Stocks are careening lower on Thursday after President Trump surprised the world by announcing he would impose tariffs on imported steel and aluminum of 25% and 10%, respectively. Following tariffs on solar panels and washing machines, Trump’s trade posture is becoming increasingly hawkish — with Chinese officials warning that they were “seriously concerned” about the issue.
Adding to the pressure was more hawkish commentary from the Federal Reserve, with New York Fed President Dudley opening the door a little wider to four quarter-point rate hikes this year, while chairman Powell warned he didn’t want to “get behind the curve on inflation.”
All of this is self reinforcing: Tariffs will boost import prices, pushing inflation higher and forcing the Fed to tighten rates more aggressively.
At the very least, we appear to be on the verge of a retest of the February panic lows. As a result, these five large-cap stocks are looking like very attractive put option plays right now:
Attractive Large-Cap Stocks: American Express (AXP)
American Express Company (NYSE:AXP) shares bounced off of resistance for the early January highs and are now careening lower, falling through their 50-day and 20-day moving averages heading back towards the February panic low support at the 200-day moving average. Consider the Mar 16 $95 puts trading at $2.01, which would be worth a double on a drop to $90.
The company will next report results on April 19, after the close. Analysts are looking for earnings of $1.71-per-share on revenues of $8.6 billion. When the company last reported on Jan. 18, earnings of $1.58 beat estimates by 4 cents on a 10.2% rise in revenues.
Attractive Large-Cap Stocks: Boeing (BA)
For months on end, nothing could phase Boeing Co (NYSE:BA) shares as they enjoyed a relentless, blemish-free uptrend. That looks set to end now, with shares falling back through their 20-day moving average after setting a marginal new high earlier this week. Merely a return to the 50-day moving average — which coincides with a test of the early February lows — would be worth a double for the Mar 16 $350 BA puts.
The company will next report results on May 2, before the bell. Analysts are looking for earnings of $2.66-per-share on revenues of $22.3 billion. When the company last reported on Jan. 31, earnings of $3.04 beat estimates by 16-cents-per-share on an 8.9% jump in revenues.
Attractive Large-Cap Stocks: Caterpillar (CAT)
Caterpillar Inc. (NYSE:CAT) shares have fallen through their 20-day and 50-day moving averages and are now threatening to break through their early February panic lows as higher metal costs will result in a direct increase in expenses. Moreover, any countervailing tariffs are likely to increase the price of U.S.-built CAT machinery in foreign markets. I recommended the Mar 16 $155 CAT puts to Edge Pro subscribers in late February. The position is up more than 154% now.
The company will next report results on April 26. Analysts are looking for earnings of $2.02-per-share on revenues of $11.58 billion. When the company last reported on Jan. 25, earnings of $2.16 beat estimates by 38 cents on a 34.7% rise in revenues.
Attractive Large-Cap Stocks: General Electric (GE)
General Electric Company (NYSE:GE) shares are on the mat and look ready to fall through critical support near the $14-a-share level. The stock has been in the doghouse for months, down more than 50% from the highs seen in late 2016. The Mar $14 GE puts are trading for just 48 cents, worth a double on a drop to $13 in the common.
The company will next report results on April 25, before the bell. Analysts are looking for earnings of 12-cents-per-share on revenues of $27.9 billion. When the company last reported on Jan. 24, earnings of 27 cents missed estimates by a penny on a 5.1% drop in revenues.
Attractive Large-Cap Stocks: 3M (MMM)
3M Co (NYSE:MMM) shares have fallen below their 20-day and 50-day moving averages after failing to recoup their January-February losses. Watch for another touch of the 200-day moving average, which would result in a gain of more than 100% for the Mar $230 MMM puts.
The company will next report results on April 26, before the bell. Analysts are looking for earnings of $2.53-per-share on revenues of $8.2 billion. When the company last reported on Jan. 25, earnings of $2.10 beat estimates by 7 cents on a 9% rise in revenues.