Stock market today: US stocks mixed as investors watch for cues
06/26/2024 22:10
Investors are wondering whether the recent rough ride for stocks is a sign of a coming retreat.
US stocks were a mixed bag on Wednesday after the S&P 500 and Nasdaq snapped a three-day losing streak, as investors watched for signs of life in the tech-driven rally and weighed the prospects for rate cuts.
The benchmark S&P 500 (^GSPC) fell around 0.1% while the Dow Jones Industrial Average (^DJI) dropped about 0.3%. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) was up about 0.3%.
The moves lower in stocks came as Treasury yields inched off their 3-month lows. The 10-year Treasury yield (^TNX) added 6 basis points to climb back to 4.3%.
A wobbly last handful of sessions has left investors wondering whether the drag on stocks is temporary or the start of a more solid retreat. The outsize impact of Nvidia stock on broader performance has underlined the question.
At the same time, the market is looking to economic prints for cues ahead of the key PCE inflation release on Friday. Federal Reserve speakers this week have underlined their caution in deciding to make interest-rate cuts, dependent on the data.
Elsewhere, Rivian (RIVN) shares surged more than 30% in morning trading after the EV maker announced an alliance with Volkswagen (VWAGY) that could boost its coffers by up to $5 billion. FedEx (FDX) stock jumped as its 2025 profit forecast topped Wall Street estimates.
Investors will watch how Chipotle (CMG) fares as its 50-for-1 stock split takes effect this morning — the largest in the history of the NYSE. Shares in the burrito seller are up 47% year to date.
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Consumer discretionary is the lone sector in the green
Consumer Discretionary (XLY) was the only of the 11 S&P 500 (^GSPC) sectors to be in the green on Wednesday morning. The sector was up about 0.6% after strong earnings from FedEx (FDX) sent shares of the company up nearly 15%. The positive results also offered a more upbeat read-through on the consumer overall leading into a report from Nike (NKE) expected Thursday after the bell.
Energy (XLE) was leading the losses on Wednesday, falling more than 1%.
Source: Yahoo Finance New home sales plummet to 6-month low
New home sales hit a sixth month low as high mortgage rates continued to weigh on buyers.
Sales of new single-family homes fell 11.3% to a seasonally adjusted rate of 619,000 units last month from April’s revised seasonally adjusted annual rate of 698,000, according to Census Bureau data released Wednesday.
May's number was the lowest since November. It also missed consensus expectations of 633,000 units, per Bloomberg data.
Affordability concerns have kept potential buyers from snapping up new homes and sellers, many of whom are locked into lower mortgage rates, from moving. The average weekly rate on the 30-year fixed mortgage still hovers well above 6%, according to Freddie Mac.
Meanwhile, home prices have been hitting new record highs. Prices in the 20 largest US metros increased 7.2% in the last 12 months ending in April, per S&P CoreLogic Case-Shiller data released Tuesday.
The drop in sales activity in May contributed to an uptick in available inventory, Bright MLS chief economist Lisa Sturtevant said in an email. At the end of the moth, the seasonally-adjusted estimate of new homes for sale was 481,000, marking the highest month-end new home inventory since 2008.
“Homebuilders had been enticing buyers with rate buydowns and other concessions, but for some homebuyers, those financial incentives are no longer enough to get them on the building lot,” Sturtevant said.
She added, "With more housing inventory and softening demand, expect the third quarter of 2024 to be a slower new housing market than the second half of 2023. However, while new home inventory is back at 2008 levels, other fundamentals in the market are significantly different than they were 16 years ago. The job market is strong, there is still pent-up demand among Millennials, and for all the increase in inventory, overall supply is still below pre-pandemic levels.”
Rivian jumps on 'meaningfully positive' investment from Volkswagen
Rivian stock (RIVN) surged nearly 30% on Wednesday after the EV maker announced a joint venture deal with Volkswagen (VWAGY), bringing key fresh capital into Rivian’s coffers.
Yahoo Finance's Pras Subramanian reports:
Volkswagen announced it intends to work with Rivian to create “next generation software-defined vehicle (SDV) architectures” to be used in both companies’ future EVs. The joint venture will use Rivian’s “zonal hardware design” and platform as the foundation of future vehicles, as well as Rivian’s electrical architecture expertise for the vehicles. Rivian will license its existing IP rights to the joint venture.
In exchange, Volkswagen will invest an initial $1 billion in Rivian through an “unsecured convertible note that will convert into Rivian’s common stock,” with up to $4 billion in additional investment staged through 2026 for a total infusion of $5 billion.
For Rivian, the news of fresh capital allays concerns over the company’s runway as it bridges to the release of its next-generation vehicles, the R2 and R3 mass-market SUVs. In terms of its cash cushion, Rivian said it had $5.98 billion at the end of Q1 versus $7.86 billion at the end of Q4.
"This news is meaningfully positive for RIVN as the agreement should provide the company with access to capital to not only fund the ramp-up of production of the R2 at its Normal, IL facility but also to build a new facility in Georgia for its mid-size vehicle platform," Bank of America analyst John Murphy wrote in a note to clients on Wednesday. "We have assumed RIVN would need to raise more capital, and VW's investments in RIVN will prove valuable in helping it achieve the scale necessary to get to positive free cash flow."
Murphy also noted potential benefits from cost savings and operating efficiencies in the joint venture deal, which could ultimately lead to higher gross margins.
Stocks slide at the open, yields rise
US stocks slipped on Wednesday after the S&P 500 and Nasdaq snapped a three-day losing streak, as investors watched for signs of life in the tech-driven rally and weighed the prospects for rate cuts.
The benchmark S&P 500 (^GSPC) fell around 0.2% while the Dow Jones Industrial Average (^DJI) dropped about 0.4%. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) slid about 0.1% as Nvidia (NVDA) extended its rebound.
The moves lower in stocks came as Treasury yields inched higher. The 10-year Treasury yield (^TNX) added 6 basis points to climb back to 4.3%.
What's really happening at FedEx and UPS
Within the past four days, investors have witnessed the fundamental remapping of America's two iconic package shippers: FedEx (FDX) and UPS (UPS).
I am just not sure those investors understand how laser-focused each respective management team is on becoming more efficient and driving better margins by unwinding legacy thoughts.
FedEx shares are up 15% in the pre-market as the company surprised the masses by saying it's exploring strategic alternatives for its LTL (less than truckload) business. FedEx has the largest LTL franchise in the US, but growth has slowed and its profit margins lag those at competitors.
EvercoreISI analyst Jonathan Chappell did a little numbers crunching overnight, and came up with an intrinsic value on FedEx of $362 a share. That assumes it no longer operates an LTL business and becomes solely focused on its Ground and Express franchises.
FedEx shares are currently trading at $292 in the pre-market.
"There is likely to be a sum of the parts premium in the stock until confirmation of the path forward," said Chappell.
I underestimated FedEx CEO Raj Subramaniam.
His CEO tenure got off to a rocky start with a few bad quarters, and I thought the near FedEx lifer wasn't going to challenge the status quo. That appears to not be the case as Subramaniam is showing a knack for aggressive cost-cutting and a desire to challenge the status quo even as founder Fred Smith watches over him on the board.
As for UPS, on Sunday it unloaded its logistics business to RXO (RXO) for $1 billion.
I have known UPS CEO Carol Tome going back to her CFO days at Home Depot (HD). She has always — and I mean always — looked for ways to do business more efficiently while not hurting the core business. That's what she has been doing at UPS since day one, and I suspect she has a few more tricks up her sleeve to drive costs down now that the logistics business is sold.
Electrifying move in Rivian after $5 billion VW deal
Rivian (RIVN) is ripping higher by 39% in the pre-market after its buzzy $5 billion deal with Volkswagen (VWAGY).
The deal is broken down into a $3 billion direct equity investment into Rivian and $2 billion investment into a 50/50 owned joint venture.
The company will be holding an investor day Thursday at its Illinois factory, so I suspect the stock could stay volatile into the weekend.
Here are a couple ways to unpack the new Rivian/VW tie-up.
Implications for Rivian
Rivian goes from having Wall Street be concerned about the need to raise more funding (speculation was north of $4 billion) to removing that risk from the table in the medium term.
"The $3 billion equity injection over the 2024-26 period should keep Rivian funded through the launch of R2 and the build-up of the Georgia facility," said Jefferies analyst Philippe Houchois in a client note.
What it means for the wider auto industry
Piper Sandler's Alexander Potter thinks the deal sends a key signal to the auto industry at large, and its many investors.
"Specifically, it suggests that proprietary ECUs, electrical architectures, and software are necessary for automakers to control themselves. Rivian and Tesla (TSLA) have long advocated for in-house mastery of these technologies, and now Volkswagen is (apparently) attempting to replicate their approach. New Chinese brands are moving at an unprecedented speed, and only through vertical integration can other automakers hope to keep pace," Potter says.
Spotlight on Lucid
Citi's Itay Michaeli is calling out Lucid as a derivative trade off the deal.
"We’d highlight Lucid (where shares are down 41% YTD) as one name that could come into greater focus given its leading battery efficiency and openness to licensing to other automakers. It’s also conceivable that the proposed VW-Rivian JV could improve EV sentiment more broadly," says Michaeli.
Lucid shares are up 9% pre-market. The company's ticker page is tops on the Yahoo Finance trending ticker page.
It's Chipotle stock-split day
Full disclosure on Chipotle (CMG) stock-split day.
Having done this for 21 years, I know a stock split doesn't change the intrinsic value of the company whose stock is being split. But I must admit, going onto Chipotle's ticker page on Yahoo Finance this morning and seeing $65 a share as opposed to $3,283 (yesterday's closing price) initially made me think "Wow, the stock is cheaper — time to buy!"
I suspect others will have that initial feeling as well. But I remind you that the company is no different fundamentally than yesterday at the close.
Yahoo Finance's Brooke Dipalma reports here on what the stock split means to investors.
