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Shares of Walt Disney Co., previously the best performer in the Dow Jones industrial average year to date, plunged on Wednesday after the company reported quarterly earnings. Although earnings came in above analyst expectations, revenue fell short, prompting a drop of almost 10 percent. But some traders are using the drop as a buying opportunity and expect the stock to rebound to prior highs.
"This could make sense, because after earnings come out, the premium drops and now you can risk just 1.5 percent to make that bullish bet," CNBC contributor Mike Khouw said Wednesday on CNBC's "Fast Money."
Disney options traded at nine times their average daily volume on Wednesday. According to Khouw, Disney was one of the most active stocks on Wednesday, second only to dividends options trading in Apple.
Specifically, traders bought the September 115-strike calls for $1.50 and the January 120-strike calls for $2.85, "two of the most surprising places where we saw activity," Khouw said. Buyers of those calls see Disney gaining about 5 percent by September, or about 10 percent by January.
Disney's shares extended losses on Thursday, trading down about 4 percent at $105. The stock is up more than 13 percent year to date.
However, the majority of analysts are still bullish on the stock, with an average price target of $121.54.
On Wednesday, Guggenheim Securities revised its target price on Disney to $120 from $127, but noted long-term growth potential for the company.
"We believe that investors will continue to take a longer-term view of valuing unique asset stories and see Disney as continuing to fit this category despite growing concern about the pay-TV marketplace," Guggenheim's Michael Morris wrote in a note to clients Wednesday.
The bad news for commodities could be spreading.
As gold, oil, copper and other commodities tumble to multiyear lows, one expert says the turmoil is far from over. In fact, he said the collapse could mean that a full-blown market correction is just around the corner.
"We're looking at real weakness in the stock market here in the U.S.," Andrew Hecht said Tuesday on CNBC's "Futures Now." "We've had a really good time in that market, and I think it's overdue for a correction."
Hecht, author of "How to Make Money with Commodities," said he's watching three commodities markets in particular: copper, oil and lumber. Hecht said copper is especially signaling a global slowdown, most notably in China.
Copper has fallen almost 17 percent this year to new six-year lows. Crude oil is down about 14 percent year to date, but saw a brief rally of 2 percent on Tuesday. Lumber has fallen about 22 percent this year.
Hecht said although August will see some volatility and bounces in commodities markets, there's still a lot more downside risk in all raw materials.
"We'll see a lot of moves like we're seeing in crude oil today, but I think once September, October settles in, we'll see another leg down in these commodity markets, and that does not bode well for equity markets in the U.S.," Hecht said.
"There's so much telegraphed to the downside, but we haven't even had one ounce of good news, and I think you need something going to get [a bottom] started," Stutland said Tuesday.
"The commodities market since 2011 has been making a series of lower highs and lower lows and I think that's going to continue," Hecht said.
For publicly traded companies, beating earnings expectations just isn't what it used to be.
Companies that have beat both earnings and revenue estimate this earnings season have seen their stocks jump just 1.5 percent on average, according to RBC's market strategy team. That compares to an average rise of 1.9 percent.
Similarly, FactSet senior earnings analyst John Butters notices that companies beating just earnings estimates (but not both earnings and revenue) have seen their stocks rise only 0.8 percent in the period starting two days before the report, and ending two days after. That's below the 1 percent average rise over the past five years.
An even more dramatic nonchalance can be seen around earnings misses. In the two-days-before-to-two-days-after period, companies that have missed earnings have tended to see a drop of 1.3 percent, versus a 2.3 percent drop on average, according to FactSet.
It's worth noting that RBC doesn't notice a similar trend for companies that have missed both revenue and earnings estimates—those stocks have tended to fall 3.1 percent this quarter, the same amount as in quarters prior, according to their numbers.
Gold just can't get a bid.
The precious metal fell near 5½-year lows on Thursday after the second-quarter GDP number showed the U.S. economy is growing at a steady rate and comments from Fed Chair Janet Yellen on Wednesday pointed to the notion of a September rate hike.
Gold is now down 13 out of the past 15 trading sessions, and according to one highly regarded technician, it's about to get even worse.
"I think we have to recognize that gold is in a structural bear market," Louise Yamada, managing director of Louise Yamada Technical Advisors, said Thursday on CNBC's "Futures Now."
Gold is down more than 8 percent this year and is on track to notch its third straight year of losses. "It broke down in 2013, exactly the year that the S&P 500 and the market broke out into what we define as a structural bull market," said Yamada, who noted that stocks and gold tend to move inversely.
Energy stocks just notched their second-best trading day of the year.
The S&P energy sector rallied 3 percent Tuesday as crude oil snapped its five-day losing streak and bounced off a four-month low. And according to one top technician, the rally is just getting started.
"We came into [this rally] extremely oversold, about the most oversold we've seen since early April," Jonathan Krinsky said Tuesday on CNBC's "Futures Now." The energy sector is currently in the midst of a 12-week losing streak, which by Krinsky's work is the worst in its plus-25-year history.
It's now been more than a year since crude oil began its vertigo-inducing plunge. Yet S&P 500 Index earnings continue to remind one of the classic joke that references the assassination of America's 16th president: "Other than that, how was the play, Mrs. Lincoln?"
Based on a mix between the reported earnings and the expectations for those results yet to released, S&P 500 companies are currently slated to report a 2.2 percent drop in earnings for the second quarter, according to FactSet. That would represent the first earnings decline since the third quarter of 2012.
Of course, that earnings growth number is likely to rise further as more companies unveil results—and could wind up in positive territory by the time all the earnings are out—given that companies tend to beat.
However, what's striking is how different that number looks once energy names are excluded. Thanks to a collapse in the price of oil, the energy sector is slated to report a monster 54 percent drop in earnings and 28 percent swoon in revenue, compared to the second quarter in the year prior.
Excluding energy, then, the S&P 500 would be looking at earnings growth of 4.1 percent. Meanwhile, revenue growth expectations would go from negative 4 percent to positive 1.8 percent, according to FactSet's senior earnings analyst, John Butters. The glum backdrop raises the stakes for the coming week, with oil giants like ExxonMobil and Chevron set to report quarterly results.
"The energy sector is reporting the largest year-over-year decline in earnings and revenues of all 10 sectors," Butters wrote in his weekly report.
"This sector is also the largest contributor to the year-over-year decline in both earnings and revenues for the S&P 500 as a whole," he added.
Of course, it can be all too easy for investors to do their best Johnny Mercer impression and simply "Ac-Cent-Tchu-ate the Positive"—twisting reality to suit a bullish investment thesis.
And investors who have exposure to the S&P 500 as a whole are indeed missing out on the higher underlying earnings they would have seen had oil prices had remained high.
That said, even with such a sharp decline in S&P 500 earnings, it shouldn't be interpreted as a direct sign the economy is slowing. After all, most Americans can be thought of as having a "short" rather than "long" exposure to oil prices, benefiting when oil prices fall in the form of lower gas prices.
While a decline in earnings would be disheartening, however, it might say more about one battered industry than about the strength of the U.S. economy.
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