Article published at 8:55 a.m. CT, updated at 9:03 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:
- CPI numbers fall in line with projections
- Major indices reverse course to the upside
- Strong earnings power tech stocks
The markets swung into positive territory in early trading and stayed there after the Consumer Price Index (CPI) soothed some inflation fears.
The CPI report’s numbers exactly matched Wall Street’s expectations of inflation, easing slightly to 3.4%, with core inflation, which excludes volatile gas and energy costs, improving to 2.4%. Though core inflation is still above the Federal Reserve’s 2% target, the slippage from last month’s 2.5% reading gives the Central Bank some wiggle room.
Inflation is the bigger worry for the Fed’s decision on the direction of interest rates, but last week’s weak job numbers are a factor as well. Still, with all the outside noise in play, we can view the economy in a positive light until some things are settled with the Iran situation. The CME FedWatch tool lightened up its look at an interest rate hike since yesterday, registering a 62% likelihood rates will stay steady at 3.5% to 3.75%.
The Dow Jones Industrial Average is moving 0.05% to the upside, with the S&P 500 Index is rising 0.22% and the Nasdaq Composite advancing by 0.50%, holding on to pre-market gains, reversing the downtrend earlier this week. Investors appeared to be waiting for the CPI report before jumping in or out of aggressive trading.
A handful of technology stocks are also fueling the market upside. Super Micro Computer assuaged Wall Street late Monday when it turned in profits that were nearly 90% higher than the year-ago period despite sales that fell short of expectations. The server company blamed delays in power, cooling and networking for the sales slip, but expects to make up the shortage in future quarters. Cash flow from operating activities was $747 million compared with a cash burn of $6.6 billion in the prior quarter. Net debt fell, too, to $1.2 billion compared with $7.5 billion in the third quarter, with cash and cash equivalents totaling $7.5 billion, the company said. Shares trekked 9.3% upward, right around its implied move.
CoreWeave shares are in rally mode after the artificial intelligence (AI) firm turned in revenues that doubled year-over-year, beating Wall Street’s expectations and offering a look into how AI could be paying off. Losses were narrower than projected. Capital expenditures hit $9.4 billion, also exceeding the Street’s outlook and ballooning debt to $35 billion. CoreWeave upped its full-year revenue guidance, citing a $104 billion backlog, a sign of ongoing expansion.
Shares continued their post-market expansion, trading 20% higher.
Lumentum Holdings are tracking higher by nearly 10% after it reported that revenue more than doubled in its fiscal fourth quarter and profits cleared Wall Street’s expectations. However, the optical and photonic products maker reported a GAAP loss of $7.2 billion tied to converting certain debt into stock. Looking ahead, Lumentum’s forecast surpasses Wall Street’s estimates.
Other tech stocks moving higher include Sandisk, up 6.2%, Micron at 4.3%, Intel rising by 2.9% and Nvidia stepping up by 1.3%.
Investors are eating up Cava Group shares after the restaurant chain said same-store sales, a critical metric, was up 9% for the second straight quarter. That helped boost second-quarter profits and earnings above projections. The Mediterranean fast-casual chain said the backlash it experienced from the cyclospora outbreak – even though it does not serve iceberg lettuce – was rebounding. Shares were rebounding too, up 17% after falling some 32% since the food safety concerns first surfaced in early May. Despite the upbeat results, Cava maintained its forecast guidance, citing “macro and geopolitical uncertainty.”
H&R Block shares are on the upswing by 13.5% after the tax preparation company raised its fiscal-year 2028 earnings and revenue outlook and upped its dividend 10%. Its fiscal fourth-quarter ended with sales lower on a year-over-year basis, but per-share earnings were higher, reflecting a mix of its client base, the company said.
Keep an eye out for Cisco Systems fiscal fourth-quarter earnings report after the market closes. Investors are more likely to be interested in what the cloud networking giant has to say than what numbers it unveils. The options market is signaling an 8% implied move in either direction, meaning a high of $130.06 and a low of $110.80. Cisco shares are climbing toward 2% in early trading, up 58.4% year-to-date.
Happy trading!
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