Article published at 8:52 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:
- FOMC minutes are coming out Wednesday
- Retail earnings will take center stage this week
- Nvidia takes sixth place on SpaceX’s biggest investors list
The three major market indices are hovering around the zero line in early trading as investors continue to absorb the upward trajectory throughout most of the past three weeks, powered mostly by robust earnings results. There was little movement on Friday, and it was to the downside.
The S&P 500 Index was flattened after three straight weeks of tapping fresh highs. On Friday, it closed off 0.17%. The Dow Jones Industrial Average was slipping to the downside while the Nasdaq Composite was edging higher in early trading after both skidded into the black Friday, The Dow lost 0.20% and the Nasdaq was lower by 0.28%.
Chips stocks are gaining in the early going as the view of the artificial investment trade has had a significant change over the last couple weeks. Earnings results were a big part of that, giving investors breathing room around the huge amounts of money devoted to its buildout. SanDisk is up by 6.6%, Western Digital higher by 5.2%, Micron 4.1% and Marvell by 6.3%.
The catalysts this week are all about the health of the consumer and the thinking from the Federal Reserve. When the Federal Open Market Committee (FOMC) reports the minutes from its July meeting on Wednesday, investors will be looking for any clues about why three FOMC members -- in a rare move -- broke ranks and voted against keeping rates unchanged at 3.50% to 3.75%. Were other members willing to go along? Were there any tense moments in the discussions? Should we expect such brief statements going forward? Moreover, what was the thinking on rate hikes before the year ends? Stay tuned.
A handful of economic reports, particularly tied to housing, are also on this week’s agenda. But a reading on consumers and their pocketbooks will highlight this week when many of the major retailers' report earnings – are they spending, stretched, trading down or shifting where their dollars. The quarterly earnings come on the heels of Friday’s unexpected 0.6% drop in July retail sales as well as the recent soft jobs report, typically signs of a sluggish economy.
Walmart has long been a consumer spending barometer because of its vast and assorted customer base, and its focus on groceries and everyday essentials. The big-box retailer opens its books before the bell on Thursday. Target will also shed light on consumer spending, but investors may be more interested in whether its turnaround is working when it reports Wednesday.
Watch, too, for Home Depot on Tuesday and Lowe’s on Wednesday – both before the market opens – for readings on big-ticket discretionary spending and even the health of the residential real estate industry. It’s been a tough haul for home construction and fixer-uppers given higher mortgage rates coupled with an estimated 30% jump in materials costs for building and renovating. Other retailers worth keeping tabs on are TJX, Ross Stores and BJ’s Wholesale, Wednesday, Thursday and Friday, respectively.
Deere’s books on Thursday will offer insight into the strength – or lack thereof – of the agricultural and the wider construction industries, both of which have undergone challenging times. Investors are likely going to be paying particular attention to data center construction activity.
Alibaba is also on Thursday’s agenda, with shares moving higher by 1.8%. The business-to-business marketplace also is getting a bump from news that it is selling its Lingxi Games video game for at least $1.5 billion to fund its artificial intelligence initiatives.
Nvidia shares are heading higher by almost 1% in early trading. On Friday, Nvidia ranked No. 6 in a roundup of SpaceX’s top investors after purchasing 122.8 million shares, valued at Friday’s close at $17.2 billion.
Nvidia’s is again considering using its massive cash reserve to back more AI infrastructure. This time it’s weighing a $3 billion investment in SB Energy, a SoftBank subsidiary developing a vast data center project for OpenAI in Ohio, The Information reported on Saturday. That investment is part of a separate deal Nvidia is discussing with SB Energy and OpenAI about backing $100 billion for the data center campus. Half of the $3 billion could be invested when the Ohio deal is inked; the other half concurrently into SB Energy’s plan to raise $5 billion in an upcoming initial public offering. These are only talks and could collapse at any time.
Happy trading!
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