Stock market today: Nasdaq, S&P 500 turn higher ahead of huge week on Wall Street
06/10/2024 23:46
Investors are looking ahead to the Fed's policy decision and key inflation data later in the week as they scale back rate-cut bets.
Both the Nasdaq and S&P 500 reversed earlier losses on Monday as investors braced for a Federal Reserve policy decision and key inflation data in the week ahead, with Nvidia (NVDA) and Apple (AAPL) events in immediate focus.
The Dow Jones Industrial Average (^DJI) dropped around 0.1%, coming off a muted end to a winning week for the three major gauges. The benchmark S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) each climbed about 0.1% and 0.3%, respectively.
Stocks are treading water after signs of strength in a mixed May nonfarm payrolls report reinforced bets that the Fed will keep interest rates at a two-decade high for longer. Trader expectations for a cut in September have fallen, while those for November have risen, according to the CME FedWatch tool.
Read more: How does the labor market affect inflation?
Investors are now looking ahead to the Fed's next rate decision and May's Consumer Price Index inflation reading, both due on Wednesday, which will provide another big test for stocks.
In the meantime, eyes are on Nvidia's (NVDA) stock split and a key Apple (AAPL) event as catalysts for stocks on Monday.
Wall Street expects trading in Nvidia to be volatile in the wake of the 10-for-1 split as retail buyers flood in. Some strategists are calling the move a "generational opportunity."
Monday also brings the first day of Apple's most highly anticipated developers conference in years, where CEO Tim Cook is expected to reveal a big push into AI to catch up with rivals.
Elsewhere, investors kept a watchful eye on potential fallout from political upsets in Europe. France's President Macron called a snap national election after a trouncing from the far right in Sunday's EU-wide vote, while Germany's leader also suffered a crushing defeat. The euro (EUR-USD=X) slumped to its lowest level in a month, while the Paris stock index (^FCHI) sank around 2%.
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S&P 500, Nasdaq rise as Dow slips
US stocks mostly recovered from earlier losses as the benchmark S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) flipped into positive territory by afternoon trading while the Dow Jones Industrial Average (^DJI) dipped about 0.1%.
Yields edged higher with the 10-year treasury (^TNX) rising about 3 basis points to trade near 4.46%.
Oil also moved to the upside with West Texas Intermediate (CL=F) rising more than 2% to trade just over $77 per barrel. Brent (BZ=F), the international benchmark price, also climbed around 2% to hover above $81 a barrel.
All eyes on Fed's 'dot plot' this week
It's a busy week on Wall Street with the Federal Reserve's interest rate decision on tap for Wednesday.
Along with its policy announcement, the Fed will release updated economic forecasts in its Summary of Economic Projections (SEP), including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future.
Yahoo Finance's Jennifer Schonberger breaks down what to expect:
Heading into this week, most market watchers believe policymakers will dial their expectations back. The question is by how much.
In March, the dot plot revealed a consensus among Fed officials for three cuts. Now that projection is in question following a string of sticky inflation readings, cautious commentary from Fed officials, and a US labor market that added more jobs than expected in May.
Most investors now expect little more than just one cut for 2024.
"I think the policy path will change a bit," said former Kansas City Fed president Esther George, who predicts the median among 19 policymakers could drop to one cut, even as a healthy number of officials still argue for two.
"My expectation is the dots will show and confirm what I think the market has picked up, and that is fewer rate cuts with the inflation forecast holding."
Fed Chair Jay Powell and his colleagues on the Federal Open Market Committee have been emphasizing they want to be sure inflation is moving "sustainably" down to their 2% target before starting cuts and that, in the interim, they expect to hold rates higher for longer.
That stance isn't expected to change this week. Officials are widely expected to hold the Fed’s benchmark rate steady on Wednesday, leaving it at a 23-year high.
Southwest stock climbs after Elliott Management discloses $1.9 billion stake
Shares of Southwest (LUV) jumped as much as 8% on Monday after activist investor group Elliott Investment Management reported a $1.9 billion stake in the airliner and called for a leadership shake-up.
In a letter to the company's board of directors, Elliot said Southwest has suffered from "poor execution" and criticized its leadership team for "stubborn unwillingness" to evolve the company's strategy.
That's led to "deeply disappointing results for shareholders, employees and customers alike."
"After 18 months of intensive research, we are convinced that Southwest represents the most compelling airline turnaround opportunity in the last two decades," the firm wrote. "The significant investment we have made reflects our conviction that, with the right leadership, Southwest can regain its status as an industry-leading airline."
Southwest has struggled as a result of Boeing's ongoing safety issues, with the airliner referring to Boeing's delays as "significant challenges" for this year and 2025. It previously warned that the issues will result in slowing growth going into next year.
In a statement to Yahoo Finance, Southwest said in response: "We maintain an open dialogue with our shareholders and value their perspectives related to enhancing shareholder value."
"We were first contacted by Elliott yesterday and look forward to better understanding their views on our company. The Southwest Board of Directors is confident in our CEO and management’s ability to execute against the company’s strategic plan to drive long-term value for all shareholders, safely and reliably serve our customers and deliver on our commitments to all of our stakeholders."
With Monday's gains, shares of Southwest have risen about 2% compared with the S&P 500's (^GSPC) 12% rise over that same time period.
Nvidia begins trading after 10-for-1 stock split
Nvidia stock (NVDA) began trading Monday on a new 10-for-1 split basis. That means one share of the artificial intelligence giant went from Friday's closing price of $1,208.88 to $120.88. The stock fell about 2% shortly after the opening bell.
Yahoo Finance's Dan Howley and Josh Schafer report:
The split means that owners of Nvidia common stock held as of the close of market on Thursday received 10 shares for each one share they held. For example, if a shareholder owned four shares of Nvidia as of Thursday, they'll now own 40 shares post-split.
Stock splits make owning shares of a stock more affordable by lowering the price of individual shares without diluting the value of existing shareholders' total holdings.
"The stock split is going to make Nvidia a lot more reachable for a lot of these retail traders," Option Research & Technology Services' Matt Amberson told Yahoo Finance last Thursday. "Now, you rarely see a stock over $1,000 with a 50% implied volatility, so the prices of the options are extraordinarily high, so options traders are really looking forward to the split."
Nvidia's split comes after the company's total market valuation briefly eclipsed $3 trillion on Wednesday, pushing the chip firm past Apple to become the second-most-valuable publicly traded US company.
Shares of Nvidia have skyrocketed thanks to the explosion in interest in generative AI that kicked off when OpenAI debuted its ChatGPT software in late 2022. Since then, hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT) have been battling to get their hands on Nvidia's hardware to power their own generative AI platforms.
Stock splits are viewed by investors as a sign of strength, and consequently companies that split their stock typically outperform the S&P 500 in the year following their announcement.
On average, stocks rise 25% in the 12 months following the announcement of their split compared to an average return of 12% from the S&P 500 in the same time frame, per analysis from Bank of America. This has been true "across market regimes," BofA investment and ETF strategist Jared Woodard wrote in a note to clients.
Notably, the trend includes the time period from 2000 to 2009, amid the unwinding of the tech bubble. Nvidia shares are up about 27% since the company announced the split on May 22.
Stocks open lower ahead of big week
US stocks edged lower to kick off a busy week on Wall Street that includes a Federal Reserve policy decision and key inflation data.
The Dow Jones Industrial Average (^DJI) hovered just below the flatline, coming off a muted end to a winning week for the three major gauges. The S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) each fell around 0.2% and 0.3%, respectively.
Your top retail stock in election season...
JPMorgan (JPM) is digging into retail names and has emerged with its top play into an uncertain election season.
No surprise that it's Walmart (WMT), which is hot off a well-received annual shareholder meeting last week that saw it add Chipotle (CMG) CEO Brian Niccol to its board.
Here's more behind JPM analyst Chris Horvers's Walmart upgrade:
"We believe the stock adds a strong balance of defense and offense on both the top and bottom lines in a soft (to softening) consumer backdrop with a highly uncertain 2H24 ahead. Moreover, we believe estimates remain beatable while there is the potential for an uptick in the multiple as we expect WMT to go on a multi-year double-digit EPS growth algo given market share gains, rising alternative profit pool benefits, and International segment profit inflection."
RBC markets note making the rounds this AM
A good note from RBC veteran strategist Lori Calvasina is making the rounds this morning.
"We continue to worry that market participants have gotten a little too optimistic about the timing of cuts. Friday’s jobs report didn’t do anything to alter that view given the strength of the payrolls number," Calvasina said.
She goes on to "stress test" her models, leaving her with two conclusions worth considering.
"One stress test bakes in no further Fed moves, stickier-than-expected inflation, and 10-year yields that don’t quite make it above 5%. That stress test points to around 4,900 on the S&P 500 on our EPS forecast and nearly 5,100 on consensus EPS," Calvasina wrote.
She added, "Another stress test bakes in a few more hikes, hotter inflation that breaks well above 3% on PCE, and a 10-year yield well north of last year’s high to 5.5%. That stress test pulls the trailing P/E down to 19.1x and points to about 4,500 for fair value for the S&P 500 on our EPS forecast and the 4,600-4,700 range using consensus EPS."
