U.S. stocks are mixed after yesterday's jump, with the technology sector being dragged down by guidance from NVIDIA and Applied Materials, while a continued rise in Leading Indicators was met with a surprising drop in consumer sentiment to an 11-month low. Deere & Company posted mixed results but Nordstrom posted upbeat quarterly figures and guidance. Trade optimism is being countered by festering Chinese and Turkish turmoil uneasiness. Treasury yields and the U.S. dollar are down, while gold and crude oil prices are up. Asia finished mostly higher and Europe is mostly lower.
At 10:55 a.m. ET, the Dow Jones Industrial Average is ticking 0.1% higher, while the S&P 500 Index is dipping 0.1% and the Nasdaq Composite is decreasing 0.5%. WTI crude oil is rising $0.36 to $65.82 per barrel, Brent crude oil is gaining $0.37 at $71.80 per barrel, and wholesale gasoline is flat at $1.99 per gallon. The Bloomberg gold spot price is advancing $4.30 to $1,178.46 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is falling 0.4% to 96.23. Natural Gas has traded in a range of $2.91-2.97 today and was last seen trading at the high of the day (+ $0.06 to $2.97/MMBtu).
Source: Schwab Center for Financial Research
Today’s Bullish Activity
Shares of Nordstrom Inc. (JWN + $5.13 to $57.41) are gapping up to a twenty-month high after the high-end department store chain reported Q2 earnings of $0.95 ($0.11 beat) on revenue of $3.98B (above the $3.96B expected) as comparable same-store sales increased 4.0% year-over-year (well above the +1.0% expected). The company also raised its guidance as full-year 2019 EPS is expected to come in a range of $3.50-3.65 (up from a prior range of $3.35-3.55) on revenue of $15.4-15.5B (up from a prior range of $15.2-15.4B) with comparable same-store sales expected to increase 1.5-2.0% (vs. prior expectations of +0.5-1.5%). Calls are outnumbering puts roughly 2:1 with the August 17th 57.50 call seeing the most action from traders (volume is 1,702 vs. open interest of 2,024).
Leading the point gainers list this morning is America’s Car-Mart Inc. (CRMT + $13.80 to $80.80) after the automotive retailer reported fiscal Q1 earnings of $1.53 per share ($0.38 beat) on revenue of $164M (above the $152.4M expected) as same-store revenue increased 12.1% year-over-year. The stock is trading at an all-time high following the results. Option volume is relatively light with the September 21st 65.00 call leading the most actives list (volume is 66 vs. open interest of 86).
Lastly, shares of Deere & Co. (DE + $1.20 to $138.55) after the U.S. tractor maker reported Q3 earnings of $2.59 per share ($0.16 miss) on revenue of $9.29B (above the $9.18B expected). Equipment net sales in the U.S. and Canada jumped by 29% year-over-year and are up 27% year-to-date. However, the company issued downside Q4 revenue guidance of ~$8.58B versus the $8.82B consensus estimate. The stock initially traded lower this morning (intraday low is $132.32) but has reversed course into positive territory, at least at the time of this writing. Puts are slightly outnumbering calls with the August 17th 133.00 put leading the way (volume is 2,091 vs. open interest of 2,156).
New 52-week highs (85 new highs today): Apple Inc. (AAPL + $2.31 to $215.63), Darden Restaurants Inc. (DRI + $0.93 to $113.81), Kellogg Company (K + $0.94 to $73.64), Target Corp. (TGT + $1.43 to $83.50)
Notable Call Activity
Some unusual call activity (roughly 8:1 over puts) is being seen in CF Industries Holdings Inc. (CF + $0.33 to $47.63) which is primarily being driven by activity on the September 21st 46.00 call. Volume on this contract is 2,835 versus open interest of 0 so we know all of the volume represents new positioning. The activity on this contract primarily consisted of various small to mid-sized blocks that were bought at or near various ask prices (contracts were exchanging hands for between $2.49 and $2.87 each) which suggests bullish intent.
Today’s Bearish Activity
Moving lower this morning is NVIDIA Inc. (NVDA - $10.76 to $246.72) after the chipmaker reported better-than-expected quarterly earnings but provided lackluster guidance last night after the market close. The company reported Q2 earnings of $1.94 per share on revenue of $3.12B (versus the respective $1.84 and $3.11B estimates) but guided Q3 EPS to a range of $1.85-2.02 on revenue of $3.19-3.22B (versus the respective $1.99 and $3.34B consensus estimates). NVIDIA said that cryptocurrency revenue dropped to $18M (below expectations of $100M) from $289M in the preceding quarter. Calls are slightly outnumbering puts but the August 17th 245.00 put is topping the most actives list (volume is 8,026 vs. open interest of 9,856).
Another “chip stock” trading to the downside is Applied Materials Inc. (AMAT - $4.52 to $42.92) after the semiconductor equipment maker beat fiscal Q3 estimates (EPS beat by $0.04 and revenue by $0.05B) but guided Q4 EPS to a range of $0.92-1.00 on revenue of $3.85-4.15B (well below the respective $1.16 and $4.45B consensus estimates). AMAT is trading at an 11-month low this morning. Puts are slightly outnumbering calls with the August 17th 43.00 put garnering the most attention from traders (volume is 2,861 vs. open interest of 3,921).
New 52-week lows (67 new lows today): Ambarella Inc. (AMBA - $0.35 to $37.63), HSBC Holdings Inc. (HSBC - $0.56 to $1.85), JD.com Inc. (JD - $0.02 to $31.95), Redfin Corp. (RDFN - $0.32 to $17.00)
Notable Put Activity
Some unusual put activity (78:1 over calls) is being seen in AngloGold Ashanti Limited (AU + $0.12 to $7.28) which is primarily being driven by activity on the September 21st 7.00 put. Volume on this contract is 40,215 (vs. open interest of 1,229) which nearly entirely consisted of a 40K block that was bought at the ask price of $0.20. We know this is a new position given the open interest data and since the trade took place at the ask price we can assume the intent is bearish in nature.
A couple of blocks were seen trading in L Brands Inc. (LB + $0.26 to $32.37) as a 2K block traded on the August 24th 31.00 put (open interest is 11) for $0.85 (directly in the middle of the $0.80 x $0.90 bid/ask spread) and a 4K block was simultaneously sold on the August 24th 29.00 put (open interest is 223) for $0.25 (when the bid/ask spread was $0.20 x $0.35). We know that these are new positions based on the open interest figures and it appears that a (bearish) put front spread was established for a net debit of $0.35 (x 2K contracts x 100 multiplier, excluding commissions) which would suggest that the block trader believes that LB can move down towards the maximum gain price of exactly $29.00 at expiration. LB is scheduled to report Q3 earnings on August 22nd after the market close so this positioning captures the potential impact of that event.
Some unusual block activity is also being seen in Sony Corp. (SNE + $0.83 to $54.67) as a 2K block was sold on the August 17th 50.00 call for $3.90 (open interest is 2,139) while a 5K block was simultaneously bought on the September 21st 55.00 call for $1.15 (open interest is 1,696). Based on the open interest data it appears that a previously held long 2K call position that was rolled out (from the August 17th to the September 21st expiration) and up (from the 50.00 to the 55.00 strike) which suggests that the block trader is still bullish on this name.
The CBOE Volatility Index (VIX - 0.48 to 12.97) is moving lower for the third day in a row as U.S. equity indices are mixed around the mid-day mark today (DJI + 68, SPX + 2, COMPX - 17). VIX option volume has been tepid (currently missing from the top 10 most actives list) and the activity has been call-biased (nearly 5:1 over puts). The most actively traded contract is the August 22nd 15.00 call as volume is 22,051 versus open interest of 98,375.
Shares of Tesla Inc. (TSLA - $26.33 to $309.12) are under pressure this morning after analysts at UBS warned that Model 3 margins could take a hit due to higher than expected powertrain costs. Today’s 7%+ drop puts the stock below both its 50-day Simple Moving Average (SMA) of $331.38 and 200-day SMA of $318.21. Option premiums are inflating as the current average implied volatility of 60% is up from yesterday’s 49% closing level. Note: the average implied volatility represents an estimated value for a 30-day implied volatility at the current underlying price, based on a curve fit of option implied volatilities.
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