It was a nasty day for stocks on Wednesday, with the S&P losing 4% while the Nasdaq dropped nearly 5% as another batch of worse than expected retail earnings had folks taking profits. Asia markets fell overnight while Europe indexes are also in the red this morning. U.S. futures are pointing to a lower open as I write this, the Dollar, Yields, and Oil are lower while Gold is higher.
To say it was a rough day for stocks yesterday would be an understatement. More concerning earnings reports from retailers, including Target, had investors looking for the exits. Retail stocks took it on the chin with many names down over 10%, but there was really no safe haven. AMZN closed down 7%, AAPL was down over 5%, FB down over 5% as well and the list goes on and on. Some are citing Melvin Capitals exit as a catalyst for some of the downside, as they held a large position in AMZN amongst others : https://www.bloomberg.com/news/articles/2022-05-18/gabe-plotkin-s-melvin-capital-to-wind-down-funds-after-losses
... and they are not going to announce the closure without first exiting. The fund was about $8 bil so not sure that would have as big an impact to drop AMZN 7%. The selling yesterday almost seems methodical. There were no huge intra-day reversals and most green candles were sold a few minutes after. Even the end to the day session, where we typically see a magical hand come in to save the markets after 3pm, never made an appearance. I would want to see some capitulation... a fast, large drop followed by a monster reversal where it looks like folks threw in their cards and buyers finally got the courage to step in. Hoping we can get that today or tomorrow, even if just for some short term relief. If there is a bright side, Yields have dropped 7 times over the past 9 sessions.
The S&P is a stone throws from bear market territory, and will likely be the headline today and tomorrow. Would want to see last weeks lows hold($389.37):
As outlined on yesterdays watchlist, I was looking at ULTA as a sympathy put play on the heels of TGT's report. ULTA reports next week and think that folks will sell first and ask questions later ahead of that, with WMT and TGT raising questions about margins, ect. I was able to grab some $330 puts and closed some out for over 100% and for 800% and held some into today. If it finds more weakness today, that $340 handle will be the spot I am watching. If it fails to hold that I will hold for a possible move under $330. If it holds and bounces I will lock the last in and revisit:
longer view:
It was a rough day for names I have calls on. IBM closed down nearly 4%, giving back most of the past 5 sessions gains. WIll need a monster rally for the rest of my freebie $140 strikes. My June $150s are seriously under water. Not going to average down there and would rather add later strikes once the market finds footing:
YOU gave back all its post-earnings gains. Great growth stories don't matter in this current environment. Definitely a name I will be watching going forward for more call opportunities once the dust settles. Was lucky to be able to close some out to cover costs on Tuesday:
CSCO reported a rough Q after the close yesterday. I may try some sympathy puts in names like AVGO and ANET:
If there is a reversal today I will be watching RBLX, ROKU, U, and EXPE for possible calls.
Here are the analyst changes of note for today:
Cisco price target lowered to $50 from $62 at Evercore ISI |
| Evercore ISI analyst Amit Daryanani lowered the firm's price target on Cisco to $50 from $62 and keeps an Outperform rating on the shares after the company reported April quarter results below expectations and gave a July quarter outlook that was "well below" Street expectations. Cisco attributed much of its shortfall to supply chain issues versus being demand related, but the bigger concern among investors is the pace of order degradation, according to Daryanani. He thinks much of the issues are around bad supply chain execution that, while frustrating, should prove transitory. Some of the missteps could end-up driving a more positive growth narrative for FY23 as comparisons ease and the supply chain starts to improve, added the analyst |
| Morgan Stanley says investor day reinforces view that Block 'eventually a bank' |
| Morgan Stanley analyst James Faucette lowered the firm's price target on Block to $110 from $118 and keeps an Equal Weight rating on the shares following Block's investor day, which he said offered useful insights into cohort and unit economics, engagement and adoption, and profitability across its ecosystems. He'd like to see faster Afterpay integration and more loan products, and while he likes the Seller business he is cautious on Square's longer-term ability to move upmarket and international opportunity, said Faucette, who concludes that the event reinforced his thesis of Block as "eventually [being] a bank |
| TJX price target raised to $80 from $78 at Morgan Stanley |
| Morgan Stanley analyst Kimberly Greenberger raised the firm's price target on TJX to $80 from $78 and keeps an Overweight rating on the shares following a Q1 report that she said "came in as the market expected" with lighter sales and better profitability, but which was accompanied by a fiscal year guidance raise that "came as a surprise." Management raised fiscal year profitability targets while lowering revenue expectations, citing strategic pricing initiatives and expense management in addition to a category mix shift back to apparel from home, all of which she views as "credible and durable benefits," Greenberger tells investors. She adds that she views Q1 as "a clearing event" and recommends initiating or adding to TJX positions |
| Block strategic vision 'impressive,' lack of guidance not surprising, says BofA |
| After attending Block's first investor day in five years, BofA analyst Jason Kupferberg said the company offered an "impressive" strategic vision in an event that was "comprehensive" and presented a "compelling vision of how various components of its ecosystem will become increasing connected and synergistic over time." While Block did not provide multi-year guidance, this was consistent with his expectations and its new margin disclosures suggest a "keen focus on profits," said Kupferberg, who keeps a Buy rating and $132 price target on Block shares |
| Costco price target lowered to $503 from $634 at Truist |
| Truist analyst Scot Ciccarelli lowered the firm's price target on Costco (COST) to $503 from $634 but keeps a Buy rating on the shares as part of a broader research note on Retail following disappointing earnings from Walmart (WMT) and Target (TGT). The analyst states that the results suggest that consumers' willingness to absorb price increases is becoming "increasingly challenged", supply chain damage has harmed demand forecasting, and the growing income bifurcation has left lower-to-middle income consumers increasingly squeezed from inflationary pressures |
And here is what I am watching today: AVGO, ANET, RBLX, U, ROKU, EXPE, BPT, AVAV, and REGN.
Let's have a great day!
-JB