Market Performance
Stocks experienced mixed action on the first session of the new month. The S&P 500 (-0.1%) and Dow Jones Industrial Average (-0.5%) settled lower, while the Nasdaq Composite logged a 0.3% gain.
Key Movers
- NVIDIA (NVDA): Gained 4.9% to $1150.00 after introducing new products, limiting downside moves in the major indices.
Economic Concerns
Concerns about economic growth kept the broader market in check. The ISM Manufacturing Index for May showed a faster pace of contraction than expected (actual 48.7%; expected 49.6%), indicating a contraction in activity.
Bond Market
- 10-yr note yield: Fell 11 basis points to 4.40%
- 2-yr note yield: Fell seven basis points to 4.82%
Dropping market rates had recently supported equities, but worries about an economic slowdown affecting earnings prospects drove stock market action today.
GDP Forecast
The Atlanta Fed GDPNow model estimate for Q2 real GDP growth is now 1.8%, down from 2.7% on May 31, in response to the soft data.
Commodities
- WTI crude oil futures: Settled sharply lower at $74.29/bbl, down 3.6%, reflecting slowdown concerns and potentially weaker demand for oil.
This price action contributed to selling in the S&P 500 energy sector, which dropped 2.6%. The utilities (-1.2%) and industrial (-1.3%) sectors followed as the next worst performers. Meanwhile, the information technology sector (+1.0%) led the pack, followed by the health care sector (+0.7%).
Speculative Buying
There was speculative buying activity in the meme stock space after "Roaring Kitty" posted a screenshot showing a big position in GameStop (GME, Financial), which rose 21.0% to $28.00.
Year-to-Date Performance
- Nasdaq Composite: +11.8% YTD
- S&P 500: +10.5% YTD
- S&P Midcap 400: +6.4% YTD
- Dow Jones Industrial Average: +2.1% YTD
- Russell 2000: +1.6% YTD
Review of Today's Economic Data
- May S&P Global US Manufacturing PMI - Final: 51.3 (Prior 50.0)
- May ISM Manufacturing Index: 48.7% (Consensus 49.6%; Prior 49.2%)
The key takeaway is the faster pace of contraction in manufacturing activity, raising concerns about the economy missing its mark with a soft landing.
- April Construction Spending: -0.1% (Consensus 0.2%; Prior -0.2%)
The key takeaway is that nonresidential spending was down in both private and public construction markets, which will be a drag on Q2 GDP growth.
Today's News
Morgan Stanley's (MS) E*Trade is considering removing meme-stock trader Keith Gill from its platform due to concerns over potential stock manipulation. Gill, known as Roaring Kitty, recently disclosed a significant position in GameStop (GME, Financial), including $115.7M in stock and options. Executives at Morgan Stanley are debating the risks of his actions and the potential backlash from his followers. GameStop stock surged 21% on Monday, continuing its upward trend.
GitLab (GTLB, Financial) saw its shares rise 1% in extended-hours trading after reporting fiscal first-quarter results that exceeded expectations. The company earned an adjusted $0.03 per share, with revenue increasing 33% year-over-year to $169.2M. GitLab's CFO highlighted strong top-line growth and positive cash flow for the first time. The company also provided an optimistic outlook for the next quarter, expecting adjusted earnings between $0.09 and $0.10 per share.
HubSpot (HUBS, Financial) may be exploring strategic options amid acquisition interest from major tech companies. Reports suggest that Google (GOOGL, Financial) and Amazon (AMZN, Financial) are interested in acquiring the marketing software firm. HubSpot's shares fell 2.3% on Monday, despite being up 9% year-to-date. Goldman Sachs (GS) and Bank of America (BAC) are reportedly advising on the potential deals.
Goldman Sachs added five stocks to its "conviction list" of U.S. stocks to buy, including Enphase (ENPH, Financial), Sempra (SRE), Edwards LifeSciences (EW), Teradyne (TER), and Brixmor Property Group (BRX). The firm removed First Solar (FSLR), Southern Co. (SO), Target (TGT), and Simon Property Group (SPG) from the list. Goldman Sachs highlighted the growth potential and strategic positioning of the newly added stocks.
A technical glitch caused volatility halts in Berkshire Hathaway's (BRK.A) shares, which appeared to lose almost 100% of their value at one point. The NYSE ruled to unwind all erroneous trades that occurred during the glitch. Berkshire Hathaway's class A shares ended the session up 0.6%, closing at $631,285.045. The issue was related to a new software release by the NYSE, owned by Intercontinental Exchange (ICE).
GameStop (GME, Financial) continues to experience buying pressure, forcing short sellers to reconsider their positions. The stock is up 109.41% from a month ago and 32% year-to-date. Short sellers have faced over $1B in losses due to the recent surge. Keith Gill's significant holdings in GameStop have contributed to the stock's rise, leading to increased volatility and short-covering activity.
Raytheon Technologies (RTX, Financial) declared a quarterly dividend of $0.63 per share, maintaining its forward yield at 2.35%. The dividend is payable on September 5 to shareholders of record as of August 16. Raytheon's consistent dividend policy reflects its robust financial health and commitment to returning value to shareholders.
VF Corp (VFC, Financial) appointed Caroline Brown as the global brand president of The North Face, effective June 10. Brown resigned from the company's board of directors to take on the new role. VF Corp also added Mindy Grossman and Kirk Tanner as independent directors, while Benno Dorer decided not to seek re-election at the 2024 Annual Meeting.
CrowdStrike Holdings (CRWD, Financial) is set to report first-quarter earnings, with analysts expecting strong results driven by high demand for its cybersecurity solutions. The company is projected to post earnings per share of $0.89 on revenues of $904.82 million. Morgan Stanley predicts CrowdStrike's valuation could reach $100 billion within the next 12 months, driven by advancements in artificial intelligence.
Toronto-Dominion Bank (TD, Financial) is under investigation by U.S. federal authorities for potential anti-money-laundering control weaknesses. Specific cases involve employees allegedly skirting compliance procedures to facilitate cash transfers. TD has taken steps to enhance its compliance measures and has terminated employees involved in the reported incidents.
Take-Two Interactive (TTWO, Financial) continued its upward trend, closing 2% higher at $163.64 on Monday. The video game publisher has gained over 5% in the past six sessions. Analysts maintain a positive outlook on TTWO, with a consensus rating of "Buy" and expectations of strong growth driven by upcoming game releases and strategic initiatives.
Energy stocks lagged on Monday as crude oil futures fell to their lowest levels since early February. OPEC+ agreed to maintain production cuts into 2025, but the market reacted negatively due to concerns over potential discord within the group. Analysts view the decision as bearish, anticipating challenges in maintaining low production levels if market conditions soften.
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