Top Stories
Today is Quad Witching in the markets. Quad Witching occurs four times a year (March, June, September, and December) and is the day each quarter where four sets of options expire on the same day: stock index futures, stock index options, stock options, and single stock futures. As markets continue to grow, and the use of options grow with them, these days carry with them some staggering numbers. Today approximately 4.5 trillion dollars’ worth of options are set to expire making it the largest September in history!
There are times these Quad Witching days carry with them a little extra volatility due to gamma being reset and the pure amount of activity around expiration. Other times they are some of the most boring days of the month. As options expire, and new ones are bought, the mechanics of the market reset and we are quickly back to tracking macro stories and technical patterns. Quad Witching is an interesting note, and fun to jabber about, but the real stories lie ahead as market digest a major Fed meeting.
It has been a busy week with a major Fed announcement and a shifting technical environment. We will analyze the entire week, and what you should be looking for next week, in the Tackle Trading Newsletter released today. Matt and Mark will also have an in-depth conversation in the Trading Justice podcast released this weekend.
Stocks in the News
- Nike: CEO John Donahoe is stepping down, with company veteran Elliott Hill coming out of retirement to take the helm. This leadership change comes as Nike faces challenges in its direct-to-consumer strategy and innovation pipeline. The transition could signal a shift in Nike’s strategic direction as it aims to address these issues and drive future growth.
- FedEx: Reported a steep quarterly profit drop and lowered its full-year revenue forecast. The company now expects revenue for fiscal 2025 to grow by a low single-digit percentage, down from previous estimates. FedEx is undergoing a complex restructuring, including cost-cutting measures and merging its Ground and Express delivery units. The company also cited a shift from speedy, pricey delivery options to cheaper, slower alternatives as a factor in its performance.
- Lennar (LEN): Reported Q3 earnings of $3.90 per share on revenue of $9.42 billion, beating expectations of $3.62 per share and $9.29 billion in revenue. However, the company’s Q4 revenue guidance of $9.56 billion to $9.78 billion fell short of the consensus estimate of $10.19 billion, sending the stock down. This mixed report suggests some challenges ahead despite strong current performance.
- ASML: Shares slipped after Morgan Stanley downgraded the semiconductor manufacturer to equal weight from overweight. Analyst Lee Simpson cited risks of a slowdown in expectations materializing for the company, reflecting broader concerns about the semiconductor industry’s cyclical nature and potential headwinds in the near future.
- Bank of America: Warren Buffett’s Berkshire Hathaway sold about 22.27 million shares for roughly $896 million, reducing its stake to 10.8%. This continues a trend since mid-July, with Berkshire offloading about $8 billion of Bank of America stock. The motivations behind Buffett’s decision remain unclear, with BofA’s CEO stating he has no knowledge of Buffett’s reasoning.
- Constellation Energy: Plans to restart the Three Mile Island nuclear plant with a 20-year power purchase agreement from Microsoft. This move highlights the growing energy demands of the tech sector, particularly for AI-focused data centers. Constellation’s stock has more than doubled year-to-date, reflecting investor optimism about the company’s future in nuclear energy.
- Chewy: The pet products retailer lost ground after announcing a public offering of $500 million of its Class A stock. Chewy also said it would buy $300 million in shares from Buddy Chester, an entity affiliated with the company’s largest shareholder, and plans to cancel and retire those repurchased shares following the transaction. These financial moves could be aimed at strengthening Chewy’s balance sheet or funding future growth initiatives.
- Valero Energy: Shares fell after Piper Sandler downgraded Valero Energy to neutral from overweight, saying it sees “less room for outperformance” for the refinery even as it remains “best in class.” This change in analyst sentiment suggests a more cautious outlook on the energy sector, potentially due to macroeconomic factors or industry-specific challenges.
Economic Reports
There were no economic reports released today. Fed speakers will start to come out of their blackout period today to give color to the recent Fed decision but unless something noteworthy is stated, are unlikely to have any market impact.
Next 24 Hours
Manufacturing and services PMI numbers are released 15 minutes after the market bell on Monday in what arguably is the most important economic report of the week. We will be out with the Tackle Trading Newsletter later today with in depth analysis of a busy week in the market.
Have a fantastic weekend!
Utilities (XLU)
Really interesting news out of Microsoft this morning where the owner of the Three Mile Island nuclear plant is investing 1.6 billion dollars to revive the plan and agreed to sell all its output to Microsoft. This is an interesting story that we will dive into during the podcast this week with multiple angles. Utilities up on the news and have a beautiful setup as we head into the week.
