JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Crude oil prices retreat
- Tech stocks in recovery mode after clarification of OpenAI revenues
- SpaceX agrees to buy low-band spectrum licenses to challenge mobile carriers
It’s been a tough week for traders with a variety of headlines that have negatively impacted the markets, crude oil prices and Treasury yields. Early trading suggests we could end the week to the upside, but it won’t likely be enough to undo all of this week’s losses.
Crude oil prices were headed lower after President Trump cooled fears of further escalation in the Middle East when he said he sees no reason for an attack on Iran before the mid-terms and that discussions to end the conflict were underway again. WTI Crude Oil prices were flat in the mid $90-per-barrel range while Brent crude was down 0.48% to the high $103-a-barrel range.
Treasury yields are still edging modestly higher at 5.26%, impacting borrowing costs on mortgage, auto loans and credit cards.
As we often mention, once investors absorb a particular headline or take a deeper dive into it, they pull back from their knee-jerk reaction. Case in point: OpenAI’s projected revenues. Thursday, the Financial Times rocked technology and other stocks tied to OpenAI and artificial intelligence (AI) overall with a report that OpenAI’s revenues would fall $20 billion short of published reports to $50 billion.
In the early going, many of those stocks were trading in relief mode after published reports clarified that OpenAI’s $50 billion in annualized revenues were calculated at the end of September, according to Bloomberg. “The figure represents a projection of OpenAI’s yearly sales based on a shorter period,” according to the report. It was also reported that the widely reported $70 billion in annualized revenues also included gross revenues from partners, not net revenues.
All that information helped the Nasdaq Composite rebound, higher by 0.77%, while S&P 500 Index gained 0.34%. The Dow Jones Industrial Average, which was able to sidestep the sharp declines Thursday, was up moderately.
Airline shares are under pressure after Delta Air Lines turned in earnings that fell short of Wall Street’s expectations and cut its forward guidance. The culprit is a 62% jump in fuel costs that are eating into profitability despite the strong demand. Shares were off better than 3%. United Airlines shares fell 1% while American Airlines lost 1.3%. Southwest Airlines was off 0.89%.
SpaceX shares are rising 3.2% after the aerospace and satellite communications company agreed to acquire a handful of 800 MHZ low-band spectrum licenses from Grain Management. Low-band spectrum airwaves can travel farther and better penetrate physical obstacles such as buildings, walls, windows and trees.
The news presents a challenge to mobile carriers because SpaceX plans to develop a hybrid architecture for Starlink Mobile that combines terrestrial infrastructure with satellite connectivity, according to Reuters. AT&T shares are down7.1% and T-Mobile shares are off better than 9.4% while Verizon is losing 6.5%.
The SpaceX news appears to be powering cell-tower stocks as those companies could be major infrastructure beneficiaries. Crown Castle shares are up 16.3% while American Tower shares are higher by 7.67% and SBA Communications shares are moving 7% to the upside.
Happy Trading!
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