Article published at 9:00 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:
- Investors await Kevin Warsh’s Fed debut
- Triple witching could lead to volatility
- SpaceX continues to challenge leadership
Investors are mostly standing on the sidelines in early trading ahead of the Federal Reserve’s first meeting with Kevin Warsh, the new chair of the Fed. They’re also again navigating the topsy-turvy movements that have dominated market activity in recent sessions as rotations in and out of technology stocks, coupled with geopolitical news, are leading the bumpy rides.
As steady as market activity seems early on, it could get frenzied at any time. And don’t forget triple witching day is tomorrow, ahead of the usual Friday schedule because of the Juneteenth holiday. Intense volatility is not uncommon when stock options, stock index options and stock index futures all expire on the same day, so prepare for that.
The Fed is widely expected to keep interest rates exactly where they are at a range of 3.5% to 3.75%. The CME FedWatch tool is virtually guaranteeing it, with a 99.6% probability that will mark the fourth straight session of an interest rate standstill.
What is unknown at this point is when we might see another move. The FedWatch probabilities have jumped around the last two weeks, at one point leaning toward a December hike. But as of early today, any real changes aren’t expected until March. That, of course, could shift gears at any time, dependent on how the economy is shaking itself out.
Oil prices, which were dropping yesterday, are inching upward as details of the memorandum of understanding to end the conflict between the U.S. and Iran are still mostly under cover. President Trump said today that the deal was not final, adding that he will “go right back to dropping bombs” on Iran if he doesn’t like the pact. That is pushing WTI crude up almost 1% to $79 a barrel. Still below $80 per barrel, but not near the $67 to $70 per barrel before the war.
As investors rotate in and out of tech stocks, the Nasdaq Composite is rebounding by 0.65%, while the Dow Jones Industrial Average is edging lower and S&P 500 is doing the opposite —but barely— in the early going. SpaceX shares are up again, so far by about 3%, pushing its market capitalization into historic levels that is rocking the upper corporate tiers.
Yesterday’s trading was a mixed bag, to say the least. The Dow danced over 52,000 for the first time at 52,191, before ending the day higher by 0.64%, at 51,991, a record close. That was thanks to lower crude oil prices and a rotation back into cyclical sectors such as financials, which led the upward momentum.
That rotation out of tech and software techs slammed the Nasdaq, which shaved 1.15% when trading settled. The S&P 500 Index also fell, but not with as much gusto as the Nasdaq, losing 0.57% after the bell rang. Seven of the S&P’s 11 sectors were positive, but tech and energy weighed the index down.
That broad tech breather was noteworthy given the myriad of the stocks that tumbled. Micron, for example, touched a fresh peak Monday, only to see profit-taking knock shares down 6.18% Tuesday. Still, the stock is up a whopping 752% over the past year. Marvell led the Nasdaq 100 pulldown, losing more than 9%, while Intel retreated by some 8%.
Other chips stocks caught up in the rotation and profit-taking include Advanced Micro Devices, which gave back more than 7%, Broadcom lower by more than 4% and Nvidia declined by 2%. Most are creeping lower in early trading.
And then there’s SpaceX, which some believe is sucking the air out of the Nasdaq 100 —and it’s not even listed on the index yet — as investors sell other shares to snap up SpaceX stock. Only three days into the stock market trading, and the rocket maker and AI behemoth got even bigger. Shares settled at $201.80, up 4.8%, but saw momentum push the stock price to $225.64 in intraday trading.
There are a few reasons why that grabbed investor attention: Since announcing an initial public offering price of $135, SpaceX’s shares have surged a head-spinning 62% and are set to extend gains today. That’s catapulted its market capitalization to once-unimaginable levels only three trading days into the stock market trading to $2.656 trillion. It also amazingly vaulted over Amazon’s market cap of $2.67 trillion, which took years to gain, to become the fifth largest U.S. company based on market cap.
Hitting that high yesterday morning pushed it ahead of Microsoft’s $2.92 market cap, but only briefly. Still, it’s on the heels of leaping over that. We’ll keep a close eye on how far up the market cap pole it will climb to outdo the three leaders – Apple at $4.38 trillion, Alphabet at $4.52 trillion and Nvidia at $5.05 trillion.
Investors sentiment can be tricky, especially with IPOs and the volatility that typically marks their first weeks and months of trading. SpaceX is a story stock that many investors are jumping into because they believe in Elon Musk’s visions. But it’s still a stock whose price will go up and go down, like all others.
Options trading debuted yesterday and the extreme interest and volatility offered a more nuanced look at the stock. More than 1.7 million contracts traded, with more calls trading than puts. That underscores the bullish optimism among investors but there’s still a cautious undertone.
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