Filed under: Deals, Bad news, Nucor Corp (NUE), Options, Technical Analysis

Nucor (NYSE: NUE) shares are falling after the company announced its plans to raise roughly $3 billion by selling stocks and bonds to raise money to buy other companies and pay off debt. The company intends to sell 25 million shares for more than $2 billion. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on NUE.

After hitting a one-year low of $41.62 in August, the stock has risen to hit its one-year high of $83.56 just last week. This morning, NUE opened at $79.13. So far this day the stock has hit a low of $77.38 and a high of $79.61. As of 12:30, NUE is trading at $79.46, down $1.86 (-2.3%). The chart for NUE looks bullish but deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $90 range. A bear-call credit spread is an options position that combines the buy and sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we’ll make a 6.4% return in five weeks as long as NUE is below $90 at June expiration. Nucor would have to rise by more than 14% before we would begin to lose money. Learn more about this type of trade here.

NUE hasn’t been above $84 at all in the past year and has shown resistance around $83 recently. This trade could be risky if the global demand for steel keeps increasing, but even if that happens, this position could be protected by resistance NUE might find between $80 and $85, where it has just formed a top and then moved lower.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that might include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in NUE.

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Filed under: Deals, Competitive strategy, Ford Motor (F), Employees, Tata Mtrs Ltd (TTM)

Ford Motor Co. (NYSE: F) is slicing production at its Volvo unit, according to The Wall Street Journal. The move, which could affect one-third of workers — some 700 — is seen as an attempt to cut the costs and losses at the upscale Swedish brand.

The question everyone is asking is whether this move is done in preparation for a sale. According to “people familiar with the matter” who discussed such things with the Journal, CEO Alan Mulally is interested in putting Volvo, whose sales have been declining, on the block. Of course, to analysts, Mulally sang a different tune last month, saying the priority is improve the Swedish auto maker operations “dramatically.”

As Kirk Kerkorian’s Tracinda Corp. continues to build its stake int he company, he might also have a thing or two to state on the matter.

For now, Volvo is cutting where it makes larger, less popular cars, and it plans to make fewer vehicles overall. But can this make Volvo more profitable for Ford, or at least more attractive to buyers? There are costs associated with producing a smaller number of cars, but with Volvo reporting 22,000 fewer vehicles sold during the first quarter, slicing production makes sense. Another matter Ford has to take into account is the massive losses it suffered lately just from the kronor-dollar exchange rate.

It was nearly a year ago that speculation ran amok that German carmaker BMW could be interested in buying Volvo. Could it still be interested? Years back, Renault was interested too. With the credit crunch still crimping deals, and with some major players like private equity — keeping in mind Chrysler’s sale to Cerberus — absent, it’s likely such a sale could be postponed.

After selling its Land Rover and Jaguar units to India’s Tata Motors Ltd. (NYSE: TTM) in a deal worth $2.3 billion, and Aston Martin for $848 million to investors led by David Richards, if Ford sells Volvo, it will be left only with Lincoln as its luxury line.

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Filed under: Before the bell, Earnings reports, Deals, Rumors, Apple Inc (AAPL), Hewlett-Packard (HPQ), Ford Motor (F), General Motors (GM), Boeing Co (BA), Intuit Inc (INTU), Barclays plc ADS (BCS), Lehman Br Holdings (LEH)

Before the bell: Futures lower ahead of PPI, after HD earnings

After announcing a deal with France’s Orange last week, and as the June 9 keynote address from Steve Jobs approaches, Apple Inc. (NASDAQ: AAPL) may be finally close to a deal that would add two of Asia’s hottest cellphone carriers, Japan and Korea, to its growing list of international partners. According to reports in Asian news services, Apple is planning a special joint release of the next-generation iPhone with Japan’s NTT DoCoMo and Korea Telecom Freetel. That would leave China as the last massive Asian market without an authorized iPhone carrier.

According to the Telegraph, Barclays (NYSE: BCS) is considering an acquisition of investment banks and looked at Lehman Brothers (NYSE: LEH) and UBS (NYSE: UBS).

The Wall Street Journal reported that Ford Motor Co. (NYSE: F) is slicing production at its Volvo unit, possibly affecting one-third of the workers, in an attempt to cut costs and losses at the upscale Swedish brand. The cut comes amid speculation that Ford is priming Volvo for a sale.

The Journal also reported that there was a breakdown in speaks between General Motors (NYSE: GM) and the United Auto Workers union, which could extend a pricey strike at a Kansas assembly line that makes the profitable Malibu sedan.

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Filed under: Before the bell, Earnings reports, Deals, Microsoft (MSFT), Yahoo! (YHOO), Home Depot (HD), Market matters, Target Corp. (TGT), Staples Inc (SPLS), Economic data, Housing

Stock futures fell early Tuesday morning, ahead of an inflation reading at the wholesale level. It is rising prices, as well as the worse housing slump in over a century that caused Home Depot’s profit to decline 66% when it reported this morning. Other retailers are scheduled to report earnings today, and the concern is many will show they face similar problems.

U.S. stocks ended mixed on Monday despite rising quite steadily until 1:30 p.m. EDT. While leading economic indicators alleviated some concerns over the economy, record crude oil prices, once again, dampened the mood on the Street and the Dow industrials rose 41 points, or 0.32%, the S&P 500 added a point, or 0.09%, but the Nasdaq Composite dropped 12 points, or 0.50%.

Producer price index, a gauge of inflation at the wholesale level, is due out in about an hour, at 8:30 a.m. EDT. The data is expected to show a 0.4% rise in April. Excluding food and energy, core-PPI is expected to show a rise of 0.2% in April.

In focus at the moment are Home Depot (NYSE: HD) earnings. The home improvement retailer reported a 66% drop in first-quarter profit Tuesday due to a massive one-time charge and continued weakness in the housing market. Excluding the charge, though, the results — 41 cents a share — beat expectations of 37 cents a share. Home Depot also said revenue in the quarter fell 3.4% and same-store sales fell 6.5% in the first quarter.

Staples Inc. (NASDAQ: SPLS) posted a slim 1.5% increase in its first-quarter profit, for the first time in two quarters. The results matched analysts expectations. Sales rose 6%, beating estimates, and the company reaffirmed its profit and sales forecast for the full year.
On Monday afternoon Staples brought its $2.5 billion hostile takeover bid for Corporate Express NV directly to the Dutch office products firm’s shareholders.

Among other retailers also due to report before the bell Tuesday is Target (NYSE: TGT).

Also, the Microsoft (NASDAQ: MSFT) - Yahoo ( NASDAQ: YHOO) saga is far from over with reports now that Microsoft wants to buy Yahoo’s search business.

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Filed under: Deals, Competitive strategy, JPMorgan Chase (JPM), Barclays plc ADS (BCS), Lehman Br Holdings (LEH)

One of the disadvantages of having a company’s stock beaten down is that it can become a takeover target. That may be about to happen to Lehman (NYSE: LEH). Barclays (NYSE: BCS) is shopping for investment banks, and Lehman appears to be on the list.

According to The Telegraph, “Lehman would add to Barclays Capital’s existing stronghold in the debt market - which could mean bloody job cuts - but would massively bolster its presence in the US.” Barclays might use a buyout to raise money to recapitalize the bank. Buying a new business which is attractive to investors might make it easier to get capital for the new and improved entity.

One argument for the deal is that Wall Street still employs too many people all chasing the same markets and customers. The JP Morgan (NYSE: JPM) buyout of Bear Stearns grant the bank to cut more than 7,000 jobs, instantly improving margins. Lehman’s market cap has dropped to $24 billion, about half what it was less than a year ago.

Being a failure sometimes means losing the chance to stay independent.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), XM Satellite Radio (XMSR)

News emerged late yesterday that the Microsoft (NASDAQ: MSFT) proposal to Yahoo! (NASDAQ: YHOO) would be to purchase its search business and have the portal keep its content operations sell its foreign investments.

According to The Wall Street Journal, “Microsoft didn’t indicate how much it would pay under the plan, which was initially presented by Microsoft representatives to Yahoo.” One school of thought is that the money could be used for a share buyback to raise Yahoo!’s stock price.

It would require some perverse logic to see how the deal would benefit Yahoo! beyond an initial infusion of cash. Search is at the core of Yahoo!’s long-term plans to revive its business, even though it runs a distant second to Google (NASDAQ: GOOG) in the category. If Yahoo! is left with nothing more than a content business, Wall Street would have to wonder whether the company could generate any meaningful operating income at all.

Microsoft is playing a game by making an odd and, in many ways, unattractive offer. The only question is why?

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

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