Shares of the iPhone maker have shed nearly 5% this week
Stocks started the week strong, as geopolitical risk eased and earnings from heavy hitters like Netflix (NFLX) and UnitedHealth (UNH) impressed. The major market indexes were trading near levels not seen since mid-March when the closing bell rang Tuesday -- with the Cboe Volatility Index (VIX) flashing this never-before-seen signal -- but quickly began paring these gains as earnings optimism waned and chip stocks sold off on signs of an industry-wide slowdown. But while the indexes are poised to close Friday with a slump, they're all holding on to weekly gains.
Apple, Chip Stocks Sell Off
In addition to IBM's (IBM) earnings reaction, one of the major drags on the stock market at week's end was Apple (AAPL), with the shares pacing for a 4.7% weekly loss -- and third straight down day. Sparking the sell-off was a round of pre-earnings bear notes, as well as a warning on cooling smartphone demand from Taiwan Semiconductors (TSM). The firm's soft forecast also exacerbated weakness in chip stocks, which began spiraling mid-week on a rare shipment miss for Lam Research (LRCX). But while one analyst said to buy the dip on Applied Materials (AMAT), Barclays took the glass-half-empty approach to Advanced Micro Devices (AMD).
FAANG News, Tesla Update
Elsewhere in the FAANG sphere, Amazon (AMZN) unveiled a big partnership with Best Buy (BBY), and options traders are upbeat ahead of earnings. Bullish traders are targeting Alphabet (GOOGL) ahead of its quarterly results, too, while MKM Partners said Twitter should stay shielded from the fallout surrounding Facebook's (FB) data scandal.
Several optical component stocks sold off this week, too, after a Commerce Department ban on U.S. sales to China's ZTE Corp. pressured suppliers. Wall Street newcomer Dropbox (DBX) also took a trip south -- on track for its third straight weekly loss -- while Tesla (TSLA) stock couldn't overcome a Model 3 production halt, even after the company set an assembly target of 6,000 units per week by the end of June.
Bank Earnings
Wall Street continued to give a lackluster reaction to bank earnings, with shares of Bank of America (BAC) and Morgan Stanley (MS) finishing flat post-earnings, and Goldman Sachs (GS) selling off. The muted price action came even as the companies reported profit beats, suggesting too much optimism was priced in ahead of earnings -- though American Express (AXP) stock gapped higher after the big-cap credit card name unveiled its results.
Retail, Energy Stocks With Cheap Options
Looking to the retail sector, Ulta (ULTA) is headed toward its best week since early January, after Guggenheim upgraded the stock to "buy." The same can't be said for Skechers (SKX), though, which is plummeting post-earnings. And while one options trader set a low bar for Shopify (SHOP) -- even with the stock sporting a big week-to-date gains -- Credit Suisse eyed record lows for this food stock. Restaurant stocks Wendy's (WEN) and Chipotle (CMG) were targeted for breakouts by analysts.
These two retail stocks took a hit from late-week selling pressure, but if past is precedent, it could be time to bet on a bounce with call options. These two energy stocks also have cheap options right now, even with earnings on the horizon. In fact, both are set for weekly wins, despite today's downside in oil prices -- sparked by a tweet from President Donald Trump.
Ways to Trade Earnings Season
Looking ahead, FAANG earnings heat up next week -- though these 25 stocks could spark options-trading ideas for premium buyers over the next several weeks. And for shareholders who are anxious about the uncertainty of earnings, this options strategy could help ease some of the stress.