US Markets

Thursday’s Vital Data: Macy’s, Cisco and Bank of America

U.S. stock futures are clawing their way higher after yesterday’s beatdown.

Friday's Vital Data: Bed Bath & Beyond, CVS and Merck

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Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.65%, and S&P 500 futures are higher by 0.66%. Nasdaq-100 futures have added 0.73%.

Yesterday’s panic in the options pit resulted in eye-popping activity. Put trading rocketed to the moon with 27.6 million contracts traded. Calls were left in the dust but still saw above-average volume at 23 million contracts for the session.

Similar action at the CBOE drove the single-session equity put/call volume ratio rose to 0.84 — its second-highest reading of the year. The 10-day moving average jumped to a new high for 2019 at 0.76.

Options traders zeroed in on earnings reports yesterday. Macy’s (NYSE:) plunged on terrible results and Cisco (NASDAQ:) is aiming for a large down gap after a sad showing of its own. Elsewhere, Bank of America (NYSE:) saw heavy options trading during yesterday’s swoon.

Let’s take a closer look:

Macy’s (M)

Macy’s shares plunged 13% yesterday after delivering yet another disappointing earnings report. The dismal data weighed heavily on the entire retail sector driving the S&P Retail ETF (NYSEARCA:) down just under 4% on the session.

For the second quarter, the Cincinnati, Ohio-based department store saw earnings per share down over 50% year-over-year to 28 cents. Revenue came in at $5.55 billion. Both measures missed analyst forecasts, and the ire of disgruntled traders was on full display.

M stock is now down 77% from its 2015 peak. Its price trend is bearish with descending moving averages across the board. Any time signs of a bottom emerge, an earnings announcement inevitably arrives to upend everything. Heed the message of the chart and steer clear of bullish plays.

On the options trading front, calls outpaced puts on the day. Activity swelled to 830% of the average daily volume, with 190,069 total contracts traded. Calls claimed 57% of the session’s sum.

Implied volatility remains lofty, despite a small post-earnings volatility crush. At 51% it sits at the 70th percentile of its one-year range. Premiums are pricing in daily moves of 54 cents or 3.2%.

Cisco (CSCO)

Cisco Systems shares fell 7% after hours following an underwhelming earnings report of its own. Weakness in China was partly to blame for the company’s disappointing forward guidance. For its fiscal fourth quarter, the technology giant posted earnings of $3.6 billion, or 83 cents a share, on revenue of $13.43 billion. Both measures topped analyst estimates, but investors found the company’s forecasts worrisome.

With this morning’s drop, CSCO stock will open just under $47, well below its 200-day moving average. The sucker punch is giving back much of this year’s gains and places Cisco deep into correction territory. Until the trend turns, rallies are suspect, and sellers hold the upper hand.

On the options trading front, traders favored calls ahead of the report. Total activity jumped to 572% of the average daily volume, with 214,998 contracts traded; 73% of the trading came from call options alone.

The options board was pricing in a move of $2.76 or 5.5%, so this morning’s 7% plunge exceeds expectations and will deliver profits to long volatility strategies like straddles and strangles.

Bank of America (BAC)

The specter of a recession continues to hamper bank stocks. An inverted yield curve and plunging bond yields create a toxic backdrop for stocks like Bank of America. Its shares fell to a seven-month low amid massive distribution on Wednesday. Its peak-to-trough drawdown is now -15%, and BAC stock is on the verge of breaching a key support zone.

    While the stock is becoming desperately oversold in the short run, future bounces are born to be sold. There’s simply too much overhead resistance at this point to comfortably bet on buyers.

    On the options trading front, calls proved more popular than puts despite the nasty price puke. Total activity popped to 251% of the average daily volume, with 640,676 contracts traded.

    The increased demand drove implied volatility up to 35%, pushing to the 54th percentile of its one-year range. Premiums now bake in daily moves of 59 cents or 2.2%.

    As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released to learn how to defend your portfolio against market volatility.

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    The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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