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Luke Kawa

Retail traders are driving off-the-charts volatility when companies release earnings

The increasing prominence of retail traders in dictating price action isn’t confined to just the world of meme stocks.

They’re also playing a key role in fueling how companies’ share prices behave at a time when every investor’s eyes are on them: upon the release of quarterly results.

“During this 2Q earnings season, retail investors frequently exhibited outsized trading behavior in stocks that experienced significant post-earnings price movements,” JPMorgan strategists led by Arun Jain wrote.

That is, substantial retail activity is associated with massive earnings reactions. The y-axis in the below chart tracks how many standard deviations JPM’s measure of retail buying is above or below its one-year average for a given stock.

JPM Retail Earnings Reaction
Source: JPMorgan

But it’s not always the case that retail is contributing to (or creating) the obvious trend in response to earnings. Sometimes the crowd is coming in with both hands to catch a falling knife in stocks that nosedived after reporting quarterly results.

While retail’s favorite name to buy was still Palantir over the last week, per JPMorgan, Eli Lilly, The Trade Desk, and CoreWeave jumped to near the top of the leaderboard as they seemingly “provided compelling ‘buy-the-dip’ opportunities following disappointing announcements.”

LLY TTD retail buying

As this has been playing out, Bespoke Investment Group observed that the typical (over?)reaction to earnings reports has been trending higher, reaching levels unseen outside of the global financial crisis.

Bespoke Earnings Reaction
Source: Bespoke Investment Group


“In the current day and age of easy, commission-free trading on brokerage apps available right on your smartphone, share-price volatility in reaction to stock-specific earnings news has moved increasingly higher,” analysts at Bespoke wrote. “At the same time, overall market volatility hasn’t seen a similar increase, which means that more and more of a stock’s overall performance is coming from the one trading day per quarter when it posts its financial results and forward guidance.”

So, in sum, retail traders are stepping up their activity in names that move on earnings at the same time that stocks are moving more than they used to on earnings!

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Cava may be an unlikely victim of a potential US government shutdown

Government shutdowns typically aren’t a big deal for the stock market as a whole.

But for Cava, which was founded in Maryland and is headquartered in Washington, DC, there’s the prospect of forgone sales in the event that government employees suddenly have no cause to frequent the fast-casual Mediterranean chain, which means emptier tills as bellies get filled elsewhere.

At the end of Q2, Cava had 398 locations. It currently boasts seven in the district proper, at least 14 a close drive away in Virginia, and 25 in Maryland.

Cava’s annual report singled out the Washington, DC/Maryland/Virginia metropolitan area as having “a high concentration of restaurants” in discussing risk factors for the company. And it may be a particularly bad time to be a slop bowl seller around the nation’s capital.

The potential shutdown would be the latest challenge for Cava as it struggles to stand out amid a myriad of lunch options for working professionals and following the recently announced departure of COO Jennifer Somers.

For what it’s worth, this is not the first time this year Cava has faced concerns about potential weakness in DC. During its Q1 earnings call, Bank of America analyst Sara Senatore questioned Cava’s leadership about a potential impact from DOGE given its “fairly big footprint” in the metro area, and at the time CFO Tricia Tolivar said the company hadn’t really seen evidence of metro-specific softness.

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Robinhood surges as prediction markets gain traction

Robinhood jumped to an all-time intraday record of more than $132 late Monday morning on growing optimism about the brokerage’s prediction markets business both on Wall Street and within the company’s own executive suite.

(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions. I own stock as part of my compensation.)

Earlier in the day, Robinhood Chief Executive Vlad Tenev posted this tweet spotlighting that more than 4 billion event contracts have been traded on the platform since they began to be offered in February.

Analysts have also been focusing on the uptick in activity in the events contract business as a potential boon for the shares.

Piper Sandler analyst Patrick Moley published a note on Monday highlighting how trading volumes at prediction market company Kalshi soared to new records over the weekend as traders took positions on the outcomes of college and pro football games using event contracts.

Moley estimates that users at Robinhood — which partnered with Kalshi to offer contracts on games — account for between 25% and 35% of Kalshi’s daily event contract activity.

“We continue to expect HOOD will report ~2.5B of event contracts traded in 3Q25 which, at $0.01/contract, translates to ~$25M in revenue,” Moley wrote.

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