Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Mar 25, 2024 at 9:36 AM
  • Buzz Stocks

In a move that feels like a long time coming, the Federal Aviation Administration's (FAA) announced today it will initiate a formal evaluation of United Airlines Holdings Inc (NASDAQ:UAL) to determine whether or not it is complying with safety regulations. This follows a string of incidents, including an aircraft that was missing an external panel upon landing, a plane that rolled onto the grass, and another that lost a tire after takeoff. 

UAL is down 3.9% to trade at $44.51 out of the gate this morning, poised to erase its monthly gain of 2%. Nevertheless, the shares remain up 9% so far this year, and surged to their highest level since September in the previous session.

Analysts remain optimistic, with 15 of the 19 in coverage sporting a "buy" or better rating, while the 12-month consensus target price of $64.78 is a 43.2% premium to current levels. In other words, the security looks ripe for a round of downgrades and/or price-target cuts.

Short-term options traders, meanwhile, lean overwhelmingly bearish. This is per the stock's Schaeffer’s open interest ratio (SOIR) of 1.91 that sits in the 99th percentile of its 12-month range.

Published on Mar 25, 2024 at 9:31 AM
  • Analyst Update
 
Published on Mar 25, 2024 at 9:04 AM
Updated on Mar 25, 2024 at 9:06 AM
  • Opening View

Fresh off a stellar week of gains on Wall Street, futures on all three major indexes are lower ahead of the open today, with Nasdaq-100 Index (NDX) futures down triple digits. Several U.S. tech stocks are slipping, amid news that China plans to block Microsoft (MSFT), Advanced Micro Devices (AMD), and Intel (INTC) chips from being used in government computers. There will be plenty of economic data by the end of this week, including the PCE price index on Friday morning, though the market will be closed for Good Friday. 

Continue reading for more on today's market, including: 

  • Tech stocks are once more powering Wall Street. 
  • Pros and cons of trading LEAPS in your portfolio. 
  • Plus, more Boeing drama; Disney upgraded; and a a new deal for Cleveland-Cliffs.

Futures March 25

5 Things You Need to Know Today

  1. The Cboe Options Exchange (CBOE) saw more than 1.4 million call contracts and 955,839 put contracts exchanged Friday. The single-session equity put/call ratio fell to 0.65, while the 21-day moving average remained at 0.71.
  2. Boeing Co (NYSE:BA) stock, struggling recently amid flaws in its airplanes, is down 2.4% premarket, after news that CEO David Calhoun is stepping down by the end of this year. Since the start of the year, the equity is down 27.5%. 
  3. Walt Disney Co (NYSE:DIS) stock is up 1.1% in electronic trading, after an upgrade from Barclays to "overweight" from "equal weight," with a price-target hike to $135 from $95. DIS hit a 52-week high on Friday before turning lower, and is up 28.3% in 2024. 
  4. The shares of Cleveland-Cliffs Inc (NYSE:CLF) are 1.4% higher before the bell, after the steel company successfully negotiated up to $575 million in funding from the U.S. Depart of Energy (DoE) for two of its projects. Should these gains hold, CLF could mark fresh one-year highs. 
  5. Plenty of economic data still on tap to close out March. 

Buzzmar25

Stocks Slide Overseas as Well

Despite inflation reports out of Singapore and Malaysia that came in better-than-expected, stocks in Asia moved lower today. The former’s inflation levels surged to its highest since July 2023, up 3.6% year-over-year, while the latter saw a rise for the first time since August 2022, reading at 1.8%. For Monday’s trading, Japan’s Nikkei shed 1.2%, pulling back from Friday’s record peak. Elsewhere, Hong Kong’s Hang Seng lost 0.2%, South Korea’s Kospi pared gains to close 0.4% lower, and the Shanghai Composite in China backpedaled 0.7%.

Things are not looking any better in Europe, as popular U.K. stocks Direct Line and Kingfisher plunged intraday. At last check, London’s FTSE 100 and France’s CAC 40 are both off 0.5%, while Germany’s DAX is down 0.06%.

Published on Mar 25, 2024 at 8:35 AM
Updated on Mar 25, 2024 at 8:39 AM
  • Monday Morning Outlook

“…there has not been a short-term technical breakdown in the SPX, which is still above the 5,000-millenium level as well as its 30-day moving average… The 30-day trendline is currently sitting at 5,060 and is projected to be at around the 5,100-century mark this time next week… .Last week, the VIX again flirted with the 15.40 level, which is half its 2023 high achieved just over one year ago. As of Friday’s close, the VIX is not signaling major weakness, but there are sentiment indicators such as those Senior Market Strategist Matthew Timpane mentioned last week that point to a heightened pullback risk... These sentiment indicators are noteworthy, but will carry more weight and meaning if the SPX breaks below support levels

-Monday Morning Outlook, March 18, 2024

On the heels of stocks trading higher again last week and the S&P 500 Index (SPX —5,234.18) notching another all-time high, I am highlighting the importance of giving more weight to sentiment indicators when they are conflicting with price action, and less when sentiment is in line with price action.

So while many sentiment indicators we track showed optimism creeping into the market -- a necessary ingredient that foreshadows weakness -- it is not a sufficient condition for the onset of notable market weakness.

In other words, there must be a defined technical breakdown that suggests latecomers to the rally are feeling pain and therefore at risk of selling. As more and more latecomers to the party feel that pain, selling power eventually overcomes buying power and a short-term correction and/or a longer, sustained period of selling materializes.

Ahead of the scheduled Federal Open Market Committee (FOMC) meeting last week, neither the SPX nor the Cboe Market Volatility Index (VIX —13.63) indicated that sentiment risks were worth acting on, unless one wanted to hedge FOMC uncertainty with portfolio insurance being cheap relative to what it might cost in the event of a major negative surprise from the Fed.

110 points above the SPX close on Friday is the 5,247 level, which is a round 10% above the 2023 close. As such, this might be considered the next big level of potential resistance.”

          -Monday Morning Outlook, March 4, 2024

So where are we now, beyond the obvious all-time high? Per the chart below, the SPX is at a potential hesitation or pivot level. Due to the momentum, I’m more inclined to call this a potential hesitation point until I see evidence that the momentum off the late-October low is hinting at running out of steam, which I don’t see at this moment.

But it is no surprise, per an observation I made earlier this month, that the 5,250 area is where the SPX struggled late last week. My observation about the potential importance of this level hinged on the idea that anyone anchoring to the 2023 close may be tempted to take profits with the index exactly 10% above last year’s close, especially with the first quarter about to end.

Moreover, note in the chart below that as the SPX approached 5,250, the top rail of a channel in place since late last year and early this year came into play. The good news for bulls, if investors anchoring to the 2023 close are no longer relevant, is that the top rail of the channel moves higher with each passing day. At the end of this shortened trading week, the top rail of the SPX channel will be just above the round 5,300-century mark.

SPX 30-Day Trendline

Anything can happen any given day or week with respect to equity and index price action. So with the potential resistance topic covered, what are the potential support levels as we head into the last week of trading in the first quarter of 2024?

The first level of support is the bottom rail of the channel, which comes into the week at 5,145 and ends at 5,170. A break of this channel would hint at a loss of momentum. But I see the 30-day moving average, which marked a mid-January low, as having importance too, even if there is a channel break. The 30-day moving average enters the week at 5,100 and is projected to be around 5,130-5,135 at week’s end.

More importantly for investors, however, is how stocks have reacted to what might be viewed as bad news regarding investors factoring in numerous rate cuts in 2024 to changing their expectations of a much slower path to lower ratesIt suggests to me that investors are placing more weight on the prospects for continued economic growth without the help of the Fed, even though the central bank continues to steal headlines. In fact, what is the appropriate level of the fed funds rate and what is perceived to be the appropriate level may well be two different animals.”

            -Monday Morning Outlook, February 26, 2024

A potentially bullish signal for equities, after the VIX failed to overtake the important 15.40 level the week prior, is the VIX’s break below a trendline connecting higher lows since December. In past commentaries, I noted the SPX went sideways when the VIX retreated to this trendline and advanced higher for a short period. Now, we are moving into a period of potentially even lower volatility, which could have bullish implications for equities in the near term, if the VIX works its way down to at least the December 2023 low.

VIX Daily March 2024

Beyond important levels, I have a general observation that is worth pondering again after circling back to an observation made in late February, as excerpted above.  

The reason why stocks rallied last week was that the Fed continued to project three rate cuts by year’s end. Keep in mind, however, that in the one month leading into last week’s FOMC meeting and following a string of hotter-than-expected inflation data, Fed funds futures traders reduced the odds of the first rate cut occurring in June from 78% to 64%.

Despite the increased probability of rates being higher for longer, the SPX rallied 4% during that period. This is again relevant because it reinforces that investors are placing more weight on growth, and less weight on the need for a rate cut.

Todd Salamone is the Senior V.P. of Research at Schaeffer's Investment Research.

 Continue Reading:
Published on Mar 22, 2024 at 4:26 PM
  • Market Recap
 
Published on Mar 22, 2024 at 2:33 PM
  • Options Recommendations

Subscribers to Schaeffer's Weekend Trader options recommendation service received this ALL commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Allstate Corp (NYSE:ALL) stock has layers of technical support on the charts, including the 10-week moving average, 50-day moving average, and +10% year-to-date level. Plus, the shares just broke above the $160 level, home to their January highs and February breakdown, and are bouncing off support from their October, December, and March lows.

 

ALL March 22

ALL’s Schaeffer’s open interest ratio (SOIR) of 0.96 ranks in the 80th percentile of its annual range. This is noteworthy as elevated SOIR’s near 1.0 have historically been in coordination with the price trending higher.
 
Plus, 60% of the peak call open interest (OI), which thwarted the stock’s post-earnings price action, rolled off on the March expiration, potentially opening the door for higher prices. The stock is seeing reasonably priced premium at the moment too, per its Schaeffer’s Volatility Index (SVI) of 21%, which ranks in the 11th percentile of its annual range.
 
Our recommended call option has a leverage ratio of 8.9, and will double in a 12.4% rise in the underlying shares.

Published on Mar 22, 2024 at 1:32 PM
  • 5-Minute Market Rundown

The Federal Open Market Committee's (FOMC) two-day meeting and subsequent move to keep interest rates unchanged -- while still planning to cut them three times this year -- were top of mind this week. Treasury yields fell as stocks rallied, pushing all three major benchmarks to record closes, with the S&P 500 Index (SPX) crossing the 5,200 mark. 

The three major indexes extended those records as the chip and broader tech sectors surged, with both the Dow Jones Industrial Average (DJI) and Nasdaq Composite (IXIC) joining the SPX in stringing together four consecutive gains. The Cboe Volatility Index (VIX) lagged amid this optimism, and while Wall Steet was mixed on Friday, the DJI and SPX were still on track for their best weekly performance so far in 2024.

Chip Stocks Steal the Show

The semiconductor sector had yet another busy week. Taiwan Semiconductor (TSM) considered  building advanced packaging capacity in Japan, while Micron Technology (MU) scored a bull note before its quarterly earnings report, then hit record highs after beating expectations. The buzz surrounding the latter's results lifted Marvell Technology (MRVL), with Broadcom (AVGO) surging to an all-time peak as well.

Not one to be left out of the action, Nvidia (NVDA) unveiled a new generation of artificial intelligence (AI) chips at its first ever GTC Conference. Meanwhile, Intel (INTC) secured $8.5 billion in government funding for high-end chip manufacturing, and $11 billion in loans.

Retail Highlights

Retailers also had their moment in the spotlight. Dick's Sporting Goods Stock (DKS) flashed a historically bullish signal, and an analyst upgrade boosted Best Buy (BBY). Gap (GPS) was also in focus after delivering a healthy profit to options bulls, while both Nike (NKE) and Lululemon Athletica (LULU) brushed off their upbeat quarterly results.

Interest Rate Decision Ahead

The last week of March is coming, and with it plenty of economic indicators, including a personal consumption expenditures (PCE) reading and consumer confidence data. In terms of earnings, investors will be expecting to hear from BlackBerry (BB), Carnival (CCL)Cintas (CTAS), GameStop (GME), in addition to Walgreens Boots Alliance (WBA). Now may be a a good time to understand why a sentiment shift could be indicative of a market top, and determine whether investment newsletters are too bullish.
Published on Mar 22, 2024 at 12:18 PM
  • Midday Market Check

         

Published on Mar 22, 2024 at 11:14 AM
  • Buzz Stocks

Apple Inc (NASDAQ:AAPL) is in focus, as the U.S. government sues the tech giant over alleged iPhone "monopoly power." A Reuters report pointed out the similarities between the lawsuit and the winning 1998 case against near-monopoly at the time, Microsoft (MSFT), but noted that as the industry changes, the lawsuit against Apple could be more difficult.

European regulators are also cracking down on Big Tech, Apple included, over potential violations of the European Union's Digital Markets Act (DMA). Separately, Apple is allegedly in talks with China-based Baidu (BIDU) about using its artificial intelligence (AI) software for its devices.

Apple stock is up 0.4% to trade at $172.05 at last glance. The equity is down nearly 11% since the start of the year, but recently found support at the $170 level. 

Though calls are winning out on an absolute basis in the options pits, it's worth noting put volume is running at double what is typically seen at this point. So far today, 351,000 calls and 316,000 puts have been exchanged, with new positions being opened at the 3/22 170-strike put -- the most popular contract by far. 

This represents a slight shift in the options pits, as calls have been much more popular than usual over the past two weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AAPL's 10-day call/put volume ratio of 2.17 ranks higher than 90% of readings from the past year. 

Published on Mar 22, 2024 at 10:32 AM
  • Buzz Stocks

Lululemon Athletica Inc (NASDAQ:LULU) stock was last seen down 14.5% at $409.20, despite the apparel retailer beating fourth-quarter earnings and revenue estimates. What's weighing on the shares instead is a disappointing annual revenue forecast, amid declining demand for its products.

The security attracted multiple price-target cuts in response, including one from Wells Fargo to $425 from $450. The 12-month consensus target price of $489.45 is a 20.8% premium to current levels, though, and 20 of the 26 analysts in coverage still rate Lululemon Athletica stock a "buy" or better.

LULU is trading at its lowest level since November, and firmly below the 120-day moving average. Shares are also on track for their worst single-day percentage loss since March 2020, while looking to snap a three-day win streak. So far this year, the security has shed 20.5%.

Options volume is already running at 25 times the intraday average, with 27,000 calls and 35,000 puts exchanged so far today. Most popular is the weekly 3/22 400-strike put, where positions are being opened. This indicated options traders expect more downside for LULU by today's close.

 

Published on Mar 22, 2024 at 10:18 AM
  • Analyst Update
  • Intraday Option Activity
  • Buzz Stocks
 
Published on Mar 22, 2024 at 9:15 AM
  • Opening View

Stock futures are indicating a break from the flurry of record closes investors have enjoyed this week. But while the Fed-induced tailwinds may be over, all three major indexes are still headed for winning weeks. Nasdaq-100 Index (NDX) futures are leading the losses with a 55-point deficit, while futures on the Dow Jones Industrial Average (DJIA) and S&P 500 Index (SPX) sit more modestly in the red.

Continue reading for more on today's market, including: 

  • Thinking big: benefits and risks to trading LEAPS
  • Options bulls load up on Micron stock after earnings. 
  • Plus, China demand weighs on NKE; BBY upgraded; and FDX surging after earnings.

Futures March 22

5 Things You Need to Know Today

  1. The Cboe Options Exchange (CBOE) saw more than 1.5 million call contracts and over 1 million put contracts exchanged Thursday. The single-session equity put/call ratio fell to 0.67, while the 21-day moving average remained at 0.71.
  2. Nike Inc (NYSE:NKE) stock is down 6.1% premarket, despite the retail giant posting better-than-expected fiscal third-quarter results, with slowing growth in China weighing on the athletic retailer's forecast. Nike stock has received a flood of bear notes in response, including a downgrade from RBC to "sector perform" from "outperform." Heading into today, NKE is down 7.1% in 2024. 
  3. Best Buy Co Inc (NYSE:BBY) stock is up 2.2% in electronic trading, after the electronics retailer received an upgrade from J.P. Morgan Securities to "overweight" from "neutral," with a price-target hike to $101 from $89. Year to date, Best Buy stock is up 2.4%. 
  4. The shares of FedEx Corp (NYSE:FDX) are up 10.5% before the bell, after the logistics company reported better-than-expected fiscal third-quarter earnings and revenue. No fewer than nine analysts lifted their price targets after the event, including Barclays to $350 from $310. On the charts, the stock has been rallying since mid February, up 4.7% since the start of the year. 
  5. Plenty of economic data still on tap to close out March. 

buzzmar22

Nikkei Stays Hot Despite Spiking Inflation Data

Japan’s Nikkei was the only index in Asia that logged gains today, hitting a fresh record high above 41,000 before closing up 0.2%, even after the February inflation rate rose to 2.8% from 2.2%. Core inflation rose 0.8%, and the Bank of Japan (BoJ) said it expects to maintain a stable, 2% price target. Electric vehicle (EV) stocks like Li Motor (LI) are weighing on Hong Kong’s Hang Seng, the index settling down 2.2%. South Korea’s Kospi and China’s Shanghai Composite fell 0.2% and 1%, respectively.

Markets in Europe are mixed, with tech stocks still reeling from the interest rate buzz from the Bank of England (BoE), among others. In response, London’s FTSE 100 is up 0.4%, France’s CAC 40 is off 0.6%, and Germany’s DAX sits flat.

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