Oh, SNAP! Or, down goes retail
08/14/17

Last week our long lost friend volatility returned to the markets, and not all of it was attributable to geopolitical turmoil with North Korea. Amid a string of earnings announcements, several stocks were punished for poor numbers. And by Friday’s close, the S&P 500 Index (SPX) had its first major weekly decrease since the end of March.

As for notable weekly performances, let’s start with SNAP Inc. (SNAP). The stock, which saw highs around $29, is now in the $12 range. Following its earnings announcement last week, when traders in the options market were clearly pricing in a significant gap move,1 SNAP dropped more than 10 percent and fell well below its 50-day moving average.

SNAP Inc (SNAP) 08/07/17-08/11/17

Source: OptionsHouse by E*TRADE

Last week wasn’t that pretty across the retail sector  either. Going into JC Penney’s (JCP) earnings announcement traders were buying puts, likely looking to profit if JCP stock were to decline. Well, on Friday, shares of JCP plunged more than 15 percent and traded below $4 after the company posted a second quarter loss of 9 cents per share, which was much worse than expected.
JC Penny (JCP) 08/07/17-08/11/17

Source: OptionsHouse by E*TRADE

Also struggling in the retail sector were Macy’s Inc. (M) and Kohl’s Corp (KSS). Shares of M and KSS dropped as the companies continued to report declining same-store sales figures.
Macy's (M) 08/07/17-08/11/17

Source: OptionsHouse by E*TRADE

Kohls Corp (KSS) 08/07/17-08/11/17

Source: OptionsHouse by E*TRADE

And that brings us to this week. Will this trend in the retail sector continue? Or will there be pockets of sunshine? Coming up will be another string of earnings reports, starting tomorrow with The TJX Companies, Inc. (TJX) and Coach, Inc. (COH). Also up are Target Corporation (TGT) on Wednesday and Wal-Mart Stores, Inc. (WMT) on Thursday. If there were any lessons to take away from the retail sector last week, it’s keep a watchful eye—this week could be another bumpy ride.

 

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1. Kilgore, Tomi. “Snap options point to volatile stock reaction to earnings report,” MarketWatch, 10 Aug. 2017. http://www.marketwatch.com/story/snap-options-point-to-volatile-stock-reaction-to-earnings-report-2017-08-10?mg=prod/accounts-mw