Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Dec 16, 2022 at 4:35 PM
  • Market Recap

Stocks finished lower for the day and week on quadruple witching Friday. The Dow finished the day down 281 points, its third-straight daily loss and second-straight weekly loss. The S&P 500 and Nasdaq also finished lower, although all three major indexes pared much steeper gains in the final hour of trading, with the blue-chip index once off by over 500 points at its session lows. Case in point, Wall Street's "fear gauge" -- the Cboe Volatility Index (VIX) -- reversed course by the end of the day to drop lower for the day and week as well. 

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

  • Buyout buzz sent Maxar stock soaring today. 
  • Biotech company announces expansion plans. 
  • Plus, X reclaims trendlines; call traders scored big with BA; and behind ADBE's surge. 

The Dow Jones Industrial Average (DJI - 32,290.46) lost 1.7% for the week, while the S&P 500 Index (SPX - 3,852.36) and Nasdaq Composite Index (IXIC - 10,705.41) posted weekly losses of 2.1% and 2.7%, respectively. 

The Cboe Volatility Index (VIX - 22.62) lost 0.9% for the week.  

Closing Indexes Summary Dec 16

NYSE and Nasdaq Stats Dec 16

5 Things to Know Today 

  1. Goldman Sachs is reportedly laying off thousands of employees, though the number of employees will still be higher than before the pandemic. (MarketWatch)
  2. Elon Musk is receiving backlash internationally, after suspending no fewer than five journalists from Twitter. (Reuters)
  3. Steel staple lifts guidance on strong demand
  4. Unpacking our mega-successful call option on Boeing stock. 
  5. Analysts praise Adobe stock after strong earnings

Corporate Earnings Dec 16

Unusual Options Activity Dec 16

Oil Rises Nearly 5% for the Week

Oil prices fell for the second day, with West Texas Intermediate (WTI) crude for January delivery dropping $1.82, or 2.4%, to settle at $74.29 a barrel. For the week, however, the commodity added 4.6%. 

Gold prices rose for the day to finish up a volatile week. February-dated gold added $12.40, or 0.7%, to settle at $1,800.20 per ounce, though the front-month contract still fell 0.6% for the week. 

Published on Dec 16, 2022 at 1:32 PM
  • 5-Minute Market Rundown

Inflation data and the Federal Reserve's interest rate decision dictated much of this week's market movement. Investors were fiercely optimistic to start, though the U.S. budget deficit widened to $248.5 billion in November. Both the Dow Jones Industrial Average (DJI) and Nasdaq Composite (IXIC) saw back-to-back, triple-digit gains, while the S&P 500 Index (SPX) reclaimed the 4,000 level thanks to a cooler-than-expected consumer price index (CPI) reading for last month.

That optimism came crashing down, though, after the Fed announced a 50 basis-point rate hike, bringing its benchmark interest rate to its highest level in 15 years. Plus, Fed Chairman Jerome Powell hinted at more rate hikes in 2023 as the central bank's fight against inflation continues. That downward spiral continued after disappointing retail sales data sparked recession fears, which pushed the IXIC and SPX to their worst single-day percentage drop since Nov. 2. At the time of this writing, all three major benchmarks were on track to log a second-straight weekly loss.

Tech Stocks Making Moves

Several tech stocks made headlines this week. Coupa Software (COUP) entered into a definitive agreement to be acquired by Thoma Bravo for $8 billion, while Oracle (ORCL) brushed off a quarterly win. Meanwhile, struggling Advanced Micro Devices (AMD) has been getting blasted in the options pits, and fellow chip maker Western Digital (WDC) received a downgrade to "sell."

Over in the social media realm, Pinterest (PINS) surged after drawing analyst praise, and options bulls swarmed Snap (SNAP) despite a Jefferies bear note. In addition, a bear signal was threatening to push ridesharing name Lyft (LYFT) even lower, while Maxar Technologies (MAXR) more than doubled thanks to a $6.4 billion acquisition deal

Major Biotech Sector Updates

The biotech sector was in focus as well. Amgen (AMGN) will reportedly buy Horizon Therapeutics (HZNP) for $26.4 billion, with the deal expected to close in early 2023. Moderna (MRNA) was under the spotlight, too, after a mid-stage trial of its experimental melanoma vaccine combined with Merck's (MRK) immunotherapy showed encouraging results. Avidity Biosciences (RNA) also released positive trial data demonstrating the first-ever successful targeted delivery of RNA into muscle, while Novavax (NVAX) announced concurrent stock and debt offerings, and BioNTech (BNTX) revealed plans for a clinical trial hub in Taiwan for its MRNA-based cancer immunotherapies.

Plenty of Data to Unpack Before Christmas

The week before Christmas will pack a punch in terms of economic indicators. Most notably, the latest personal consumption expenditures (PCE) price index, durable goods orders, consumer spending, and housing data are on tap. And while the earnings docket is quiet, Cintas (CTAS), General Mills (GIS), Nike (NIKE), Rite Aid (RAD) will still report. Before then, look back at several "known unknown" events that triggered selling this  week, and see why the second half of December could bring tailwinds to Wall Street.

Published on Dec 16, 2022 at 12:04 PM
  • Midday Market Check
 
Published on Dec 16, 2022 at 11:06 AM
  • Buzz Stocks

Adobe Inc (NASDAQ:ADBE) stock is surging today, up 7.6% at $353.77 at last glance, after the company's fourth-quarter earnings report. The software name reported better-than-expected profits of $3.60 per share and revenue in line with estimates, as well as a full-year forecast exceeding analyst expectations. Adobe also announced its plans to buy web application startup Figma. 

No fewer than nine analysts raised their price targets after the event, with the highest coming from Evercore ISI, who moved up to $425 from $350. The 12-month consensus price target of $387.31 is a 12.8% premium to current levels. Of the 22 analysts in coverage, nine carry a "buy" or better rating, with 13 a "hold." 

Options traders are targeting ADBE at nine times the average intraday amount, with 37,000 calls and 35,000 puts across the tape so far. The December 335 put is the most popular, with new positions being opened there. 

Today's options activity shows a slight shift in sentiment, as 1.29 puts have been bought for every call in the last 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks higher than 86% of readings from the past year, showing puts being picked up at a more rapid pace than usual. 

Options might be a good way to go, too, as the security's Schaeffer's Volatility Scorecard (SVS) sits at a 92 out of 100, meaning ADBE has exceeded option traders' volatility expectations during the past year.

Published on Dec 16, 2022 at 11:00 AM
  • Quantitative Analysis
  • Editor's Pick

Subscribers to Chart of the Week received this commentary on Sunday, December 11.

Last week, subscribers to our Weekly Options Countdown (WOC) service scored a 151% profit on our recommended Boeing Co (NYSE:BA) weekly 12/2 177.50-strike call. Below, we'll unpack the reasoning for the short-term bullish stance on BA.

We recommended the trade on Sunday night, Nov. 27, with entry for first-thing Monday morning. At that time, the aerospace giant was forming a November flag pattern that was breaking out of a recent downtrend. The shares had successfully retested their August peak and had reclaimed a confluence of moving averages with historically bullish implications, per the chart below.

BA Postmortem COTW

There was also heavy call open interest overhead at the 180- and 185-strikes, which meant a move higher could lead these levels to act as a magnet in the short term. Digging deeper, the stock's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sat in the 91st percentile of its annual range. So, while calls still outflanked puts on an absolute basis, the high percentile indicated the rate of put buying was near its highest levels of 2022. An unwinding of these bearish bets would push BA higher.

On top of this upside potential, it was a good time to target BA options, as premiums were at a discount level. At the time, the stock's Schaeffer's Volatility Index (SVI) ranked near the bottom one-third of annual readings, hinting at unusually low volatility expectations among options traders. Further, the stock’s Schaeffer’s Volatility Scorecard (SVS) checked in at 75, which meant BA had regularly made bigger-than-expected moves on the charts on the past year, compared to what options traders had priced in.

While Boeing stock stumbled out of the gate on Nov. 28, the day the trade was initiated, it righted itself and closed the week 2.5% higher, nabbing at that time an eight-month high of $188.44. As with all weekly contracts, we closed our position at the Friday bell, allowing subscribers to collect a 151% profit in just five trading days.

Options volume has had a banner 2022; per the OCC data below, U.S. volume is on track for 10.32 billion contracts, 4% above 2021 and more than double the amount in 2019. Weeklies We discuss the rise in shorter-term contracts with Cboe Global Markets below, in our latest podcast.

If weeklies seem like your thing, you’re in luck! Schaeffer’s is running a holiday promotion for WOC. For December’s issue, we’re offering WOC for just $30. That’s six weekly trades, for a total of $30. Math isn’t my strong suit, but I’m pretty sure that comes out to $5 per trade! Click the link below to claim this year-end offer.

As for one of our latest product launches, we’re bringing you and extended version of Weekly Options Countdown, WOC Plus! With this subscription, you'll get your six profit-ready expiration option trades, AND an additional one to four trades sent straight to your inbox the Friday prior to options expiration.

OCC Data

Published on Dec 16, 2022 at 10:24 AM
  • Buzz Stocks

Maxar Technologies Inc (NYSE:MAXR) has more than doubled this morning, last seen up 120.1% at $50.84, after the company agreed to be acquired by Advent International in a deal worth $6.4 billion. The deal will require advent to pay $53 per share to shareholders -- which is a 129% premium to MAXR's Thursday close. Once the deal closes, which is expected to happen in mid 2023, Maxar will become a privately held firm. 

Today's pop puts MAXR above several long-term technical ceilings, including the 200-day moving average, which has pressured the stock lower several times during the past two years. The equity also toppled its former 2022 peak of $40.48, hit on April 19, and is trading at its highest level since March 2021. 

MAXR's typically quiet options pits are brimming with activity today. So far, 1,117 calls and 1,382 puts have exchanged hands -- which is 12 times the intraday average. The most popular is the January 2023 50-strike put, followed by the 35-strike put in the same series, with positions being bought to open at both. 

It's worth noting that these options can be had at a relative bargain right now. This is because the security's Schaeffer's Volatility Index (SVI) of 58% stands higher than just 11% of readings from the past year. In other words, options players are pricing in relatively low volatility expectations at the moment. 

Published on Dec 16, 2022 at 10:01 AM
  • Buzz Stocks
 
Published on Dec 16, 2022 at 9:37 AM
  • Buzz Stocks

United States Steel Corporation (NYSE:X) stock is bucking the broad market this morning, last seen up 3.9% to trade at $24.57, after the company hiked its fourth-quarter guidance amid an increase in commercial steel demand in the U.S. 

On the charts, X recently pulled back to its May, August, September, and November highs -- an area that aligns with its 200-day moving average. The steel stock boasts a 4.6% year-over-year lead, while the SPDR S&P 500 ETF Trust (SPY) is down 17.2% in the last 12 months. Today's gain has the shares not only reclaiming that 200-day trendline, but back above their year-to-date breakeven as well. 

An unwinding of pessimism in the options pits could also boost the shares. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) confirms a substantial put bias, with X's 10/day put/call volume ratio ranking higher than 85% of annual readings.

Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.53 stands in the 84th percentile of the last 12 months. This suggests short-term options traders favor bearish bets.

The good news for those looking to speculate, is X options can be had at a relative bargain right now. The stock's Schaeffer's Volatility Index (SVI) of 52% stands in the 22nd percentile readings from the past year. In other words, traders are pricing in extremely low volatility expectations on the stock at the moment. What's more, the equity sports a Schaeffer's Volatility Scorecard (SVS) of 97 out of 100, the stock tends to outperform said expectations -- a great thing for buyers. 

Published on Dec 16, 2022 at 9:20 AM
Updated on Dec 16, 2022 at 9:27 AM
  • Opening View

Stock futures are pointed lower once again, setting the major indexes up for a second-straight weekly loss. Fears of a recession in 2023 are swirling amid expectations of even more interest rate hikes. Adding coal the fire is retail sales data, which indicated higher inflation is denting consumer spending. At last check, futures on the Dow Jones Industrial Average (DJIA) are pointed 406 points lower, while S&P 500 Index (SPX) and Nasdaq-100 Index (NDX) futures also sit firmly below fair market value. 

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

  • These 3 stocks moved sharply lower yesterday.
  • Goldman Sachs weighed in on the chip sector.
  • Plus, 2 of today's biggest earnings reports; and Meta Platforms stock upgraded.

Futures Chart December 162022

5 Things You Need to Know Today

  1. The Cboe Options Exchange (CBOE) saw more than 1.3 million call contracts and 991,152 put contracts exchanged on Thursday. The single-session equity put/call ratio fell to 0.73 and the 21-day moving average stayed at 0.74.
  2. Olive Garden parent Darden Restaurants, Inc. (NYSE:DRI) is off 0.3% before the opening bell, following a better-than-expected fiscal second-quarter report. The company beat profit, revenue, and same-restaurant sales estimates, and raised its 2023 earnings guidance. The equity sits just below breakeven on a year-to-date basis.
  3. Adobe Inc (NASDAQ:ADBE) sports a 5.3% premarket lead, and is looking to add to its 19.4% quarter-to-date gains, after its fourth-quarter earning results beat estimates, while revenue was in line with Wall Street's forecasts. What's more, Adobe released upbeat guidance for its fiscal first quarter.
  4. J.P. Morgan Securities upgraded Facebook and Instagram parent Meta Platforms Inc (NASDAQ) to "overweight" from "neutral," citing factors such as increased cost controls and Apple's (AAPL) privacy rule changes. META is up 2.5% in premarket trading, but is still 65.5% lower in 2022.
  5. The S&P U.S. manufacturing and services purchasing managers' indexes (PMI) are expected are due out today.
     

OV Buzz Chart Dec 16

European Markets Succumb to Global Interest Rate Hikes

Asian stocks sputtered as well, weighed down by the same issues plaguing U.S. equities. Japan’s Nikkei got it the worst, losing 1.9%. China’s Shanghai Composite finished marginally lower, as the country’s Central Economic Work Conference entered its second day. Hong Kong’s Hang Seng bucked the broad market trend with a 0.4% gain, while South Korea’s Kospi finished 0.04% lower.

Over in Europe, bourses are reacting negatively to the flurry of interest rate hikes across the globe. The European Central Bank (ECB) hiked its rate from 1.5% to 2%, while the Bank of England (BoE) opted for a 50 basis-point hike as well. At last check, London’s FTSE 100 is off by 1.4%, the French CAC 40 is 1.4% lower, and the German DAX is down 0.7%.

Published on Dec 15, 2022 at 4:30 PM
  • Market Recap

Recession fears came back in full force on Wall Street today, following today's weaker-than-expected retail sales data on top of yesterday's Fed comments. The Dow finished the day 763 points lower for its worst day since Sept. 13, while the Nasdaq and S&P 500 both suffered their worst single-day percentage drop since Nov. 2. Overseas, the European Central Bank (ECB) and Bank of England (BoE) hiked their lending rates by 50 basis points as well.

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

  • Two hotel stocks in focus today.
  • Options bulls unfazed by sinking Snap stock.
  • Plus, a WDC downgrade; LEN's earnings results; and headwinds ahead for AT&T. 

Closing Indexes Summary Dec 15

NYSE and Nasdaq Stats Dec 15

5 Things to Know Today 

  1. Netflix's (NFLX) ad-supported subscription service is off to a rocky start. Plus, Needham's streaming outlook for 2023 wasn't too keen on the stock. (Marketwatch)
  2. Puerto Rico is making moves in an effort to become more independent, with a bill just passed through the U.S. House of Representatives. (Reuters)
  3. One analyst favors Micron over Western Digital stock
  4. Options bears loading up on Lennar stock
  5. AT&T stock could hit the brakes next year. 

Corporate Earnings Dec 15

Unusual Options Activity Dec 15

Oil, Gold Drop Lower

Oil prices fell for the first day in four, losing ground in the wake of a partial restart of the Keystone Pipeline following last week's shutdown. West Texas Intermediate (WTI) crude for January delivery lost $1.17, or 1.5%, to settle at $76.11 a barrel on the New York Mercantile Exchange. 

Gold prices dropped for the second day. February-dated gold fell $30.90, or 1.7%, to settle at $1,794.40 per ounce, its lowest finish in over a week. 

Published on Dec 15, 2022 at 3:44 PM
  • Buzz Stocks

Stocks are reeling this afternoon, as Wall Street fears the Federal Reserve's hawkish stance may push the economy into recession. Netflix Inc (NASDAQ:NFLX), Novavax Inc (NASDAQ:NVAX), and Roblox Corp (NYSE:RBLX) are among the names feeling the heat, though they are each deepening their respective selloffs for different reasons, which we'll dive into below.

Neftlix's Ad-Supported Service Disappoints

Netflix stock was last seen down 9.4% at $288.06 at last check, after online magazine Digiday reported ad-supported viewership is falling short, and that the streaming name allowed advertisers to pull ads that are yet to run. According to five agency executives, Netflix has delivered only 80% of the expected audience. Shares are now breaching a recent floor at the $300 level, and slipping below the 40-day moving average. Year-to-date, NFLX has lost 52.2%.

Novavax Stock Hits 2-Year Low

Meanwhile, NVAX is off 27.8% to trade at $12.44 at last check, after the drug maker announced concurrent offerings of $125 million of common stock, and $125 million of convertible debt. In response, BofA Global Research slashed the stock's price target to $13 from $16. The security earlier hit a fresh two-year low of $12.08, and has now lost long-term support from the $15 level. Over the last 12 months, NVAX has shed 93.2%. 

Unpacking Roblox's Dismal Metrics

RBLX's selloff came after the gaming name said average bookings per daily active user in November could dip 7% to 9% year-over-year, as foreign currencies fluctuate Shares are down 17.1% at $27.45 this afternoon, with its last rally falling short of the $36 level as the 40-day moving average continues to enact pressure. RBLX is off 73.5% in 2022.

Published on Dec 15, 2022 at 2:49 PM
Updated on Dec 15, 2022 at 2:50 PM
  • Buzz Stocks
  • Analyst Downgrades

Hotel giants Marriott International Inc (NASDAQ:MAR) and Hilton Hotels Corporation (NYSE:HLT) have been the subject of several analyst notes over the past couple days. Citigroup downgraded both stocks to "neutral" from "buy" yesterday, citing "potential for weaker RevPAR growth versus expectations," and also predicting slowing growth for the segment.

Today, Barclays chimed in on both as well. The firm cut its rating on Marriott stock to "equal weight" from "overweight," citing a weakening macro environment, but raised its price target to $170 from $163 on strong travel demand. Barclays kept its "equal weight" rating on Hilton Hotels stock, however, but also hiked its price target to $139 from $133. 

Amid the analyst notes, it's also worth noting that Marriott opened its first resort in Dubai on Palm Island. MAR is down 2.1% at $155.92 at last glance, though the equity's 60-day moving average appears to be keeping losses in check. Year-to-date, the equity is down 6%. 

Hilton Hotels stock is also down 2.1%, trading at $133.14 at last check. This negative price action has HLT firmly below the $133 level, which has acted as support since its early-November bull gap. Year-to-date, the security is down 14.9%. 

 

 

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