US stocks closed mixed Monday while a meme stock rally was reignited following a string of recent market gains. Investors largely stuck to wait-and-see mode, with attention to an upcoming inflation report seen as a potential starting gun for interest rate cuts.
The S&P 500 (^GSPC) closed just below the flatline, while the tech-heavy Nasdaq Composite (^IXIC) moved up about 0.2%. The Dow Jones Industrial Average (^DJI) snapped its eight-day winning streak, closing down 0.2%.
The markets were dominated by a meme rally Monday.
Stocks have come back strong in May on the back of better-than-expected earnings and a revival of optimism for a Federal Reserve easing in monetary policy. The Dow notched eight straight daily wins in a row on Friday — though a dearth of economic releases likely played a part.
After recent hot inflation data, markets have been more skittish as investors have increasingly priced in "no landing," where price increases don't come down to the Fed's target but the economy keeps growing.
This week brings a flood of economic releases as potential catalysts, with the Consumer Price Index update on Wednesday the star. The CPI update for April will shed light on whether inflation is staying sticky into the second quarter amid some belief on Wall Street that the report will mark a faster descent and set the stage for more than one rate cut this year.
Dow snaps eight-day winning streak, investors focus on inflation print this week
The Dow snapped an eight-day winning streak Monday as investors await this week's monthly inflation report for clues to how the Federal Reserve will move on interest rates this year.
The S&P 500 (^GSPC) closed just below the flatline, while the tech-heavy Nasdaq Composite (^IXIC) moved up about 0.2%. The Dow Jones Industrial Average (^DJI) snapped an eight-day winning streak to close the session down 0.2%.
Investors are keeping a watchful eye on quarterly results from Home Depot (HD) due out Tuesday before the market open while Walmart (WMT) will report on Thursday.
On Wednesday, investors will find out whether the stickier-than-expected inflation trend continued into the second quarter with the release of the Consumer Price Index (CPI) reading for April.
Ines Ferré
AMC rides the meme stock rally, up 100%
Theater operator AMC (AMC) gained as much as 100% Monday amid a monster meme stock rally.
Monday's rally comes as GameStop shares soared more than 70% after social media star 'Roaring Kitty' posted on X for the first time since 2021.
AMC shares are still down roughly 85% over the last year as the company has repeatedly issued shares to pay down its debt. Year-to-date, the stock is down about 7%.
Ines Ferré
Chevron stock falls after proxy adviser recommends Hess shareholders abstain from merger vote
Chevron (CVX) shares sank more than 1% after a proxy consultant advised Hess shareholders to abstain from voting on the proposed merger of the two companies.
Institutional Shareholder Services said the deal carries the risk of potentially breaking down "without any compensation."
Proxy consultants are typically hired by mutual funds, pension funds and other large shareholders for advice on how to vote in merger deals such as the $53 billion merger announced last year between Chevron and Hess.
ExxonMobil (XOM) took the companies to arbitration this year claiming it has a right of first refusal for Hess’ stake in its Guyana operation, one of the largest crude discoveries in the past decade. ExxonMobil holds a 45% interest in the oil-rich block.
Chevron and Hess have argued against that claim because Hess would still own its interest in Guyana, but under the control of Chevron.
In a statement a Chevron spokesperson told Yahoo Finance, “We look forward to Hess obtaining a successful shareholder vote and completing the transaction.“
Hess shareholders are expected to vote May 28.
Over the weekend Senate Majority Leader Chuck Schumer called on the Federal Trade Commission (FTC) to intervene in the proposed merger between Chevron and Hess. Schumer claims the merger will allow oil companies to raise gas prices.
Ines Ferré
Bitcoin gains, hovers near $63,000
Bitcoin rallied more than 2Monday to trade just below $63,000 per token.
The global cryptocurrency had dipped below $61,000 earlier this morning after struggling to make significant gains over the past couple of weeks.
The recent bitcoin 'halving' in April failed to send prices higher. Bitcoin reached an all-time high in March of this year
Josh Schafer
One company is weighing down S&P 500 earnings growth
Companies in the S&P 500 (^GSPC) have reported what's broadly been considered a solid Q1 earnings season for the index, with one key exception: drugmaker Bristol Myers Squibb (BMY).
Last month, the company reported a massive loss per share in the first quarter on charges related to a series of acquisitions and cut its profit forecast for the year.
With 92% of S&P companies done reporting, the index is pacing for 5.4% earnings growth compared to the year-ago quarter, which would be the largest year-over-year earnings growth for the index since the second quarter of 2022. Take out Bristol, and the pace jumps to 8.3%, according to FactSet senior earnings analyst John Butters.
Overall, the Health Care sector (XLV) has seen earnings decline by 25.4% from the same quarter a year ago, in line with Energy's (XLE) decline for the worst performance in the S&P 500 this quarter.
When removing a few other companies from the sector, the S&P 500's earnings growth would shoot even higher. Butters also ran the numbers for the index when excluding Pfizer (PFE) and Gilead Sciences (GILD). Gilead Sciences reported a loss per share of $1.32 in the most recent quarter, compared to earnings per share of $1.37 in the same quarter a year ago. Pfizer meanwhile reported earnings per share of $0.82, down from $1.23 in the same quarter a year ago.
When removing those two companies and Bristol Myers Squibb, the S&P 500 would be pacing for earnings growth of 9.7%, per Butters' analysis.
GameStop shares gained more than 70% Monday. They rose as much as 110% during the session, prompting numerous trading halts reminiscent of the meme short squeezes that garnered national attention during the pandemic.
The stock's meteoric rise came after social media star 'Roaring Kitty' posted on X for the first time since 2021.
Short sellers lost more than $938 billion in mark-to-market losses during Monday's monster rally, according to data compiled by S3 Partners.
Tech giant Alibaba rose more than 5% ahead of the company's fiscal fourth-quarter earnings due out Tuesday. Chinese stocks have rallied in recent weeks.
Tencent Music Entertainment Group (TME), and JD.com (JD) also gained during Monday's session.
Ines Ferré
Apple stock rises on potential OpenAI deal, shares help lift Nasdaq
Apple (AAPL) shares rose more than 1.5% as the tech giant is reportedly nearing a deal with OpenAI to include its technology on iPhones.
The companies are set to finalize the terms of an agreement to include OpenAI's ChatGPT service on iOS 18, according to a Bloomberg report.
Apple shares helped lift the Nasdaq Composite (^IXIC) higher on Monday as Information Technology related stocks rose.
Ines Ferré
GameStop stock soars, slapping short sellers with $1.3 billion in losses in May
GameStop shares soared as much as 110% Monday, prompting heavy losses for short sellers.
"Including today's losses, GME shorts are now down -$1.34 billion in May month-to-date losses, and now down -$952 million for the year," Ihor Dusaniwsky, managing partner at S3 Partners, told Yahoo Finance Monday.
Short interest on the video game retailer's stock is relatively high, hovering just north of 24% of the float.
Other meme stocks rose along with GameStop Monday after social media star "Roaring Kitty", seen as the kickstarter for the GME short squeeze in January 2021, posted online for the first time in about three years.
Shares of theater operator AMC (AMC) gained 20% while Trump Media & Technology Group (DJT) increased 8% during the session.
"Short sellers may be in for a bumpy and bloody ride in these stocks," said Dusanniwsky.
Ines Ferré
Cocoa futures tank 18% Monday, sharply off April's all-time highs
Cocoa (CC=F) futures tanked as much as 18% Monday, their biggest one day drop since 1960.
The commodity was trading below the $7,400 level during the session.
Cocoa has drastically come off its all-time high of more than $12,000 per metric ton last month.
Ines Ferré
Fed’s Jefferson calls for holding rates steady until inflation cools further
"We continue to look for additional evidence that inflation is going to return to our 2% target,” Jefferson said during a question and answer session at the Cleveland Fed.
“Until we have that, I think it is appropriate to keep the policy rate in restrictive territory."
Jefferson said he changed his view after hotter-than-expected inflation data in the first quarter.
The Fed decided on May 1 to keep its benchmark interest rate in a range of 5.25%-5.50%, a 23-year high. Its next policy meeting is not until June 12, when the central bank is again expected to hold rates steady.
GameStop soars 70% after social media star 'Roaring Kitty' post
GameStop (GME) shares soared as much as 80% Monday and were temporarily halted for volatility after "Roaring Kitty", seen as the kickstarter of the meme frenzy during the pandemic, posted for the first time since 2021.
Sunday's post on X included a meme of a video gamer leaning forward, a sign that things are getting serious.
Monday's rise comes amid a recent rally in meme stocks. GameStop shares are up 90% year-to-date. Short interest on the stock is about 24% of the float.
Roaring Kitty, identified in 2021 as Keith Gill, became a prominent figure followed on the WallStreetBets forum and on YouTube for his bullish stance on GameStop.
He posted videos about why GameStop was poised to go higher. In February 2021, he testified before Congress as lawmakers looked into a massive short squeeze spurred by an army of retail traders.
Hedge fund Melvin Capital, at the center of a massive bet that GameStop shares would fall, lost billions of dollars during the meme frenzy. The phenomenon attracted millions of retail traders and prompted greater scrutiny over payment for order flow, a way in which some trading platforms make money.
Ines Ferré
Stocks rise to begin CPI-focused week, with Dow eyeing 9th straight win
Stocks opened higher Monday as investors turned their attention to the latest monthly inflation report due out this week for clues to how the Federal Reserve will move on interest rates this year.
The S&P 500 (^GSPC) rose roughly 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) moved up about 0.3%. The Dow Jones Industrial Average (^DJI) also added about 0.3%, eyeing a ninth straight daily win. The blue-chip index notched its best week of the year on Friday.
On Wednesday, investors will find out whether the stickier-than-expected inflation trend continued into the second quarter with the release of the Consumer Price Index (CPI) reading for April.
On the retail spending front, quarterly results from Home Depot (HD) due out Tuesday and Walmart (WMT) on Thursday may give insight into the health of the US consumer.
Brian Sozzi
Netflix stock rallies ahead of Upfront event
Here's an interesting, fun fact on Netflix (NFLX) you probably didn't realize.
The stock has rallied 12% since May 1 and is now trading at the levels seen before the company's disappointing earnings day in late April.
In a new note this morning, JPMorgan analyst Doug Anmuth credits the rebound to "1) increased comfort with both the 2024 reported revenue outlook and NFLX’s decision to no longer report subscribers beginning in 2025; 2) recognition that NFLX is not subject to heavy AI-driven capex intensity like Meta, Alphabet, and Amazon; and 3) excitement into the Upfront presentation on May 16."
The annual Upfront presentation is when TV networks and streaming services pitch their programming and ad products to advertisers and agencies.
Anmuth thinks Netflix will have bullish things to say at the event that could be a catalyst to the stock:
"At the Upfront we expect an update to the 23 million plus ad tier monthly active user (MAU) disclosure, with our conversations suggesting investors are looking for 35-40 million plus ad tier MAUs, including the benefit of the T-Mobile bundle. Outside of ad tier metrics, we expect updates on the upcoming content slate and NFLX’s sports strategy, with articles suggesting NFLX could host two NFL games on Christmas later this year. NFLX would bring the NFL large global distribution while the games could serve as a boost to NFLX’s ad tier and enable the company to actively promote upcoming content. Finally, we look for progress around improving the ad product, tech, and sales, with some investors expecting a 3P demand side platform announcement."
Brian Sozzi
Bullish trading call on Walmart into earnings from EvercoreISI
Walmart (WMT) stock has been lagging the S&P 500 the past month as sticky inflation data calls into question the spending power of US consumers.
There has been some chatter on the Street of extra-conservative guidance from Walmart when it reports earnings this Thursday morning.
But Evercore ISI's retail analyst Greg Melich is putting those worries to the side, adding Walmart to his tactical buy list into the results.
Said Melich this morning:
"We believe the company is executing at a high level while pursuing initiatives such as digital advertising, Walmart Plus, and automation. Even a modest improvement in digital profitability (before considering incremental advertising/alternative profit opportunity) provides a considerable margin capture opportunity. Our sense is that the company will speak to a fairly steady low to middle income consumer, in addition to higher income share capture, with positive traffic and share gain reasons for the commentary to skew constructive through the year. Normally Walmart does not raise full year EPS and comparable sales guidance in 1Q, but we do see them taking a positive tone with respect to underlying momentum in the business. This may prove especially pronounced in international operations — which continue to see positive double-digit percentage comparable sales, with positive industry commentary on Walmart’s continued share capture likely under appreciated by investors."
Brian Sozzi
A look at earnings growth
An interesting dynamic in markets begins to form.
After several years of explosive earnings per share growth for the "Magnificent 7" names, the space is headed for a slowdown this year and next (see the chart on the left from RBC strategist Lori Calvasina). By the same token, after several years of limp growth for the 493 other S&P 500 components, EPS growth is seen accelerating this year and next.
The question on the horizon is this: Do the other 493 S&P 500 companies represent better value than the Magnificent 7 as their profit growth is likely to accelerate again in 2025?
Does it make sense to nibble at the 493 other stocks in the S&P 500? (RBC)
Brian Sozzi
Save this date: May 20, JPMorgan investor day
With its stock up a cool 8.7% in the past month on the back of expectations for higher-for-longer interest rates, JPMorgan's (JPM) May 20 investor day is coming into focus.
Jefferies analyst Ken Usdin is out with a note this morning, sticking with a Buy rating going into the investor day but hiking his price target to $227 from $215. He expects a "focus on market share gains, investment spending and efficiency" on the part of JPM execs.
"While the net interest income guidance seems conservative with higher-for-longer rates, we see JPM continuing to slow-play guide updates," added Usdin.
Brian Sozzi
Goldman not banking on major inflation slowdown
Sticky inflation is likely to stay sticky in 2024.
Ahead of this week's key CPI Index report, Goldman Sachs is calling out the potential for disinflation in some important categories as the year treks along. Even still, Goldman's macro team forecasts inflation to stay above the Fed's preferred 2% target.
Here's Goldman's top economist Jan Hatzius:
"We see further disinflation in the pipeline in 2024 from rebalancing in the auto, housing rental, and labor markets, though we expect offsets from continued catch-up inflation in healthcare, car insurance, and housing. We forecast year-over-year core CPI inflation of 3.5% and core PCE inflation of 2.7% in December 2024."
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