U.S. January retail sales fell 0.9% from a month earlier, well below the expected 0.2% decline, initially pushing the 10-year Treasury note yield below 4.5%. "Retail sales disappointed this morning, but it might not be as bad as the headline numbers suggest as winter weather and the California wildfires likely played a role," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "The next month's reading will be key to see if there's an offsetting rebound, or if January was the start of a trend."
Before the report, stocks retreated from near-record highs amid lingering tariff concerns, though President Donald Trump cooled fears yesterday by saying that "reciprocal tariffs" wouldn't start until April. Next week—a holiday-shortened one with trading closed Monday for Presidents' Day—features minutes from the Federal Reserve's last meeting and a host of housing data. Home builder stocks felt pressure this week from receding odds of Fed rate cuts as inflation stayed hot. Rising shelter costs played into January's bearish Consumer Price Index (CPI), and looming data could hint if stubborn rates kept home buying muted. Walmart (WMT) is the largest company reporting next week.
"Price action is very resilient and perhaps that just reflects that investors are more focused on healthy economic data and double-digit earnings growth, rather than the potential for higher yields and inflation," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. Still, he warns investors to monitor the trajectory of earnings revisions due to uncertainty about how government policy changes might affect corporate growth. Around 77% of S&P 500 companies have surpassed Wall Street's earnings consensus, with fourth quarter earnings per share growth at 11%.
Morning Rush
The 10-year U.S. Treasury yield (TNX) is back down to 4.46%.
The U.S. Dollar Index ($DXY) has fallen to 106.63, a two-month low.
The CBOE Volatility Index® (VIX) is also lower, now 14.89.
WTI Crude Oil (/CL) is dropping to $71.02/barrel.
Bitcoin (BTC) is up today, now at $97,260.
Ethereum (ETH) back to $2,749.
Source: Schwab Center for Financial Research
Today's Bullish Activity
Shares of DraftKings Inc. (DKNG + $5.80 to $52.25) are up over 12% in morning trading, setting a new 52-week high, and on track for their highest close since September 2021, after the online gambling site reported Q4 earnings that beat expectations and raised its sales guidance for the current year. DraftKings announced it generated Adjusted EPS of $0.14, beating analysts' expectations of $0.11. Sales of $1.39 billion were in line with estimates, as were the number of monthly players, at 4.8 million. DraftKings also raised its 2025 sales forecast to at least $6.3 billion, targeting revenue growth of 32% - 38%.
Per Bloomberg, DraftKings CEO Jason Robins noted that additional online gaming legalization in the US appears inevitable and mentioned the company's success with in-play betting during the Super Bowl and a boxing match between Jake Paul and Mike Tyson.
Option trading in DKNG currently stands at 193,362 contracts, 7x the daily average, with calls outpacing puts nearly 3:1. Leading the way are the following trades, expirations, and strikes:
- February 21st, 2025, 55.00 call accounted for 14,215 contracts; open interest is 3,581 contracts.
- February 14th, 2025, 54.00 call accounted for 10,728 contracts; open interest is 7,472 contracts.
- February 14th, 2025, 53.00 call accounted for 8,058 contracts; open interest is 1,700 contracts.
New 52-week highs (208 new highs today): Alibaba Group Holding (BABA + $1.39 to $120.93), DraftKings Inc. (DKNG + $5.80 to $52.25), Roku Inc. (ROKU + $10.00 to $96.80), Hims & Hers Health Inc. (HIMS + $2.00 to $61.18)
Notable Call Activity
Unusual call activity is noted today in Organon & Co. (OGN - $0.55 to $15.77), as call volume currently stand at 13,328 contracts, 15x the average daily volume. Most of the activity can be attributed to two expiration months, February 21st, and March 21st, 2025, where traders are rolling long call positions out and up. Traders have closed their long call positions at the February 21st 15.00 strike and opened new long call positions at the March 21st 17.50 strike through multiple block trades to the tune of over 3,900 times. On top of that, traders are also adding new long positions in March, as over 8,300 contracts have traded at the 17.50 strike, primarily on the buy side. This represents new positioning, given the open interest of 2,523 contracts (suggesting bullish intent). Organon shares rallied yesterday by 11%, following a Q4 earnings report that topped estimates.
Other call activity of note can be seen today in Herbalife Ltd. (HLF + 0.44 to $5.66), as call activity has spiked to 12,003 contracts in morning trading (23x daily average). Traders are adding new long call positions in both the May 16th, 2025, and the August 15th, 2025, expiration months. In both months, two separate 5,000-contract block trades occurred on the buy side, at the 7.50 strikes, for $0.35 in May and for $0.65 in August, both at their respective offer prices. The collective open interest at those two strikes totaled 600 contracts, so we know these are new positions (suggesting bullish intent). Shares of HLF recently hit a 52-week low price of $5.04, just two days ago. Investors may be anticipating positive, or less negative, data to come from the earnings announcement that is slated for February 19th.
Today's Bearish Activity
Shares of SoundHound AI (SOUN - $4.18 to $11.07) are getting hammered today, down over 27%, the largest intraday tumble since June 2022, after NVIDIA filed a 13F indicating that the chipmaker exited its stake in the company. SoundHound, the provider of voice-based conversational AI technology for automakers and for fast-food restaurant drive-thrus, was a relatively unknown company until NVIDIA announced back in February 2024 in its 13F filing a position in the stock. Shares rallied from around $2.00 at the time of the initial disclosure to $24.00 in late December, a gain of over 1000%. SoundHound is still expected to post $84 million in revenue for 2024, per Bloomberg.
Option trading in SOUN currently stands at 315,967 contracts, 12x the daily average, with calls outpacing puts 1.5:1. Leading the way are the following trades, expirations, and strikes:
- February 14th, 2025, 10.00 put accounted for 20,991 contracts; open interest is 1,269 contracts.
- July 18th, 2025, 11.00 call accounted for 147,034 contracts; open interest is 3,097 contracts.
- February 14th, 2025, 12.00 call accounted for 9,875 contracts; open interest is 199 contracts.
New 52-week lows (60 new lows today): Informatica Inc. (INFA - $7.81 to $17.36), Merck & Company (MRK - $0.89 to $83.53), Elanco Animal Health Inc. (ELAN - $0.52 to $11.14), Vera Therapeutics Inc. (VERA - $6.24 to $27.94)
Notable Put Activity
Some unusual put activity is noted today in Nu Skin Enterprises (NUS + $1.46 to $7.88). This activity equates to over 1,287 put contracts, 35x average daily put volume. Traders are buying the February 21st, 2025, expiration puts, specifically at the 7.50 strike. Traders have paid prices ranging from $0.15 to $0.25, primarily at the offer throughout the morning, following a jump in the share price of NUS. This comes on the heels of positive earnings news and a 2025 profit outlook that topped estimates. Interestingly, from a technical standpoint, shares appear to be failing at the 200-day SMA price of $8.88, after touching an intra-day high price of $10.04.
Unusual put activity can also be seen in Serve Robotics Inc. (SERV - $9.62 to $13.30), as put volume stands at 32,600 contracts in morning trading, 9x average daily volume. Much of that volume can be attributed to activity in the February 14th, 2025, expiration month, where approximately 10,000 contracts have already traded. Activity is heaviest between the 11.00 and 14.00 strikes, including both buys and sells, as traders react to the news that Nvidia dumped its holdings of Serve Robotics, sending the shares down over 40%. Shares of SERV are trading at their lowest level in the past two months, potentially finding support at the 100-day SMA of $12.50.
Gauging Volatility
The Cboe Volatility Index (VIX - 0.21 to 14.89) has traded on both sides of the unchanged line, as equity markets are mixed in morning trading (DJI - 120, SPX + 1, COMPX + 37). VIX movement has occurred within a tight range today (the intraday range is 14.85 – 15.42). VIX option volume is muted today, given its omission from the "Top Volume by Underlying" list. The volume put/call ratio is currently 0.15, and the highest volume contract is the March 18th, 2025, 23.00 call (volume is 79,943 vs. open interest of 62,539).
