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Dealing with some hangups

Posted June 26, 2024 at 9:45 am
Patrick J. O’Hare

We were left wondering yesterday if NVIDIA (NVDA) rebounding would come at the expense of the broader market or if that rebound would foster a true, broad market advance on the heels of Monday’s broad-based advance when NVIDIA was reeling. We got our answer.

NVIDIA rebounding pretty much came at the expense of the broader market; however, the S&P 500 and Nasdaq Composite capitalized on that weighty influence and gains in other mega-cap stocks.

The proof, they say, was in the pudding. The market-cap weighted S&P 500 increased 0.4% while the equal-weighted S&P 500 declined 0.7%.

NVIDIA is back at it again today. It is up 1.1% in pre-market trading, sharing some of the spotlight with FedEx (FDX), which is up 14.6% after its better-than-expected earnings report and encouraging outlook, Rivian (RIVN), which is up 38% after the news that it is entering a joint venture with Volkswagen that will entail an initial $1 billion investment and up to $4 billion in planned additional investment by Volkswagen, and Whirlpool (WHR), which is up 18% on a Reuters report that Bosch is considering an acquisition of the company.

Southwest Airlines (LUV) is also in the spotlight, but not for the best of reasons. Southwest expects its Q2 RASM to decline in the 4.0-4.5% range compared to its prior expectation of a 1.5-3.5% decline, both on a year-over-year basis. The cut was blamed primarily on the “complexities in adapting its revenue management to current booking patterns in this dynamic environment.” Shares of LUV are down 4%.

General Mills (GIS) is another lowlight, trading down 4.9% after a fiscal Q4 earnings report that featured weaker-than-expected net sales resulting from “unfavorable net price realization and mix and lower pound volume,” and a tepid FY25 outlook.

There are plenty of story stocks today, but at the moment there isn’t plenty of conviction at the index level.

Currently, the S&P 500 futures are down 10 points and are trading 0.2% below fair value, the Nasdaq 100 futures are down 28 points and are trading 0.1% below fair value, and the Dow Jones Industrial Average futures are down 81 points and are trading 0.3% below fair value.

What’s the hangup?  Hard to say exactly, but it is likely a little bit of valuation angst, the bump in the 10-yr note yield to 4.29%, and hesitation in front of Micron’s (MU) earnings report after the close.

Before we get to the latter, market participants will see the May New Home Sales Report ( consensus 650,000; prior 634,000) at 10:00 a.m. ET and the $70 billion 5-yr note auction at 1:00 p.m. ET.

Earlier, it was reported that the weekly MBA Mortgage Applications Index was up 0.8% with refinance applications flat and purchase applications up 1.0%, denoting some relatively soft demand in the face of elevated mortgage rates.

Originally Posted June 26, 2024 – Dealing with some hangups

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