U.S. stock futures are headed higher again this morning, meaning today may be the day the Dow Jones Industrial Average caps the magical 20,000 level. The Dow closed at a record high yesterday, with a late-arriving Santa Claus rally lifting stocks across the board. With less than two weeks until 2017, all three major indices are on track to gain roughly 10% this year.
At last check, futures on the Dow Jones Industrial Average were up 0.03%, while S&P 500 futures had added 0.36% and Nasdaq-100 futures had risen 0.49%.
On the options front, volume remained light on Tuesday, with about 14.4 million calls and 11.9 million puts changing hands. On the CBOE, the single-session equity put/call volume ratio retreated to 0.63, while the 10-day moving average held at 0.57.
Turning to Tuesday’s volume leaders, Apple Inc. (NASDAQ:AAPL) saw a pair of reports emerge on manufacturing, speculating on a plant in India and the company’s reluctance to continue making Macs in the U.S. Meanwhile, Nvidia Corporation (NASDAQ:NVDA) surged on a pair of significant price-target increases, while Nike Inc (NYSE:NKE) offered up strong second-quarter earnings.
Apple Inc. (AAPL)
Will they stay, or will they go? A pair of reports on Apple manufacturing surfaced yesterday: one all but confirming that the company was moving forward with manufacturing in India, the other underscoring Apple’s desire to kill off U.S. manufacturing.
Apple’s motives in India are clear — start making iPhones and Macs as a foothold for sales in the country (and, of course, cheaper labor). As for the U.S., just because Apple wants to move away from making Macs stateside doesn’t mean it will. As the article notes, doing so would be political suicide.
Combining the mix of sentiment in these reports with the fact that AAPL stock is trading near its October highs has created some headwinds for the shares. And options traders were quick to pick up on the shift. Overall, total volume came in at 628,000 contracts on Tuesday, with calls accounting for a below average 58% of the day’s take.
AAPL stock has cleared peak weekly December 23 series call open interest at $115, but OI is building in the weekly December 30 series at the $116, $117 and $120 strikes — all of which are sporting more than 10,000 contracts each. If Santa Claus fails to come through for AAPL stock, these calls may be in trouble heading into expiration.
Nvidia Corporation (NVDA)
Both Goldman Sachs and Mizuho Securities boosted their price targets on NVDA stock yesterday — Goldman adding NVDA to its “conviction buy” list with a $129 price target and Mizuho setting its sights on $115 for the shares. Nvidia has come a long way since I last zeroed in on the shares, and if you got into that NVDA January 2017 $95/$100 bull call spread, now’s the time to get out and take profits. Why? As InvestorPlace contributor Josh Enomoto notes, “It’s a whole new level of crazy.”
Even speculative options traders, seeing NVDA rush toward $105 yesterday, took a moment of pause. Volume on the chip maker came in at 201,000 contracts, with only about 59% of those crossing at call contracts.
Looking out to January 2017, there is very little overhead call OI for NVDA, and while this would normally be a bullish indicator for me, the fact that the stock is trading heavily overbought backs this lack of higher aspirations from options traders.
In short, you might want to take a cue from the options pits and sit on NVDA until the shares consolidate recent gains.
Nike Inc (NKE)
Better-than-expected second-quarter results provided a bit of life for NKE stock yesterday. Revenue grew by 6% to $8.2 billion, while earnings jumped 11% to 50 cents per share, topping expectations for 43 cents per share. Heading into the report, NKE stock rose nearly 2%, and the shares are up another 2.6% in pre-market trading this morning.
NKE options traders were divided heading into the report. Total volume came in at a near-term high of 328,000 contracts, with calls only managing to capture 56% of the day’s take. NKE is set to open north of $53, which puts the shares above peak call OI in the weekly December 23 series (at $53), but leaves the stock well shy of peak January 2017 call OI of more than 32,000 contracts at the $55 strike.
Breaking above $53 would be a coup for NKE bulls, but with the Dow edging closer to 20,000, profit taking may bring considerable headwinds going forward.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
