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:
- Volume is thin as investors head out for the holiday
- Crude oil is falling again
- Nonfarm payrolls disappointed
The markets are crawling into positive territory in the early going as our country – and investors – are prepping for the nation’s 250th anniversary of the day the Continental Congress adopted the Declaration of Independence.
As a reminder, the bond market closes at 2 p.m. ET today, and the New York Stock Exchange and the Nasdaq will shut down tomorrow for the long holiday weekend.
None of the three major indices was even a half of a percentage point higher on thin volume that is expected to fall off substantially as the day wears on and investors pack up for the long holiday weekend. The Dow Jones Industrials was up 0.33%, the S&P 500 higher by 0.15% and the Nasdaq up by 0.11% in the early going. Assuming they all stay in positive terrain for the entire trading session, the Dow is on track for its fourth straight week of advancements, while the S&P and Nasdaq could chart a third positive week in four weeks of gains.
The Labor Department said nonfarm payrolls, a closely watched measure of the changes in the number of folks employed in June, grew by 57,000. That’s about half of the 115,000 Wall Street was expecting. The May numbers were dramatically revised down to 129,000 from the 172,000 reported. At the same time, the unemployment rate slipped to 4.2% from last month’s 4.3%.
Remember, these numbers are based on surveys and, therefore, can be inconsistent, which is why we see so many revisions. Still, they give us a peek into what might be happening in the job market, which then leads to how consumer spending may shift in either direction. After the report, the CME’s FedWatch tool’s probability rate of interest rate hikes dropped to 52% from 62%.
Tensions are still tight but ships apparently are moving slowly but surely through the Strait of Hormuz as the U.S. and Iran hammer out a peace agreement. Crude oil prices are dropping for the third day, off better 1.6% to $67.73 per barrel. That’s the lowest level since February as diplomacy in the Mideast appears to be calming the industry.
Though prices at the pump nationwide are declining, oil experts say U.S. refiners are running incredibly hard right now, which explains why prices are still so much higher than they were a year ago. Ships are moving, but the traffic of about 40 to 80 ships per day is still far below the normal daily traffic of 130 to 140 ships making it through the strait before the crisis began in March. Keep an eye on how negotiations progress.
It was a ho-hum day of trading yesterday as volume began to wane ahead of the long holiday weekend and with investors still absorbing Monday’s impressive close to the second quarter. The three major indices barely budged then, too, before ending in negative territory.
Though the Dow touched a fresh summit of 52,742.66 in intraday trading, it couldn’t keep it and slid slightly into the red to finish the session lower by 0.3%. A chunk of that could be because of the nearly 7% drop in Caterpillar, a heavy weight among the 30 Dow components, after headlines hit that well-known "Big Short" investor Michael Burry said on social media that he was shorting the stock. He also said he was bearish on Nvidia, which fell 2.5%, and Applied Materials, which tumbled nearly 10%. Caterpillar shares were trading slightly higher by about 0.66% in the early going.
Caterpillar shares also hit the S&P 500, which slumped 0.2% at the close. The Nasdaq Composite took a tumble as well after major semiconductor names got hit, falling 0.7% on the session. Micron and Sandisk each gave back roughly 11%, in what could be a profit-taking measure. But remember they’re both sitting on incredibly healthy gains year-to-date.
Elsewhere Meta shares ended the session nearly 9% higher after the social media network said it is developing what it calls “Meta Compute,” which will rent its computing capacity to outside developers. In essence, it’s creating another source of revenue through its massive AI data centers to help defray the astronomical costs it is investing in AI. Today, shares are falling another 1%.
General Mills shares climbed 8.5% after the cereal maker delivered fourth-quarter adjusted earnings that bested Wall Street’s expectations. Executives said they expect a “difficult consumer backdrop” going forward, which will challenge sales. They also said they plan to strip some $3 billion in costs by 2030 in an effort to better streamline efficiency in the business.
Happy Birthday America!
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