Bank of America Up on Buffett Enthusiasm, While FRED Falls Into Turmoil

Constellation Brands vaulted to a new record high after reporting earnings

Patrick Martin
Jun 29, 2017 at 10:30 AM
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U.S. stocks are trading lower this morning, with the major equity indexes cooling after a near-historic close on Wednesday. Among specific names on the move today are beer stock Constellation Brands, Inc. (NYSE:STZ), retail stock Fred's, Inc. (NASDAQ:FRED), and financial giant Bank of America Corp (NYSE:BAC). Here's a quick look at what's moving shares of STZ, FRED, and BAC.

Earnings Beat Sends Constellation Brands to New Highs

Constellation Brands stock is up nearly 7% to trade at $195.80, after the company's earnings exceeded analysts' expectations. The beverage company, whose brands include Corona beer and Svedka vodka, reported increased net income for the fiscal first quarter, and hiked its full-year profit forecast.

It's been a year to toast for STZ stock, which is up 28% year-to-date. The shares have benefited from support at their 50-day moving average since early February, but -- thanks to today's bullish gap -- STZ is now trading well above this trendline, and comfortably north of recent resistance around $185. Earlier, in fact, Constellation shares tagged a new record high of $197.41.

Analysts seem appropriately optimistic, given the stellar price action. Of the nine brokerages covering STZ stock, eight rate it a "buy" or better.

Fred's Stock Plummets as Rite Aid Deal Falls Apart

Fred's stock is reeling, down 23% to trade at $9.49, after Walgreens terminated its potential merger with Rite Aid -- and, by extension, a related deal to sell up to 1,200 Rite Aid stores to FRED. The bad news continues to pile on for FRED stock, which is down 49% year-to-date, and earlier hit a new low for 2017.

Short sellers may be rejoicing, however. Almost 60% of FRED's total available float is sold short, and it would take 13 sessions to repurchase all of those pessimistic positions, at the stock's average daily trading volume. Given today's big percentage drop, though, FRED stock will be off-limits for potential shorts through the end of the week. 

Bank of America Booms as Fed OKs Dividend Hike

Bank of America stock is up 2.5% to trade at $24.48, after receiving a double dose of good news today. The Fed last night approved the bank stock's dividend hike, and as a result, Warren Buffett's Berkshire Hathaway could be set to become its biggest shareholder, with the firm holding warrants to buy 700 million shares. This is welcome news for BAC stock, which is up 10% year-to-date, but has recently been stifled by the $24 level.

Now may be the time to jump in on short-term options on BAC, as well. BAC stock sports a Schaeffer's Volatility Index of 24%, which stands higher than only 21% of all other readings from the past year -- indicating relatively modest volatility premiums are being priced into short-term options. In addition, BAC's Schaeffer's Volatility Scorecard (SVS) sits at 95, indicating Bank of America stock has tended to exceed option traders' volatility expectations during the past year.


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