U.S. wholesale inflation slipped in September, easing investor worries after slightly warmer-than-expected consumer price data yesterday. Major indexes and Treasuries were subdued early today following the news, with eyes also on the latest round of bank earnings.
The September Producer Price Index (PPI) was flat, below expectations for a 0.1% increase and down from 0.2% in August, the government said. Lower energy prices were instrumental. The core PPI, which doesn't include food or energy, rose 0.2%, in line with consensus and down from 0.3% in August, showing signs of progress.
"Better news on the inflation front today, with the monthly PPI readings coming in below consensus expectations and below last month's numbers," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "Treasury yields fell a bit following the release as this report runs a bit counter to yesterday's relatively strong Consumer Price Index (CPI) report. We've believed that the disinflationary trend remains intact, and this morning's PPI reports support that case."
Annual PPI was a little less refreshing than the monthly readings, with the headline rising 1.8% compared to the Bloomberg consensus estimate of a 1.6% increase and the core PPI rising by 2.8% compared to the consensus estimate of 2.6%. The readings for both headline and core PPI for August were upwardly revised as well.
Turning to earnings, JPMorgan Chase (JPM) appeared to impress, judging by a 1% rally ahead of the open. JPM easily beat analysts' consensus on earnings per share while revenue also topped average estimates, and investors appeared upbeat about the firm's new guidance.
The story wasn't all that different at its competitor, Wells Fargo (WFC), which also reported this morning and enjoyed a quick jump in shares despite a large drop in the closely watched net interest income category.
Morning Rush
The 10-year U.S. Treasury yield (TNX) was steady at 4.1%.
The U.S. Dollar Index ($DXY) rose to near two-month highs at 102.97.
The Cboe Volatility Index® (VIX) is down 0.45 to 20.48.
WTI Crude Oil (/CL) dropped 0.6% to $75.36 per barrel.
Bitcoin (BTC) climbed 2.9% to $61,291.
Source: Schwab Center for Financial Research
Today's Bullish Activity
Unusual call activity is noted today in CNX Resource Corp. (CNX + $1.47 to $36.20), as call contracts currently stand at 22,981, 30x the average daily volume in morning trading. Much of that volume can be attributed to activity in the April 17th, 2024, expiration month where over 22,000 contracts have traded at the 40.00 strike. A large purchase of 19,468 of these calls for $2.15 occurred when the bid/ask was $2.00 x $2.15. There is a fair amount of open interest at that strike, 11,636 contracts, so this purchase may have been an addition to a current position (suggesting bullish intent). Shares of CNX have been on a tear of late, rallying 37% in the past 30 days to set a fresh nine-year high in today's trading.
We also see bullish and unusual call activity in Bentley Systems Inc. (BSY + $0.52 to $50.68) as call activity has spiked to 1,227 contracts in morning trading (45x daily average). Much of this activity can be attributed to multiple block orders in the November 15th, 2024, expiration at the 55.00 strike. Those transactions have led to volume of over 1,170 contracts with most of the trades occurring between the prices of $0.70 and $0.85, above the mid-mark price. There were only 743 contracts of open interest, so this is likely new positioning (suggesting bullish intent).
New 52-week highs (277 new highs today): Carnival Corp. (CCL + $0.38 to $20.77), Palantir Technologies Inc. (PLTR + $0.50 to $44.02), Uber Technologies (UBER + $7.44 to $85.34), Kinder Morgan (KMI + $0.71 to $24.43), MicroStrategy (MSTR + $19.97 to $203.25)
Today's Bearish Activity
Some unusual and bearish put activity is noted today in the Whitestone REIT (WSR + $0.13 to $14.17). This activity equates to over 2,295 put contracts, 32x average daily put volume. We've seen buying concentrated in the December 20th, 2024, expiration month, specifically at the 12.50 put strike. Traders have paid $0.50 through multiple block transactions for these puts which until today had only 627 contracts of open interest. This suggests new positioning and bearish intent. Shares of WSR recently traded at a 52-week high price of $14.53 following an increased takeover offer, from $14.00 to$15.00, from MCB Real Estate earlier this week. This put purchase could represent traders hedging the deal risk.
Unusual and bearish put activity can also be seen in VF Corp. (VFC - $0.05 to $20.20), as multiple collar trades have transacted in the November 1st, 2024, expiration month. A collar trade is an option spread position that utilizes the sale of an out-of-the money call to help fund the purchase of an out-of-the money put. This is usually done against a long stock position to hedge some downside risk, especially against event risk, such as an earnings announcement. VF Corp. has scheduled its earnings date for October 28th. In these specific transactions, the November 1st 21.00 / 23.00 call vertical spread was sold around 20,000 times in multiple block transactions to purchase a total of 20,000 of the 17.00 and 16.50 put strikes. This allows the seller of the call spreads to use the $0.65 credit collected to purchase the puts for downside risk protection should the stock fall below the 17.00 and 16.50 put strikes at expiration. This trade represents new positioning given the collective open interest of 1,000 contracts (suggesting bearish intent).
New 52-week lows (40 new lows today): Stellantis N.V. (STLA - $0.34 to $12.96), Immatics N.V. (IMTX - $0.09 to $9.25), Algonquin Power & Utility (AQN- $0.04 to $4.95), Viasat Inc. (VSAT - $0.06 to $10.61)
Gauging Volatility
The Cboe Volatility Index (VIX - 0.45 to 20.48) has been on both sides of unchanged line, as equity markets are moving higher in morning trading (DJI + 273, SPX + 25, COMPX + 39). VIX movement has occurred within a narrow range today (the intraday range is 20.34 – 21.03). VIX option volume is tepid today, given its omission on the "Top Volume by Underlying" list. The volume put/call ratio is currently 0.43, but the highest volume contract is the October 16th, 2024, 21.00 put (volume is 22,048 vs. open interest of 149,700).
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