Article published at 9:15 a.m. CT.
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Western Digital and Sandisk weigh on chip stocks
- SpaceX’s first tranche of IPO lockup opens
- Diageo launches $1 billion restructuring plan
The markets seem to be mostly taking a breather after an active period of trading prompted by earnings results. Most were stronger, but some offered forward guidance that seemed to disappoint investors, leading to downward pressure.
In early trading, the Dow Jones Industrial Average is on track to touch another record close after five straight sessions to the upside. It’s still early, but the index is up 0.24%.
The S&P 500 Index is moving higher as well, up 0.12%. But the Nasdaq Composite isn’t following that lead, falling again in early trading, off 0.05%.
Yesterday began in rally mode for all three major indices, but only the Dow managed to move again to a fresh peak, while the Nasdaq and the S&P fell into the red. The Dow advanced by 0.49%, or 263 points higher, while the Nasdaq took back 0.83% and the S&P slipped 0.17%, snapping its four-day streak to the upside.
Better-than-expected profits and sales don’t always pump stocks prices when coupled with soft guidance. Western Digital and Sandisk were witness to that late yesterday when they both reported strong fourth-quarter results but offered guidance that underwhelmed investors. Western Digital shares were falling 15% in early trading. Sandisk, the memory chip giant that Western Digital spun off, gave back nearly 10% in early trading.
Some profit-taking could also be in play. Western Digital shares have vaulted 443% over the last year, two-and-half times in three months, while Sandisk shares have shot up more than 1,300% during the same period.
Investors appear to be buying SpaceX shares on the dip ahead of an expected flow of stock that will begin hitting the market today. Anytime you have an increase of flow, shares could see marked volatility. Shares were higher by 2.43% in early trading.
The earliest tranche of the initial public opening lockup expires, meaning insiders and early investors will get their first opportunity to sell their shares. At this point, that represents up to 911 million shares, worth roughly $101 billion. It doesn’t mean everyone will sell, but just the threat of more shares hitting the market could mean the share price could bounce around – and meet upward resistance.
Unlike most IPOs that have a 180-day lock up period, SpaceX split theirs into five tranches. The next three tranches are spread between now and early December, with a large one in November. Executive Chairman Elon Musk’s 6.4 billion shares will be unlocked with the last tranche in June, 366 days after the IPO.
Speaking of SpaceX, Nvidia shares are on the upside after Musk said the firm will commit to using only Nvidia chips for its artificial intelligence infrastructure. That news also pressured shares of Advanced Micro Devices, which was one of the two main chip providers. Nvidia shares were heading higher by 1% and AMD was lower by 1.5%.
Spirits maker Diageo shares were higher despite falling sales and profits, pressured by slowing liquor sales in its North American division after $1.2 billion in repairment charges. However, shares were moving 5.3% to the upside after the maker of Guiness beer and Johnnie Walker whiskey said it is launching a $1 billion restructuring plan that will focus on growing the premiumization of those and other brand names. Shares added 5.5% in early trading.
Happy trading!
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