eBay (EBAY) January 29 and 30 puts are active on flat volatility with total call volume of 37K contracts compared to 103K puts, according to Track Data. The increase in trading of the January 29 and 30 puts suggest traders anticipate movement into its Q4 January 19 EPS report.

BMO Financial Group (BMO) announced that it will acquire all outstanding shares of common stock of Marshall & Ilsley (MI) in a stock-for-stock transaction. Under the terms of the agreement, each outstanding share of M&I will be exchanged for 0.1257 shares of Bank of Montreal upon closing. BMO Financial Group overall option implied volatility of 21 is below its 26-week average of 27, according to Track Data, suggesting decreasing price movement.

CBOE Volatility Index (VIX) traded down 10% to at intra-day low of 15.46, an eight-month low.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

The U.S. House of Representatives passed the tax bill that had already been approved by the Senate, but that did little, if anything, to put a charge into the market today. Better-than-expected earnings reported after markets closed yesterday from Oracle and Research in Motion didn't boost the opening today either. Later in the morning, the report on leading economic indicators from the Conference Board also showed improvement, rising 0.4% in October. The dollar rose slightly on the forex market following Moody's five-notch downgrade of Irish debt. All in all, a day of mixed news with mixed results.

Here are the numbers for late afternoon trading today:

Dow Jones 11,491.98 -7.27 (-0.06%)
S&P 500 1,243.91 +1.04 (0.08%)
Nasdaq 2,642.97 +5.66 (0.21%)

The new earnings season ramps up this week as Alcoa Inc. (NYSE: AA) reports fourth-quarter results. Last week, the Pittsburgh-based producer of aluminum and alumina announced layoffs and production cuts as a reaction to the economic downturn. Analysts surveyed by Thomson Reuters expect that Alcoa will have swung to its first quarterly loss in years: $0.10 per share. That compares to a profit of $0.36 per share in the same period of the previous year. Revenues for the quarter are expected to have fallen 28.8% from a year ago to $5.3 billion. For 2008, analysts are looking for earnings of $1.40 per share on revenue of $27.6 billion, down from $2.60 per share and $30.8 billion in the previous year. Alcoa missed earnings estimates in three of the past five quarters, by 25.4% in the third quarter. The consensus recommendation of analysts shifted from buy to hold AA during the past quarter. The share price has been climbing in recent weeks, but it is 65.6% lower than a year ago.

Intel Corp. (NASDAQ: INTC) is also scheduled to report fourth-quarter results this week, one of a handful of tech stocks to do so. The number one semiconductor maker is expected to post earnings down 86.8% to $0.05 per share, and sales of $8.2 billion, down 23.3% from a year ago. Last week, Intel forecast sales for the quarter of $8.2 billion. The full-year numbers are expected to be marginally lower than a year ago, or $0.94 per share on $37.7 billion. Intel only missed earnings estimates in one of the past five quarters. Shares are about $2.00 higher than the 52-week low, but 37.2% lower than a year ago.

MOST NOTEWORTHY:

• UBS downgraded Merck & Co Inc (NYSE: MRK) to Neutral from Buy citing slowing Gardasil trends and vaccine supply issues.
• Merriman cut On2 Technologies Inc (AMEX: ONT) to Neutral from Buy to reflect the reduced visibility into financials and management changes.
• Baird downgraded shares of Zions Bancorporation (NASDAQ: ZION) to Neutral from Outperform to reflect deteriorating credit quality and growing capital concerns. The firm lowered their target price to $32 from $43.

• AstraZeneca Plc (NYSE: AZN) was downgraded to Hold from Buy at Deutsche Bank.
• JP Morgan lowered Marshall & Ilsley Corporation (NYSE: MI) to Underweight from Neutral.
• Acme Packet Inc (NASDAQ: APKT) was downgraded to Neutral from Buy at Piper.