Article published at 9:40 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:
- Nasdaq falls in early going as investors take profits
- Warsh and central bankers talking in Europe
- Gold and silver prices falling
After a blockbuster ending to a remarkable quarter, the markets seem to be taking a break as we enter the third quarter, wallowing slightly below the flat line in the early trading.
The Dow Jones Industrials is off by 0.19% while the S&P 500 is slipping by 0.21%. The Nasdaq Composite is gaining more momentum to the downside, moving toward a 1% decline.
WTI crude prices are falling too, which is good news for those who use gasoline. WTI crude prices fell below $68 a barrel, down 1.1%, suggesting that investors are not as nervous this time about peace talks between the U.S. and Iran blowing up. Oil containers are slowly making their way through the Strait of Hormuz.
As we’ve seen many times, how the markets open and how they close could be vastly different. There is plenty of noise out there to impact investors sentiment. Federal Reserve Chair Kevin Warsh, for example, is speaking on a panel discussion with other central bankers in Europe today. Many are listening for his take on the economy, both domestic and globally, and how that might impact the direction of interest rates in the U.S. Early on, he was keeping his interest rates thoughts close to the vest, but said the Fed is charting a new course to make better decisions on monetary policy.
Keep an eye on gold and silver prices, which have been falling in recent sessions, an indication that investors are widely expecting interest rates to rise. The relationship between precious metals and interest rates tend to be inverse because gold and silver are non-yielding assets that fall out of favor as investors move toward higher yielding investments.
Gold in particular has taken a pounding since reaching an all-time high in January, backtracking by nearly 16% in the second quarter, marking its worse quarter in 13 years. Since peaking in January, prices have dived some 25%. They’re edging up in the early going. Keep watch.
A standout in the early trading are shares of Meta, up better than 8% after Bloomberg reported that it was developing plans for a cloud infrastructure arm that will generate revenue by selling access to AI computing power.
The second quarter and first half ended with a bang, knocking out records – including a fresh peak for the Dow Jones Industrials -- and charting unbelievable and, in many cases, unprecedented gains. For the S&P 500 and the Nasdaq Composite, they closed the quarter in the best position in six years.
The Dow bumped up 0.26% to 52,319.20 in yesterday’s action. The S&P added 0.79% and the Nasdaq, once again the star performer, knocked out a 1.52% gain. Not surprisingly, the second quarter has been dominated by semiconductor and tech stocks, which also have been the catalyst behind sharp selloffs over the quarter. Investors have rotated in and out of those stocks, some buying on the dip, others looking for cover as they worried about the massive AI infrastructure capital expenditure spending that is without revenues or earnings to justify those dollars.
Here’s a look at how powerful this rally has been for a handful of stocks and their upward movement: Sandisk has racked up a jaw-dropping 845% year-to-date, Micron soared some 302%, Intel leapt higher by 277%, Western Digital sprang by 269% while Marvell jumped 198% and Advanced Micro Devices was higher by 171%.
Get this too: The record chip rally added an astonishing $2 trillion in combined market cap to Micron, Intel and Advanced Micro Devices, according to reports.
On the job front, U.S. openings and hires tracked a steady path in May at 7.6 million vacant posts, mostly unchanged from the 7.59 million the Labor Department reported a month ago. Wall Street was thinking openings would fall by as much as 10%. On the hiring front, some 5.2 million Americans landed new jobs, up 3.3%. Layoffs, however, edged up 1.1% from April’s 1%. For the most part, the results indicate the U.S. job market is stabilizing and looking toward expansion.
We’ll get a clearer picture on Thursday when the Labor Department releases the weekly jobless claims.
On the earnings front, Nike managed to outpace Wall Street’s low expectations --- apparently the ninth straight quarter to do so – but the stock was hammered in post-market trading, following a performance pattern that has gone on for years. Revenues dipped 1% and China continues to be an issue. Though China’s sales beat expectations, they were still 12% lower than the year-ago period.
The forward guidance was not any better as the company warned that the next six months would be challenging. On its conference call, the company – once the icon of athletic products – said it continues to face topline headwinds because “our consumer is under pressure around the world.” Shares dropped 7% in post-market trading and look to be some 3% lower in the early going today.
Higher prices at the pump and the wobbly economy – especially among lower-income consumers – nipped Constellation Brands’s sales for the quarter, but they still managed to outpace Wall Street’s expectations. Shares were up roughly 3% in the early going.
And it looks like beer is clawing to get on a comeback path, despite shifting consumer preferences and the rise of alternative beverages, not all of which include alcohol. The company’s beer sales jumped 2% on a year-over-year basis to $2.28 billion, driving the earnings beat as sales in Modelo Especial and Corona Extra rose, mostly driven by lower prices and more focused marketing, the company said.
Interestingly, sales at convenience stores and the like -- where gasoline is often sold -- slipped 0.3%, which the company attributed to a shift away from them to big-box stores with lower prices. As another example of the shift in consumer preferences away from beer and wine to ready-to-drink and flavored seltzers, not to mention “mindful drinking,” Constellation said it sees a bumpy road ahead for beer, organic wine and spirit sales to range from up 1% to down 1% on the year. Shares were edging 1% higher early on.
Good trading and good luck to the U.S. soccer team as it faces Bosnia and Herzegovina in a World Cup knockout game tonight!
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