Stocks are pointed sharply higher this morning, as Wall Street reacts to news out of Japan. In a move to preempt any further economic weakness, the Bank of Japan adopted a negative interest rate policy. Additionally, U.S. traders will receive the latest data on U.S. fourth-quarter economic growth later this morning.
Heading into the open, U.S. stock futures on the Nasdaq Composite are up 0.64%, with S&P 500 futures up 0.8%, and Dow Jones Industrial Average futures rising 0.81%.
In options activity, corporate earnings reports drove significant volume across the board, with Facebook Inc (NASDAQ:FB) receiving the lion’s share. On the CBOE, the single-session equity put/call volume ratio fell back to 0.62, while the 10-day moving average continued lower to 0.72 — a two week low.
In equity option news, FB call volume soared to near-term highs as traders reacted to the company’s strong fourth-quarter earnings report, where profit topped $1 billion for the first time ever. Microsoft Corporation (NASDAQ:MSFT) was also popular with call traders, as revenue topped Wall Street’s expectations on strong Cloud Services demand. Finally, Qualcomm, Inc. (NASDAQ:QCOM) was surprisingly call heavy, even though the shares dropped more than 8% on weak current quarter guidance.
Facebook Inc (FB)
It seems that you like Facebook! You really, really like Facebook! Well, quite a few of you do, anyway. In addition to record profits, Facebook also noted that monthly active users rose 14% 1.59 billion, and that roughly 80% of all ad revenue now comes from cell phone ad sales. Helping to bolster FB’s 15.5% run yesterday, RBC Capital Markets lifted their price target on the shares to $160 per share from $130.
Options traders were keen to get in on FB stock’s rally on Thursday. Volume came in at a near-term high of 2.3 million contracts, with calls snapping up 63% of the total take. That said, call volume as a percentage total volume was a touch lower than average (65%-67%).
FB stock topped $109 by the close on Thursday, placing the stock above several key open interest hurdles. However, the shares are still staring up at peak weekly Jan 29 series call OI at the $110 strike, totaling 17,691 contracts. This strike could give FB bulls fits through the close today.
Microsoft Corporation (MSFT)
You really can teach an old dog new tricks. Microsoft reported second-quarter earnings yesterday of 78 cents per share on revenue of $25.7 billion, topping Wall Street’s targets for 71 cents and revenue of $25.26 billion. While Windows sales remained weak, Microsoft more than made up the difference with rapid growth in Cloud Services. In fact, cloud revenue topped $9.4 billion, and Microsoft said it hopes the unit will top $20 billion by 2018.
Option volume was unusually brisk for MSFT stock. Some 767,600 contracts changed hands on the issue yesterday, with calls claiming a whopping 72% of the total take. MSFT is up sharply premarket on the news, with the shares challenging staunch long-term resistance at $55.
Speaking of $55, the strike is home to particularly heavy call OI in the weekly Jan 29 series. Some 10,700 calls are open at this strike, second only to the $59.50 strike, where 11,500 calls are currently open. A breakout above $55 today could be a huge boon for MSFT bulls, as there is little in the way of overhead resistance north of this strike.
Qualcomm, Inc. (QCOM)
In what has become a theme for many this earnings season, Qualcomm topped earnings expectations, but disappointed with guidance. For the most recent quarter, earnings came in at 97 cents per share on revenue of $5.8 billion, versus estimates of 90 cents and revenue of $5.69 billion.
However, both figures were a decline from year-ago results, and Qualcomm guided below expectations for the second quarter, placing guidance at between 90 cents and $1.00 per share. Wall Street was looking for $1.02 for the second quarter.
As a result, QCOM plunged more than 8% to hit its lowest level since 2010. Options traders didn’t seem as perturbed as you might expect. Volume on the day topped out at 195,322 contracts, with calls claiming 76% of the day’s take.
That said, Qualcomm is trading below all major OI strikes in the weekly January 29 series, save nearly 4,000 puts at the $43 strike. QCOM stock is trending lower in premarket trading, so this strike, too, may fall before the close today.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
