Fundamentals add color to price picture

While Wednesday’s activity in Sherwin-Williams (SHW) may have appeared to be more about trading than investing, it highlighted a couple of larger fundamental themes the market has been grappling with.

The paint maker experienced a bump in options activity on Thursday, with put volume roughly 12 times average:

Puts also outnumbered call volume roughly 27 to one. This activity occurred on a day SHW fell more than 2%, a move that dropped shares fairly close to the bottom of a trading range that has been in place since at least January 2025—and arguably, since November 2024, when shares last set record highs (around $400):

With the lion’s share of Wednesday’s put volume (2,725 contracts) occuring in the April $290 strike, it’s easy to argue hypothetical bull and bear cases for either side of the trade. A put buyer may have decided to hedge a long stock position, or was perhaps using the options in anticipation of additional downside in the event prices broke below the implied support at the lower end of the trading range.

A put seller, conversely, may have decided that current levels would again function as support, and that the stock had the potential to add another rebound to the longstanding consolidation.

Highlighting two fundamental factors—one recent, one longer-term—may add some color to the price discussion.

First, oil is a key input for SHW products, and the stock’s current downswing unfolded as oil prices surged following the US-Israeli strikes on Iran. While Morgan Stanley & Co. analysts note this has thrown the company’s raw materials line item into flux, they maintain an Overweight rating on the stock, citing the company’s pricing power and solid earnings at the “bottom of the housing cycle.”

Longer term, the analysts add that “stubborn interest rates” remain the company’s biggest risk, although they expect SHW to get “a larger piece of a bigger pie once lower rates create a significant volume tailwind.”¹

These two factors are interwined, though, since high oil prices could potentially exacerbate already-stubborn inflation, potentially making the Fed more cautious about cutting interest rates. However, Morgan Stanley & Co. economists have expressed “high conviction” that the Fed will not respond to climbing oil prices with rate hikes. Despite the possibility of higher headline inflation numbers and softer economic growth, they expect the Fed to “look through” current energy price pressures and “stay on hold or cut rates if activity weakens.”²

Today’s numbers include (all times ET): weekly jobless claims (8:30 a.m.), Philadelphia Fed Manufacturing Index (8:30 a.m.), new home sales (10 a.m.), EIA Natural Gas Report (10:30 a.m.).

Today’s earnings include (all times ET): Accenture (ACN), Carnival (CCL), Darden Restaurants (DRI), FedEx (FDX).

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¹ MorganStanley.com. Paint Sales Update: Strength for December P&WP & January HIRS. 3/6/26.
² MorganStanley.com. March FOMC Preview: Oil Shocks: The Fed's Playbook Is Hold or Cut, Not Hike. 3/13/26.