Article published at 9:35 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:
- Investors await progress reports on U.S./Iran negotiations
- PCE data on Thursday to offer insight on inflation direction
- Alan Greenspan, long-respected Fed chair, dies
Investors appear to be hanging on the sidelines in the early going Monday as they await news of the progress of negotiations in the Middle East, which were paused over the weekend amid reports of escalating tensions and sharp rhetoric between the U.S. and Iran.
By morning, however, Iran said all-night talks were promising toward reaching a peace deal within the next two months. In the early going, all three indices were edging off the flat line, with the Dow Jones Industrial, the Nasdaq Composition and the S&P 500 Index all inching into the green.
WTI crude oil fell to the $76 range as well amid reports that efforts to restore “normal” traffic through the Strait of Hormuz were proceeding.
On the good news front, the national average price of regular gasoline stood at about $3.93 per gallon, about 60 cents below what it was a month ago, but some 70 cents above the average it held in June of last year, according to AAA.
There’s plenty of economic data expected to come out this week but we’ll be watching Thursday’s Personal Consumption Expenditures (PCE) Index, the Federal Reserve’s go-to on inflation data. The index is the best attempt to measure real-world spending of a basket of goods and services on which urban consumers spend money. Core PCI, however, strips out food and energy, which tend to be volatile based on jolts to the economy, such as weather or geopolitical events. Wall Street is expecting the core PCE to climb, bringing the year-over-year core inflation rate to 3.3%.
Durable Goods Orders are also on Thursday’s agenda and investors are expecting a pullback in spending for big-ticket items, which would give us a reading on business and consumer confidence.
We’re keeping an eye on tech stocks again this week, including Micron, Super Micro Computer, Seagate and Sandisk, all of which are trending higher. Sandisk shares were pushed forward after Apple Chief Executive Tim Cook warned last week that the company’s product prices would leap higher because of an “unavoidable” jump in memory costs.
Of course, we’re also keeping track of SpaceX’s movement, which is on the downside in the early going, marking its third straight pullback since its initial public offering 10 days ago. Even still, shares are some 30% richer than the $135 each IPO price.
Making headlines, too, is the 20-year pact inked this morning between Chevron and Microsoft. The partnership allows Microsoft to purchase power, equivalent to 2.7 gigawatts or 2 million homes, for a Texas data center. Chevron’s partners, GE Vernova and Caterpillar, are providing the energy, with Caterpillar providing the turbines that will power the data. Chevron shares advanced better than 1% in early trading, while Microsoft shares were muted. GE Vernova and Caterpillar shares were trading about 2% each to the upside.
Last week’s stock action was on a roller coaster, with tech stocks getting the bumpiest ride. Wednesday and Thursday were prime examples. On Wednesday, all three indices tumbled, falling deeper after the Federal Reserve and Kevin Warsh, its new chair, kept interest rates in the 3.50% to 3.75% range. This was expected but alarmed the market when the majority of interest-rate members signaled they were leaning toward an upturn later this year and into next year.
By Thursday morning, however, all had calmed down and the markets were back in an upswing. When the session ended, the market activity looked strong going into a long weekend after the Fed sell-off the day before and amid high hopes some positive decisive action would take place during the first peace negotiations between the U.S. and Iran. All three ended higher, with the Nasdaq jumping 1.91%, the S&P 500 gaining 1.08% and Dow inching higher by 0.4%, and market the third straight week in positive territory.
In other news, Alan Greenspan, who led the Federal Reserve from 1987 to 2006, died Monday. He was 100 years old. We talked about Greenspan last week, noting how Warsh, who is now leading the Fed, is following Greenspan’s ideals. Greenspan skillfully managed monetary policy during a time of great economic expansion.
He was known for what he called “purposeful obfuscation,” to avoid certain questions coming up that he could not and/or did not want to answer. His muddy explanations to mute expectations were coined “Fed speak.” During his tenure, his black briefcase was often considered a marker of whether the Fed would raise or lower interest rates, based on how overstuffed it looked as he walked into Fed meetings. In a 1996 speech aimed at cooling a hot trading market, he said investors were exhibiting “irrational exuberance.” May he rest in peace.
Have a good trading day!
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