Article published at 9:05 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:
- Markets start shortened week to the upside
- Comcast spins off media arm from technology
- Week marks end of quarter and first half
It looks like we’re back on the merry-go-round as stocks were rising across the board in the early going, shaking off last week’s harsh pullback as well as the weekend tensions between the U.S. and Iran that appear to be taking a pause.
The two traded military strikes over the weekend that derailed negotiations, but agreed to get back to the table today to continue to knock out a peace agreement that will end the war that is going into its fifth month. Some ships were inching their way through certain routes through the Strait of Hormuz, according to reports.
Oil prices are on the upswing, with WTI crude higher by 1.2% to trade back in the $70 range. Major oil companies including Chevron, ExxonMobile, ConocoPhillips and BP also were edging higher. The Dow Jones Industrial index advanced by 0.46% and the S&P 500 was higher by 0.77%. The Nasdaq, which has ping-ponged in recent weeks, was solidly higher early on, up 1.3%.
Honeywell Aerospace joins the Nasdaq Composite today, heading higher in the early going. Also moving the markets were shares of Comcast, surging 23% in the early going after it announced it will split its media wing from the technology business. The company called it a setup that “will unlock a more entrepreneurial management approach and open up a multitude of new opportunities for each business.” The media industry has faced a number of headwinds as streaming services have eaten into the TV and cable bundle.
The tax-free spinoff, which is expected to take a year to complete, will create NBCUniversal, the media arm that will include the NBC and Telemundo networks, Peacock, Bravo and Sky, the European broadcaster, as well as Universal film and television studios and the theme parks. Comcast will keep its cable, wireless and business services. Shareholders will get chunks of both companies.
It appears to be a welcome relief for Comcast shareholders as shares have sunk some 30% year-over-year. Others jumped on the bandwagon, including Netflix, Walt Disney and Paramount Skydance all moved forward.
As the week begins, remember it marks the end of the quarter and the first half. That means we’re likely to see waves of volatility as institutional fund managers rebalance their portfolios, though many have already started. Given the huge swings in AI stocks in recent weeks while bonds were losing grounds, many portfolio targets are probably off their marks.
Expect some instability, but don’t overthink it. These swings will likely be driven more by technical flows of equity, not because of fundamental issues per se. Plus, new spinoffs and stocks going in and out of indices typically makes for some interesting stock movements.
This is a shortened week ahead of the July 4th holiday, which could lead to bumpy trading, too, as retail investors tend to lighten their trading. This week’s earnings agenda includes Nike and Constellation Brands on Tuesday and General Mills on Wednesday – all of which offer clues into consumer sentiment and spending.
Nike investors will be focused on inventory issues as well as what’s going on with its China business. Nike shares have been in a freefall year-to-date, sinking 35.6%. Constellation Brands will offer insight into consumer discretionary spending, as well as a notable industry reset as younger drinkers practice so-called “mindful drinking.” General Mills earnings will offer a taste of the data on consumer staples and pricing concerns. Investors expect challenged earnings after the cereal giant lowered its forecast, noting that lower-income consumers are having financial issues.
Nonfarm payrolls are slated to come out Thursday, a day earlier than normal because of the shortened week. Wall Street expects some 110,000 jobs will be added, down from 172,000 in May.
Last week was a choppy series of sessions that ended mixed. The Nasdaq grabbed the headlines, posting its fifth straight losing session, down 4.8% over the period. Year-to-date, the Nasdaq is holding higher by 8.9% despite the heavy rotation out of major tech stocks.
The blue-chip Dow and the S&P both slightly slipped into red territory with the Dow rising some 0.6% on the week and the S&P down nearly 2%.
Good trading!
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