JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Cboe Volatility Index® is blinking yellow
- Nasdaq 100 index crawls out of correction territory
- Apple takes a bite out of all major indices
Bells seem to be ringing for investors on both sides of technology and semiconductor stock trading today, as those tapping into buying opportunities lifted some stocks while those holding off appeared wary that the artificial intelligence (AI) investment strategy might be getting ahead of itself.
Some investors might have been sitting on the sidelines waiting for potential clarity from today’s elections. The results might change control of Congress, which could affect everything from taxes to data center development and AI regulation. It’s best not to get too crazy one way or another with expectations about the results. Traditionally markets still perform well when the House and/or Senate are controlled by one party while the president represents another party.
The uncertainty caused by elections, however, typically brings volatility. The Cboe Volatility Index® (VIX®) tells what we call the red-yellow-green light story: It’s been bouncing up and down from its cautionary level of 20 over the last three trading sessions, closing at 20.51 today. That’s down 3.03% on the day, but still above 20. This is a yellow light to watch.
Tech stocks have weighed heavily on the broader markets for some time, and today’s activity continues to highlight that. Investors stepping back into companies hit hard in recent sessions are driving a rebound of sorts on the Nasdaq Composite and the S&P 500 Index. The Nasdaq ended the session higher by 0.83% and the S&P 500 by 0.36%. The Dow Jones Industrial Average missed the uptick, sliding on the backs of Apple, Salesforce and Home Depot, to close off 0.38%.
The tech-heavy Nasdaq 100, a selective index of the top 100 nonfinancial companies, well represents the love-hate relationship investors have had with the sector. The Nasdaq 100 reached a record close Oct. 6, but finished Monday in correction territory, down more than 10% from its record high by 10.4%. That shifted course today with the Nasdaq 100 closing 0.68% higher.
Apple’s stock took a bite out of all the major indices after investors pushed shares lower by 1.9%. The iPhone maker turned in fiscal fourth-quarter earnings late Monday that bested Wall Street’s estimates, but disappointed investors with weak margin guidance. The company blamed the lower guidance on an “unprecedented” jump in memory-chip prices.
Though Apple is not considered an AI-related company – it doesn’t make chips or networking technology – but it does integrate AI into all its consumer devices. Apple’s lower margin guidance tied to higher chip prices points to the high development costs AI-centric companies face as they invest for growth.
The Job Openings and Labor Turnover Survey (JOLTS) underscored a resilient and active job market, despite a handful of layoff announcements and expectations from the likes of Meta, Amazon, Visa, Uber and Microsoft. Job openings climbed to 7.52 million, beating expectations. Maybe more interesting was the voluntary quits rate, which jumped to 3.36 million, the highest since May 2023. Typically, that signals high worker confidence in moving to new opportunities.
Let’s hope that helps Walt Disney employees who might be part of a broad cost-cutting effort that includes “thousands of job cuts,” as some managers were told to “target 20% in annual cost cuts,” according to Bloomberg. Disney shares rose 0.92%.
Earnings continue this week, with McDonald’s tomorrow morning. Who doesn’t love to talk about McRibs and Shamrock shakes? We’ll be watching for customer traffic trends and any indication of “consumer fatigue,” when even low-priced restaurant meals are too expensive for struggling families. Options are pricing in a 4% move in either direction.
Happy Trading!
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