Stock market today: Nvidia, Nasdaq reach record highs as AI rally continues
05/29/2024 03:14
Wall Street is starting the holiday-shortened week in a muted mood as the wait for the Fed's favorite inflation data begins.
The tech-heavy Nasdaq Composite (^IXIC) reached a new high on Tuesday, breaching 17,000 for the first time as AI darling Nvidia (NVDA) continued its post-earnings tear to also reach a record of $1,140 a share.
The benchmark S&P 500 (^GSPC) finished the day just above the flatline, while the Dow Jones Industrial Average (^DJI) drifted about 0.6% lower, shedding more than 200 points.
The major gauges are regrouping after a volatile week as traders return from the Memorial Day break. Stocks have been buffeted back and forth by two impulses: fading optimism for rate cuts on one hand, and high hopes for AI on the other.
Investors are now firmly back on inflation watch, counting down to the release of the Federal Reserve's preferred PCE gauge on Friday. Fed officials have sent out a drumbeat of warnings that data must show real cooling in inflation to trigger a policy shift, with Neel Kashkari the latest to join them.
Read more: How does the labor market affect inflation?
In other individual movers, GameStop (GME) stock soared nearly 25% on Tuesday. The games retailer on Friday said it had brought in not far off $1 billion from a share sale during the meme rally earlier in May. Meanwhile, Apple (AAPL) rose following data showing iPhone sales in China jumped over 50% in April as retail partners cut prices.
Live14 updates
Nasdaq, Nvidia hit records
The tech-heavy Nasdaq Composite (^IXIC) reached a new high on Tuesday, breaching 17,000 for the first time as AI darling Nvidia (NVDA) continued its post-earnings tear to also reach a record of $1,140 a share.
The benchmark S&P 500 (^GSPC) finished the day just above the flatline while the Dow Jones Industrial Average (^DJI) drifted about 0.6% lower, shedding more than 200 points. The Dow was the only major US index to close in the red.
Elon Musk's Tesla pay package under even more scrutiny
Notable proxy adviser firm Glass Lewis is weighing in on Tesla’s (TSLA) upcoming shareholder proposals — with CEO Elon Musk's pay package a top area of concern.
Yahoo Finance's Pras Subramanian reports:
Currently Musk's ownership stake in Tesla sits at 12.9%, but would balloon to 22.4% if the pay package is approved by shareholders, Glass Lewis said. The firm first raised concerns about Musk's compensation in 2018 when it was granted.
“Glass Lewis raised a number of concerns about the [2018] grant, including the quantum of pay and the dilutive impact on disinterested shareholders,” the firm wrote in a large report issued over the weekend. The firm said the “most substantive” of its prior concerns remain the same.
“The excessive size of the award, both on a pure dollar basis and in terms of the dilutive effect upon exercise, remains very much top of mind as discussed in fuller detail above. The Company's provided rationale does little to combat these concerns given their proportionate magnitude.”
Shares fell about 2% on Tuesday following the Glass Lewis report.
Glass Lewis also said Tesla moving its state of incorporation to Texas is unwarranted at this time.
Earlier this year, Tesla filed its proxy statement ahead of the EV maker's June 13 shareholder meeting with two big requests: that shareholders vote to ratify CEO Elon Musk’s 2018 pay package, which had been rescinded by a Delaware judge earlier this year, and that they agree to move Tesla’s state of incorporation to Texas from Delaware.
The Delaware court found the package was awarded to Musk by a board that didn’t act “in the best interests” of Tesla and showed “barely any evidence of negotiations at all.” Musk’s 2018 pay package was worth around $56 billion; Glass Lewis’s calculations now claim Musk’s current package is valued at around $44.9 billion.
If that weren't enough, Musk has threatened to pull AI and other high-value tech projects from Tesla if he doesn’t have approximately 25% ownership control of Tesla.
Given the size of the pay package and the heightened focus on Tesla stock in general, Wall Street expects the results of the vote could be a rocky time for shareholders.
Another Fed official expects rates to remain elevated for 'extended' period
Minneapolis Fed president Neel Kashkari became the latest Fed official to call for higher-for-longer interest rates.
Yahoo Finance's Jennifer Schonberger reports:
Kashkari said Tuesday he is still not ruling out an interest rate hike, but it’s more likely the central bank could hold rates steady for an "extended" time as it waits for inflation to drop.
"We could sit here for as long as necessary until we get convinced that inflation is sustainably going back down to our 2% target," he said.
While holding rates at their current 23-year high "for an extended period of time is a more likely outcome," Kashkari made it clear that other options are on the table if inflation doesn't fall.
"I'm not ruling out potential interest rate increases from here," he said.
Minneapolis Federal Reserve president Neel Kashkari participates in the Yahoo Finance All Markets Summit at Union West on Thursday, Oct. 10, 2019, in New York. (Photo by Evan Agostini/Invision/AP) (Evan Agostini/Invision/AP) The Fed decided on May 1 to keep its benchmark interest rate in a range of 5.25%-5.50% as it tries to get inflation down to its goal of 2%.
Minutes from that meeting released last week indicated some policymakers discussed their willingness to raise rates if needed.
"Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate,” according to the minutes.
Hopes for a rate cut this year are dwindling. Investors have now scaled back the odds of the potential first rate cut in September, with a 50% chance the Fed won’t cut rates that month. Odds of a cut in November are 46%.
The inflation readings in the first quarter were hotter than expected, but an April reading released after the Fed's last meeting did show some easing of those price pressures.
This Friday officials will get a fresh reading from their preferred inflation gauge, the Personal Consumption Expenditures index on a core basis, which strips out volatile food and energy prices.
Economists expect April's "core" PCE clocked in at an annual gain of 2.8%, flat from March's increase. Over the prior month, economists expect "core" PCE rose 0.2%, down from 0.3% the month prior.
UBS boosts S&P 500 year-end target to 5,600 on 'robust' earnings growth
On Tuesday, UBS Investment Bank us equity strategist Jonathan Golub joined the growing list of Wall Street strategists boosting their outlook for the S&P 500 (^GSPC) this year.
Golub boosted his year-end target to 5,600 from 5,400, citing "stronger earnings."
"While subsequent quarter earnings estimates typically decline during earnings season, [second quarter] estimates have also been quite robust," Golub wrote. "A similar pattern is also evident in full-year 2024 estimates. These trends all support further market upside."
S&P 500 earnings grew 6% in the first quarter, and when excluding dismal earnings from Bristol Myers-Squibb (BMY), earnings grew more than 10%, per Bank of America.
This comes as earnings for future quarters are on the rise, too. Earnings growth for the full-year 2024 and 2025 have increased since April 5, per FactSet data. Consensus now sees earnings growing 11.4% in 2024, up from 10.9% in April. In 2025, earnings growth estimates have moved up to 14.2% from the 11.6% growth seen on April 5.
Nvidia, GameStop, DraftKings: Stocks trending in afternoon trading
Here are some of the stocks on Yahoo Finance's trending ticker page in afternoon trading on Tuesday:
Nvidia (NVDA): The stock climbed above $1,100 for the first time ever on Tuesday, on pace to close above record highs, after Elon Musk’s artificial intelligence startup xAI said it raised $6 billion in a Series B funding round. Musk said the company is in the process of building a supercomputer, which will be powered by Nvidia's chip technology.
GameStop (GME): Shares surged as much as 22% after the video game retailer said it raised almost $1 billion from its latest equity offering. Fellow meme darling AMC Entertainment (AMC) also capitalized on the meme frenzy by raising $250 million through the sale of 72.5 million shares earlier this month. Shares of AMC rose about 10%.
DraftKings (DKNG): Shares dropped more than 10% after the Illinois Senate passed a bill that includes new tax hikes on sports betting. The hikes would make Illinois the second-most-expensive state for online sports gambling companies to operate in — only behind New York. Analysts warn other states could soon follow Illinois' lead. Flutter Entertainment (FLUT, FLTR.L), the owner of FanDuel, also fell on the news, with shares down about 7%.
Celsius Holdings (CELH): Shares plummeted 16% on Tuesday after Morgan Stanley analyst Dara Mohsenian warned in a new note to clients that year-over-year sales growth for Celsius energy drinks appears to be slowing on a sequential basis.
Stocks on pace for best monthly performance of 2024
Stocks traded mixed on Tuesday to kick off a shortened holiday trading week.
The tech-heavy Nasdaq Composite (^IXIC) led the day, up about 0.5%. The benchmark S&P 500 (^GSPC) hugged the flatline after its fifth straight week of gains while the Dow Jones Industrial Average (^DJI) fell about 0.4%. Stocks are currently on pace to secure their best month of the year.
Meanwhile, Treasury yields moved higher after a rebound in consumer confidence. The 10-year Treasury yield (^TNX) nudged about 3 basis points higher to trade near 4%.
The latest index reading from the Conference Board came in at 102, above 97.5 in April and higher than the 96 economists surveyed by Bloomberg had expected.
The index was buoyed by a strong labor market and marked the first increase of consumer confidence in four months. Still, "for the fourth consecutive month, the Expectations Index was below 80, the threshold which usually signals a recession ahead," The Conference Board warned.
Nvidia shares climb above $1,100 for first time ever
Nvidia (NVDA) shares traded above $1,100 for the first time ever on Tuesday.
The milestone moment comes as the stock gained about 5% after Elon Musk’s artificial intelligence startup xAI raised $6 billion in a Series B funding round, the company announced in a blog post. The funding brings the valuation of xAI to $24 billion.
The increase of AI competition has continued to boost Nvidia's growth rate as the chipmaker continues its record-setting rally.
Last week, Nvidia reported first quarter results that impressed Wall Street. The company also announced a 10-for-1 stock split and an increased dividend.
GameStop shares surge on completion of nearly $1 billion stock sale
GameStop (GME) stock surged as much as 22% on Tuesday with shares opening at around $23. The moves come after the video game retailer said it raised almost $1 billion from its latest equity offering.
Although shares are still well below the near $65 level reached earlier this month during a short-lived meme rally, the stock action reflects investor exuberance over the meme trade.
Yahoo Finance's Ines Ferré reports:
“If this were a normal market, people would be a little freaked out,” Steve Sosnick, Interactive Brokers' chief strategist, told Yahoo Finance.
He added, “You don’t sell stock into the market if you think your stock is undervalued. You do it when you think your stock is overvalued.”
GameStop is a heavily shorted stock, with short interest just above 21% of the float.
The company took advantage of mid-May's unexpected meme rally, selling 45 million shares to bring in about $933 million, according to a Friday statement.
GameStop said it intends to use the net proceeds for general corporate purposes, which may include acquisitions and investments.
The offering was first announced on May 17 along with the company’s preliminary financial results, sending shares tanking as much as 30% that day.
The offering was seen as a smart move by some Wall Street analysts amid the video game retailer’s struggling financials. GameStop's quarterly sales fell sharply from the year earlier period, according to its most recent earnings report.
San Diego sees highest gains in home prices
As home prices notched a new all-time high in March, certain cities remained more susceptible to rising costs.
Regionally, San Diego continued to report the highest year-over-year gain among the 20 major cities, rising 11.1% in March. New York and Cleveland also increased 9.2% and 8.8%, respectively.
Elevated mortgage rates, high home prices, and limited housing stock have challenged homebuyers. In March, mortgage rates hovered around the mid-6% range. Last week, they fell below 7% for the first time since early April.
Despite pent-up demand for homes, low inventory remains a problem, which hasn't allowed home prices to ease. But that dynamic is expected to change.
"Although we expect mortgage rates to drift lower in the next few years, we also expect inventory to gradually normalise which should help cool the market," Thomas Ryan, North American economist at Capital Economics, wrote in a note to clients after the release. Ryan and his team expect home prices to climb by 3% in 2025 and 2.5% in 2026.
Home prices hit new records, data shows
The seasonally adjusted S&P CoreLogic Case-Shiller national home price index (HPI) rose 0.3% month over month in March and jumped 6.5% on a year-over-year basis — the second strongest annual gain since late 2022, Oxford Economics said in a note to clients following the data's release.
"We expect home price growth to remain positive in the quarters ahead, with risks skewed to the upside," Oxford Economics lead economist Bernard Yaros wrote. "Scarce supply in the resale market, a sturdy labor market, and pent-up demand from Millennials aging into their prime household-formation years argue for potentially firmer house price gains than in our baseline forecast."
According to the data, prices in the 20 biggest US metro areas hit another all-time high in March.
(Source: Oxford Economics/Haver Analytics) Yaros added that although he expects "declines in mortgage rates as the first rate cut by the Federal Reserve comes into view" prices should continue to remain elevated amid a "historically tight" supply of homes for sale.
Meanwhile, the seasonally adjusted Federal Housing Finance Agency (FHFA) House Price Index also rose during the month of March but at a slower pace compared to previous months. The index climbed just 0.1% after rising 1.2% month over month in February.
"Though base effects have started to become less favorable for the FHFA index, it is still rising on an annual basis faster than it did for most of 2023," Yaros said.
Consumer confidence rebounds for first time in 3 months
Consumer confidence unexpectedly rose in May.
The latest index reading from the Conference Board was 102, above 97.5 in April and higher than the 96 economists surveyed by Bloomberg had expected. The May reading ended three months of declines for the index.
"Consumers’ assessment of current business conditions was slightly less positive than last month," the Conference Board chief economist Dana Peterson said in the release. "However, the strong labor market continued to bolster consumers’ overall assessment of the present situation. Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to get.'"
Peterson added: "Fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index."
Dow falls, Nasdaq gains at open
US stocks opened mixed on Tuesday, with tech serving as a bright spot ahead of a critical inflation report due later this week.
The benchmark S&P 500 (^GSPC) climbed about 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) added roughly 0.4% after solid closing gains on Friday. The Dow Jones Industrial Average (^DJI) was the biggest laggard of the morning, slipping 0.3%.
Foot Locker isn't out of the woods
Foot Locker (FL) has had a horrendous 12 months.
Poor financial performances have led to surprisingly poor outlooks, sending shares down 16% in the past year.
The Street is bracing for another dreadful quarter from the sneaker and sportswear retailer when it reports Thursday morning.
Evercore ISI analyst Michael Binetti said investors should expect a "very tough quarter." The company could warn again for the full year.
He pointed to several reasons why:
"In addition to pressured low-income consumers, we think key product launches like Air Max DN underperformed, and the recent Jordan 4 Industrial Blue is selling below MSRP in the resale channel ($185 vs $215 MSRP)."
Evercore ISI's take on Trump 2.0 tariffs
We have started to see Wall Street crunch the numbers on the economic impact of the new tariffs that former President Donald Trump would be keen on implementing if he were to win a second term.
Today Evercore ISI weighs in with its take:
"Presidents rarely enact or implement the full entirety of any campaign idea and Trump in particular likes to use bold ideas as a launching off. Nevertheless, it is critical to understand what a dramatic starting point Trump has put forward as that has implications for where we could ultimately land. Taken at face value, the combination of the proposed 10% across-the-board tariff and the 60% China tariff would lead to an overall U.S. weighted average tariff rate of nearly 17%, the highest since the 1930s Smoot-Hawley era. On a static basis (i.e., not assuming any dynamic economic effects), tariffs would rise from 0.3% of GDP to 1.9% of GDP – an increase of more than $400 billion annually. Such a dramatic move would almost certainly lead to major retaliation by trading partners."
Are markets under-pricing a new Trump trade war? (EvercoreISI)
