U.S. stock futures are mixed this morning, as Wall Street digests an earnings miss from Lowe’s Companies, Inc. (NYSE:LOW) in the wake of yesterday’s slowing new home sales growth data. Furthermore, minutes from the latest Federal Reserve meeting arrive today, and could finally put to rest speculation over a potential June interest rate hike.
Heading into the open, futures on the Dow Jones Industrial Average were up 0.06%, S&P 500 futures were up 0.03% and Nasdaq-100 futures were higher by 0.17%.
On the options front, volume was anemic on Tuesday, with only about 12.8 million calls and 11.2 million puts changing hands. On the CBOE, the single-session equity put/call volume ratio rebounded to 0.60, while the 10-day moving average slipped to a fresh one-month low of 0.61.
Heading up Tuesday’s options activity, Advanced Micro Devices, Inc. (NASDAQ:AMD) call options remained popular even as the shares continued to see fallout from confirmation that the company is not partnering up with Intel Corporation (NASDAQ:INTC). Elsewhere, Lowe’s stock slipped on poor April new home sales and is down sharply this morning as first-quarter earnings missed expectations. Finally, United States Steel Corporation (NYSE:X) surged ahead of a Commerce Department hearing that could weigh in on steel import prices.
Advanced Micro Devices, Inc. (AMD)
Last week, AMD stock surged on reports that the company was partnering up with Intel to offer its graphics chips in future hardware pairings. The news had little to stand on, as AMD failed to comment in the following days. Then on Monday, AMD CEO Lisa Su put the nail in the coffin by stating at a J.P. Morgan conference that “We’re not looking at enabling a competitor to compete against our products.”
AMD stock is down more than 17% since rumors of the tie up first began to dissipate, but options traders remain overwhelmingly positive on the shares prospects. On Tuesday, AMD saw volume top 208,000 contracts, with calls snapping up 74% of the day’s take. What’s more, the June put/call open interest ratio has dipped in recent days, falling to 0.84 from a reading north of 0.90 early last week.
While AMD stock has struggled during the past month, the shares appear to be holding firm in the $11 region, giving investors hope of a rebound. In fact, peak June call OI totals more than 30,000 contracts at the overhead $12 strike, hinting that options traders, too, are looking for AMD to push higher in short order.
Lowe’s Companies, Inc. (LOW)
A drop in May new home sales prompted declines across the board for home improvement retailers yesterday. New home sales declined 11.4% to a seasonally adjusted annual rate of 569,00 units last month, falling from a more than nine-year high in April. The report set the stage for disappointment heading into Lowe’s first-quarter report this morning.
Lowe’s reported earnings of $1.03 per share on revenue of $16.86 billion, missing Wall Street’s expectations for earnings of $1.06 per share and sales of $16.96 billion. What’s more, same-store sales for the quarter rose by just 1.9%, also missing expectations for a rise of 2.6%.
Options traders appeared to suspect that a miss was in the works, as calls only accounted for about 59% of the more than 296,000 contracts traded on LOW stock. That said, at least one trader placed a rather large bullish bet on Lowes.
According to Trade-Alert.com, blocks of 10,000 contracts traded simultaneously on the June $84 and $89 call strikes, resulting in a bull call spread that was asked at $1.57, or $157 per pair of contracts. With LOW trading down more than 4% this morning, this trade is in danger of being a wash.
United States Steel Corporation (X)
Steel stocks rallied across the board yesterday, as traders speculated on the results of a Commerce Department investigation into steel import prices, which could arrive later today. U.S. President Donald Trump called on the Commerce Department to investigate unfair steel import prices last month, and traders expect the department to rule that low prices on imported steel are a danger to U.S. national security.
As a result, U.S. Steel stock surged more than 4.6% on Tuesday, driving heavy options speculation in the process. Total volume on X shares leapt to more than 228,000 contracts, with calls snapping up 74% of the day’s take.
A growing preference for call options has marked a shift in X stock’s sentiment of late, with the June put/call open interest ratio reversing lower in recent weeks to arrive at 0.84 yesterday. Peak call OI currently totals more than 12,000 contracts at the $23 strike, with traders looking for X stock to rebound from support near $20.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.