NYSE: BAC), B2B Internet HOLDRs (AMEX: BHH), Ariba, Inc. (NASDAQ: ARBA), Internet Capital Group (NASDAQ: ICGE), Internet Infrastructure HOLDRs (AMEX: IIH), VeriSign Inc. (NASDAQ: VRSN), Akamai Technologies Inc. (NASDAQ: AKAM), United States Natural Gas (NYSE: UNG), United States Oil (NYSE: USO), SPDR Gold Shares (NYSE: GLD), UltraShort S&P500 ProShares (NYSE: SDS), SPDRs (NYSE: SPY), New York Stock Exchange (NYSE: NYX) and the NASDAQ OMX Group Inc. (NASDAQ: NDAQ).
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S&P Looking For More Bank Losses (WFC, CMA, USB, BBT, RF, COF, FITB, HBAN, SNV, WTNY, FAS)
Standard & Poor’s may still have at least some relevance in its debt ratings. This morning we saw a wave of downgrades at banks by the debt ratings agency on systematic-risk and non-systematic risk. We tried to shorten this up to the most concise report in rating groups as this is hitting many of the bank stocks pretty hard this morning. Wells Fargo & Co. (NYSE: WFC), Comerica (NYSE: CMA), USBancorp (NYSE: USB), BB&T Corp. (NYSE: BBT), Regions Financial Corp. (NYSE: RF), Capital One Financial Corp. (NYSE: COF), Fifth Third Bancorp (NASDAQ: FITB), Huntington Bancshares Inc. (NASDAQ: HBAN), Synovus Financial Corp. (NYSE: SNV) and Whitney Holding Corp. (NASDAQ: WTNY) were all in the wave of S&P downgrades. This news has the extremely volatile Direxion Daily Financial Bull 3X Shares (NYSE: FAS) triple leverage financial sector ETF down 7% at $8.60.
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Leveraged ETF’s Weigh Bank Preferred Redemptions (FAS, FAZ, UYG, SKF, PGF, BAC, JPM, WFC, GS, C)
The triple-leverage financial ETFs of Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) are getting to deal with yet another potential wrench in the machine: preferred share redemptions from major banks. This will also pose a potential issue for the Ultra Financials ProShares (NYSE: UYG) and the UltraShort Financials ProShares (NYSE: SKF) ETFs that trade at double-leverage of the Dow Jones U.S. Financials index.
The PowerShares Financial Preferred (NYSE: PGF) is the ETF that specifically tracks the preferred shares of financial stocks. This can also be impacted, although we would note that this ETF here has five of its top ten holdings which are European bank preferred shares and the top ten holdings are over half of the ETF.
This comes on the hells of this morning’s Bank of America Corporation (NYSE: BAC) announcement that it was offering a tender exchange offer on nine of its preferred series for up to 200 million shares of common stock. At today’s prices, that would represent more than $2.2 billion in new common stock. The largest US bank holding company issuers we have seen with Bank of America are JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC), and Goldman Sachs Group Inc. (NYSE: GS).
Top Analyst Upgrades & Downgrades (ATHN, ARUN, FAS, CVLT, DEO, NE, RDC, ZUMZ)
These are some of the top pre-market analyst calls from Wall Street we have seen early this Friday morning:
Athenahealth (ATHN) Cut to Sell at UBS.
Aruba Networks (ARUN) Raised to Buy at Jefferies; Raised to Overweight at JPMorgan.
Chico’s FAS (FAS) Raised to Buy at SunTrust Robinson Humphrey.
CommVault Systems (CVLT) Cut to Hold at KeyBanc.
Diageo plc (DEO) Raised to Neutral at JPMorgan.
Noble Corp. (NE) Raised to Buy at Deutsche Bank.
Rowan Cos. (RDC) Raised to Buy at Deutsche Bank.
Zumiez (ZUMZ) Cut to Neutral at Baird.
JON C. OGG
MAY 22, 2009
FAS/FAZ Dealing With Billions of Dollars of Securities Sales from Members (FAS, FAZ, BBT, COF, PFG, WFC, USB)
The triple leverage ETF’s, the Direxion Financial Bull 3X Shares (NYSE: FAS) and Direxion Financial Bear 3X Shares (NYSE: FAZ), are perhaps the most volatile of all financial-stock ETF’s. This morning they are getting to deal with a wave of secondary offerings and capital offerings from constituent member banks and financial firms. These ETF’s are reacting to major “raising cash” filings and offerings from BB&T Corp. (NYSE: BBT), Capital One Financial Corp. (NYSE: COF), Principal Financial Group Inc. (NYSE: PFG), Wells Fargo & Co. (NYSE: WFC), and US Bancorp (NYSE: USB).
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Financials & Direxion 3X Bulls, Recent Highs (FAS, FAZ, JPM, BAC, GS, WFC)
To call the triple-leverage financial ETF of the Direxion Financial Bull 3X Shares (NYSE: FAS) volatile would be the understatement of the year. It has become the day trading instrument of choice for those who trade financial stocks because it has such a low share price and because its triple-leverage adds that much more volatility. What is interesting is that this ETF is not just a bank ETF as it tracks the Russell 1000 Financial Services Index. While it aims to diversify to all financial firms in that index with more than 200 components last year, it looks like the four top dogs of JP MORGAN CHASE & CO. (NYSE: JPM), BANK OF AMERICA CORP. (NYSE: BAC), GOLDMAN SACHS GROUP (NYSE: GS), and WELLS FARGO & CO (NYSE: WFC) may now more than 20% of the weighting.
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Direxion Launches FAS/FAZ-Like ETFs For T-Bonds (FAS, FAZ, TYD, TYO, TMF, TMV)
Direxion is at it again with triple-leverage ETFs. If you love trading the financial stocks for triple leverage via the Direxion Financial Bull 3X Shares (NYSE: FAS) or shorting them with triple leverage via the Direxion Financial Bear 3X Shares (NYSE: FAZ), then you have some new trading vehicles to use for bonds. You can now be long or short the US 10-Year or US 30-Year Treasury Bonds.
Direxion Daily 10-Year Treasury Bull 3X Shares (NYSE: TYD)
Direxion Daily 10-Year Treasury Bear 3X Shares (NYSE: TYO)
Direxion Daily 30-Year Treasury Bull 3X Shares (NYSE: TMF)
Direxion Daily 30-Year Treasury Bear 3X Shares (NYSE: TMV)
These were all very thinly traded so far, but they are probably unknown to almost everyone. It will be interesting to see how these trade once the FOMC does not have its near-Zero rate policy on the short end of the curve and when there is a big economic number move.
Jon C. Ogg
JPMorgan Chase Shows How It’s Done (JPM, FAS)
JPMorgan Chase & Co. (NYSE: JPM) rose about 7% yesterday ahead of this morning’s earnings announcement along with other major financial stocks, and now we know why. Jamie Dimon and friends at one of the strongest US-banks posted earnings at $0.40 EPS vs. $0.32 estimates from Thomson Reuters; and revenues came in at $26.9 billion rather than the estimates of $22.96 billion. So far, this is good enough that it is running the wild Direxion Financial Bull 3X Shares (NYSE: FAS) ETF.
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