U.S. stock futures are pointed broadly lower this morning. The Dow, in particular, is headed for its worst weekly loss since June. Not only is it the last trading day of September, but it is also the last day of the quarter. Look for profit taking and portfolio repositioning to dominate today’s trading barring any major market moving news.
As for the quarter, the Dow Jones Industrial Average is up an impressive 8.9%. Trailing those gains are the S&P 500, up 7.2%, and the Nasdaq Composite, which has gained 7.1% so far on the quarter.
Those figure may change sharply today, however. Heading into the open, Dow futures are down 0.40% with S&P off 0.35%. Nasdaq-100 futures have fallen 0.48%.
In the options pits, volume was on the light side yesterday following a round of repositioning on Wednesday. Only about 16.9 million calls and 13.6 million puts changed hands on the session.
On the CBOE, the single-session equity put/call volume ratio continued to rise, arriving at 0.61 — a four-week high. The 10-day moving average ticked higher as a result, coming in at 0.58.
Options traders were tech heavy on Thursday following a round of analyst activity on FAANG stocks. Apple (NASDAQ:AAPL) call options gained ground after JPMorgan reiterated coverage, while Amazon.com (NASDAQ:AMZN) options rallied on a price target hike. Advanced Micro Devices (NASDAQ:AMD) was hit with a downgrade at Northland.
Let’s take a closer look:
The news was short and sweet on Apple yesterday. JPMorgan reiterated its “overweight” rating and $272 price target for AAPL stock. According to JPMorgan, Apple is transitioning into a services business faster than expected. The rise in services revenue has been heavily scrutinized amid slowing growth in iPhone sales.
AAPL stock gained about 2% on the news, driving moderate volume in Apple’s options pits. More than 628,000 contracts traded on AAPL yesterday, with calls claiming 59% of the activity.
However, it will take quite a few more calls to change Apple’s October sentiment backdrop. Currently, the October put/call open interest ratio comes in at 1.28. Puts clearly have the upper hand, as options traders have grown cautious of the stock near all-time highs.
Amazon, my favorite trillion-dollar company, has a new “biggest fan” on Wall Street. Stifel analyst Scott Devitt lifted his price target to $2,525 from $2,020 on Thursday, topping Morgan Stanley’s previous high target of $2,500. Devitt’s target represents about 25% upside for AMZN stock from currently levels.
According to Devitt, “Amazon is the leader in two large and rapidly growing markets (e-commerce and Cloud), and strong momentum from AWS and advertising are elevating the near/intermediate-term margin trajectory.”
AMZN stock also rose about 2% yesterday, though options activity was slightly less enthusiastic compared to AAPL’s. Volume came in at 234,000 contracts, with calls claiming just 56% of the day’s take.
Options activity is slightly more optimistic on AMZN compared to AAPL. The October put/call OI ratio comes in at 1.08, with calls and puts nearly equal on the month. AMZN is down from all-time highs, but the shares are making a comeback after bouncing off support near $1,900. Look for this ratio to trend higher as Amazon extends this rally.
Advanced Micro Devices (AMD)
I’m not the only one that thinks that AMD is a bit more euphoric than rational at the moment. Gus Richard of Northland Capital Markets cut his rating on AMD to “market perform” from “outperform” yesterday. Richard remains bullish on AMD, however, lifting his price target to $30 from $26.
“While we expect numbers to go up, and [the] stock to continue to outperform between now and the end of the year as investors chase performance, we are downgrading shares on what we believe are irrational expectations of rate of change in financial performance,” Richard said in a note to clients.
A bit of irrational exuberance has pushed AMD to levels not seen since 2006 this year, and options traders have chased that rally. Volume yesterday defied Richard’s downgrade. Calls claimed 60% of the more than 309,000 contracts traded on the stock.
However, it’s notable that volume came in at about half AMD’s daily average. What’s more, the October put/call OI ratio rests at 1.01, with puts now on par with calls for the series. It would appear that AMD bulls are losing a bit of momentum on the speculative front, which could lead to downside risk over the short-term.
As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.