Market Overview
It was a somewhat lackluster session in the stock market. The S&P 500 (+0.1%), Dow Jones Industrial Average (+0.1%), and Nasdaq Composite (+0.3%) settled slightly higher than yesterday, while the Russell 2000 outperformed, settling 1.0% higher.
Market Breadth
Market breadth was positive, but there wasn't a lot of conviction on either side of the tape. Advancers had a roughly 3-to-2 lead over decliners at the NYSE and the Nasdaq.
Investor Sentiment
The lack of conviction today stemmed from a wait-and-see stance in front of the May Personal Income and Spending report tomorrow at 8:30 ET, which features the Fed's preferred inflation gauges in the form of PCE and core-PCE price indexes.
Mega Cap Stocks
Ongoing buying interest in the mega cap space played an integral role in index-level performance. Shares of Amazon.com (AMZN, Financial) moved further into record territory after crossing $2 trillion in market cap. The Vanguard Mega Cap Growth ETF (MGK) logged a 0.3% gain.
Semiconductor Stocks
Semiconductor-related names acted as a drag on the broader market after Micron's (MU) earnings report. NVIDIA (NVDA, Financial) was an influential standout from the space.
Bank Stocks
Some bank stocks traded higher as the Fed's stress test showed that the 31 large banks subject to the test this year have sufficient capital. The SPDR S&P Bank ETF (KBE) closed 1.0% higher, and the SPDR S&P Regional Banking ETF (KRE) showed a 1.1% gain. Still, the S&P 500 financial sector fell 0.3% today.
Treasury Yields
Treasury yields settled lower in response to this morning's data and a stellar $44 billion 7-year note sale. The 10-year note yield, at 4.33% shortly before 8:30 ET, settled at 4.29%, which is three basis points lower than yesterday. The 2-year note yield, at 4.76% before 8:30 ET, settled at 4.72%.
Year-to-Date Performance
- Nasdaq Composite: +19.0% YTD
- S&P 500: +15.0% YTD
- S&P Midcap 400: +5.1% YTD
- Dow Jones Industrial Average: +3.9% YTD
- Russell 2000: +0.6% YTD
Economic Data Review
- May Adv. Intl. Trade in Goods: -$100.6 billion; Prior was revised to -$98.0 billion from -$99.4 billion
- May Adv. Retail Inventories: 0.7%; Prior 0.7%
- May Adv. Wholesale Inventories: 0.6%; Prior 0.2%
- Weekly Initial Claims: 233K (consensus 238K); Prior was revised to 239K from 238K
- Weekly Continuing Claims: 1.839 million; Prior was revised to 1.821 million from 1.828 million
- May Durable Orders: 0.1% (consensus -1.2%); Prior was revised to 0.2% from 0.7%
- May Durable Orders ex-transportation: -0.1% (consensus 0.2%); Prior 0.4%
- Q1 GDP - Third Estimate: 1.4% (consensus 1.3%); Prior 1.3%
- Q1 GDP Deflator - Third Estimate: 3.1% (consensus 3.1%); Prior 3.0%
- May Pending Home Sales: -2.1% (consensus 2.3%); Prior -7.7%
Key Takeaways
- The elevated level of continuing jobless claims suggests laid-off workers are facing longer wait times before finding a new job, indicating a softening labor market.
- New orders for nondefense capital goods excluding aircraft, a proxy for business spending, declined 0.6% month-over-month.
- The Q1 GDP report is dated, but the slowdown in personal spending is noteworthy in light of more anecdotal evidence suggesting consumers are reining in discretionary spending.
Upcoming Economic Data
Friday's economic calendar features the Fed's preferred inflation gauge in the form of PCE Price Indexes in the May Personal Income and Spending report. Other data tomorrow include:
Guru Stock Picks
Hennessy Japan Fund has made the following transactions:
Hennessy Japan Small Cap Fund has made the following transactions:
Today's News
The National Football League (NFL) has lost an antitrust trial regarding its NFL Sunday Ticket broadcast package and has been ordered to pay approximately $4.7 billion in damages, which could be tripled under antitrust law. A Los Angeles jury sided with a class of football-fan plaintiffs who accused the league of collaborating with DirecTV to inflate prices for fans, especially for out-of-market games. This rare antitrust case that went to trial could potentially cost the NFL over $14 billion, prompting considerations for a new model.
Nike (NKE, Financial) shares are down 5% after the company’s CFO acknowledged macroeconomic challenges that hinted at a potential guidance cut. The sportswear giant reported an adjusted profit of $1.01 per share, beating expectations, but revenue fell short, declining 2% against estimates for a 1% gain. Foot Locker (FL, Financial) shares also dropped by 3% in sympathy. Nike's CFO, Matthew Friend, noted that the company is taking steps to become more competitive, but investors are bracing for a guidance cut during the earnings call.
Nokia (NOK, Financial) has announced the acquisition of Infinera (INFN, Financial) for $2.3 billion, aiming to bolster its optical networking capabilities, particularly in North America. Infinera's stock surged more than 25% in early post-market trading following the announcement. The deal, expected to close in the first half of 2025, represents a 28% premium to Infinera’s closing share price on June 26. Nokia CEO Pekka Lundmark highlighted the strategic fit between the companies and the expected 10% EPS accretion from the acquisition.
Uber Technologies (UBER, Financial) and Lyft (LYFT, Financial) have reached a settlement with Massachusetts Attorney General Andrea Campbell’s office to resolve a multi-year lawsuit over the classification status of their drivers. As part of the agreement, both companies will raise their minimum pay to $32.50 per hour and offer additional benefits. Uber will also pay $148 million, and Lyft will pay $27 million to the state for driver restitution payments.
Amazon (AMZN, Financial) announced a delay in the production of its Project Kuiper satellites, now expected to start in the fourth quarter, with beta testing slated for next year. Despite the delay, Amazon shares rose 2.1%, hitting a new 52-week high. The Kuiper satellites aim to compete with SpaceX's StarLink, and Amazon has contracts with SpaceX, Arianespace, Blue Origin, and United Launch Alliance for satellite deployment.
Southern Co. (SO, Financial) CEO Chris Womack stated that the U.S. needs at least 10 GW of additional nuclear capacity to meet growing energy demand and climate goals. Building new nuclear plants is costly and time-consuming, as evidenced by Southern’s Plant Vogtle project, which opened seven years behind schedule and doubled its original cost estimates to over $30 billion. Womack emphasized the need for government incentives to boost the nuclear industry.
Wolfe Research anticipates that investors will continue to favor mega-cap technology stocks amid increasing market volatility. The firm highlighted that high-flyers like Nvidia (NVDA, Financial) and Broadcom (AVGO, Financial) have seen some sell-off, while Alphabet (GOOG) and Meta Platforms (META) continue to perform well. Wolfe Research expects the "Magnificent 7" stocks to remain attractive to investors navigating economic data surprises.
Walgreens Boots Alliance (WBA, Financial) announced a significant round of store closures as part of a strategic review, which negatively impacted shares of its rival CVS Health (CVS) and pharmaceutical distributor Cencora (COR). Walgreens’ Q3 results for fiscal 2024 fell short of expectations, causing its stock to drop significantly. CVS and Cencora shares also saw declines in response to the news.
GuruFocus Stock Analysis
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