U.S. stock futures are headed lower this morning, as Wall Street digests the possibility of more interest rate hikes in 2018. On Friday, Cleveland Fed President Loretta Mester hinted to Reuters at the possibility of four rate hikes this year. On Saturday, San Francisco Fed President John Williams backed the current pace of three hikes due to economic lift from the tax plan.
More from the Fed will arrive today. Atlanta Fed President Raphael Bostic is due to speak at the Rotary Club of Atlanta this afternoon. Additionally, Boston Fed President Eric Rosengren will participate in a panel to discuss whether Fed should stick to a 2% inflation target.
While futures were headed higher early this morning, they have since reversed course. At last check, Dow Jones Industrial Average futures are down 0.06%, S&P 500 futures are off 0.15% and Nasdaq-100 futures have fallen 0.13%.
Turning to the options pits, Friday’s volume remained brisk. Overall, about 20.5 million calls and 16.4 million puts changed hands. The CBOE single-session equity put/call volume ratio rose to 0.58. The 10-day moving average held at 0.56.
Taking a closer look at Friday’s options activity, Apple Inc. (NASDAQ:AAPL) attracted heavy call volume heading into what proved to be a rather rough weekend for the company. Meanwhile, Micron Technology, Inc. (NASDAQ:MU) options received a sentiment boost after a bullish note on memory chip demand from Keybank. Finally, General Electric Company (NYSE:GE), last year’s ultimate dog of the Dow, has emerged as one of 2018’s top 10 favorites.
Apple Inc (AAPL)
Apple stock options were extremely call heavy on Friday. Volume topped out at 543,000 contracts, with calls snapping up an above average 69% of the day’s take. The net effect was to drive AAPL’s January 2018 put/call open interest ratio lower from a reading near 1.16 to today’s perch at 1.12.
Sentiment was up after the company said that it would quickly patch any semiconductor vulnerabilities. Chip stocks were hit hard after revelations of exploits affecting Intel Corporation (NASDAQ:INTC) and Advanced Micro Devices, Inc. (NASDAQ:AMD) processors.
Today, however, could be a different story. Apple was hit with fresh concerns over worker conditions in China following the suicide of a Foxconn worker at an iPhone production plant this weekend. Additionally, investors are calling for Apple to investigate the potential harm of iPhone and tablet-like devices on children.
AAPL stock is down fractionally in pre-market trading.
Micron Technology, Inc. (MU)
Micron stock remained volatile on Friday, despite a bullish research note from analysts at Keybanc. According to Keybanc, news in the DRAM and NAND markets is “neutral to good.” Specifically, DRAM supply is tight and should help support prices, while NAND is headed for “oversupply.” However, NAND oversupply should work its way out of the system later this year, returning pricing power to Micron.
Options traders appeared to take profits following the recent run higher, however. Volume on Friday rose to 305,000 contracts, with calls accounting for 65% of the day’s take.
The resulting January 2018 put/call OI ratio rose to 0.65 from last week’s reading of 0.62. The activity hints that options traders may be taking profits after MU rallied more than 11% last week.
General Electric Company (GE)
After finishing 2017 as the worst performing member of the Dow Jones Industrial Average, GE stock has emerged as one of the potential top performers of 2018. General Electric has made the top 10 list of several notable top-ranked stock newsletters, including George Putnam’s, The Turnaround Letter.
GE stock is already up more than 6% in 2018, enjoying a solid first week for the year. Options traders have also taken up the bullish call. Volume on Friday rose to 272,000 contracts, or more than 1.5 times GE’s daily average. Calls gobbled up 72% of the day’s take.
Short-term options traders have grown heavily bullish on GE stock heading into the first expiration of 2018. Specifically, the January put/call OI ratio has fallen to a reading of 0.43, with calls more than doubling puts among front-month options.
Finally, there could be more gains to come. GE closed above its 50-day moving average on Friday and could be set to challenge resistance at $19 this week. A breakout above resistance at $19 could be a significant short-term boon for GE bulls.
As of this writing, Joseph Hargett was long General Electric Company (GE) stock.
