Article published at 9:20 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:
- Today’s the day SK Hynix ADRs hit the markets
- Chips stocks sink
- Delta Airlines outpaces expectations
Friday’s trading is mixed in the early going with all three major indices moving marginally off the flatline. This is not necessarily unusual, given it’s a Friday and its summer. In a news driven market that we’ve been experiencing of late, investors don’t want to be aggressive and possibly get caught up in news you can’t control over the weekend.
In early trading, the Nasdaq Composite and the S&P 500 were inching into positive territory. The Dow Jones Industrial Average was a bit higher.
Speaking of news and the Nasdaq, we have one big news event today and it is the Nasdaq debut of SK Hynix, the South Korean semiconductor and chip giant. The American Depository Receipts, which represent shares of a foreign company, opened at $149 a share – with more than 17 million shares in the offering – and was projected to raise $26.5 billion.
It is the largest ADR offering in history, topping Alibaba’s then record in 2014 that generated $21.8 billion. For U.S. investors, this is the first new route into the stock, and given that it was seven times oversubscribed, it looks like it’s a magnet. Each ADR represents one-tenth of a share in South Korea.
SK Hynix commands 56% of the high-bandwidth memory, according to it Securities and Exchange Commission’s filing. It is a huge supplier for Nvidia, and its rivals include Samsung and Micron. It will be interesting to watch the markets throughout the day for a check on whether investors rotate out of a handful of tech shares to fund a piece of this new investment.
In early trading, it appeared they were as shares of Intel, Sandisk, Marvell, Western Digital and Micron were all sinking better by 2% to as much as 4%. After a robust trading session yesterday, it looks like folks might be flattening out ahead of the weekend as well as rotating.
In a sign that the airline industry is doing relatively well despite higher fuel costs, Delta Airlines reported quarterly earnings earlier today that outpaced Wall Street’s expectations for both revenue and profit per share. The company reaffirmed its full-year guidance and offered a third-quarter outlook that was within projections.
In bad news for travelers, Chief Executive Ed Bastian said in an interview on CNBC that Delta is passing on higher fuel costs – which are still up some 50% -- to consumers. That practice, which is happening across the industry, will continue while prices remain elevated. Why? Because demand is strong despite the pricier air tickets and shares across the industry have mostly been rising. Given the foggy situation between the U.S. and Iran, airlines share prices are likely to be driven by headline news, something you must factor into your trading of these stocks.
Delta shares jumped immediately after earnings were released, but then bounced in and out of the green, which might be tied to profit-taking. Shares are up 28% year-to-date. American Airlines, United Airlines and Southwest Air shares were all marginally lower early on.
On the crude oil front, WTI crude is on track for its best week since May. But it’s been a rocky one, with prices jumping up and down. In recent action, WTI crude was trading in the $71 range.
Happy trading!
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