S&P futures are 6-7 handles lower this morning after a nearly 3% drop in the Nikkei overnight. The Japanese index dropped sharply thanks to a higher-than-expected CPI reading that shows inflation is rising more quickly and the Bank of Japan might meet to take its foot off the monetary policy accelerator. Yesterday the S&P was able to rebound from early selling and stem the tide from some of Thursday’s mild faulty signals, but traders will now be watching yesterday’s low as a short-term pivot. A close below that low could open the door for deeper corrective action.
With it being the end of July, I expect it to be a slow and lethargic tape overall today. The traders who are at their desks will likely largely be focusing on stocks that recently reported earnings. Last night we had another raft of reports.
Amazon (AMZN) swung to a quarterly loss in a mediocre quarter, but as is often the case the company got a pass from Wall Street. Amazon continues to spend heavily on the future, and is heavily involved in several business segments that could see quick growth on the horizon. Investors aren’t quite ready to write it off as it’s only down a few dollars this morning after flashing down quickly on the report last night.
Starbucks (SBUX) is up over 5% this morning after reporting a strong quarter at new all-time highs.
Zynga (ZNGA) is a different story. The gaming company jumped yesterday on the strong Facebook report because its success is largely tied to the social media site. However, last night’s earnings report rekindled fears that the company is in a death spiral and the stock is down around 18% this morning. The new CEO recently brought over from Microsoft could potentially turn things around down the road, but the short-term pressure might be too much to overcome. I’m not compelled to buy the dip here.
Expedia (EXPE) is getting slammed overnight after reporting a very poor quarter. The online travel site stocks have been red hot over the past few years, but last night’s report could be an inflection point as EXPE is down around 23% pre-market. Priceline (PCLN) is also down due to concerns its next earnings could reflect a similar fate.
Cliff Natural Resources (CLF) reported earnings last night and is up 5% this morning. The stock triggered a short squeeze last quarter after a solid report, and still has a high short float. Traders may be watching it this morning to see if it can squeeze.
In a non-earnings related move, Tesla (TSLA) is up over 4% this morning after getting a big upgrade, but it is well off pre-market highs. If you are going to be at your desk today, an ultra high-beta name like TSLA could be your best bet in the search for volatility.
Disclosure: John Darsie is long CLF