Article published at 9:30 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:
- Major indices trying to stay positive
- WTI crude prices are jumping up and down
- Tech stocks are higher, leading Nasdaq
It looks like it could be another day of intraday volatility in trading. The three major indices are trying to stay on an upward climb in the early going as investors try to wrap their heads around the rocky geopolitical tensions in the Middle East while largely discounting the action there.
The U.S. and Iran continued to trade overnight strikes for the second time in a row, with what looks like little effort to end the escalation. After yesterday’s rickety day, today looks a little calmer to start, but remember so much can happen throughout a session.
Crude oil prices are jumping around again amid reports of limited traffic going through the Strait of Hormuz. WTI crude was up nearly 1% and approaching $74 a barrel early on before reversing course, falling 0.69% to just above $73 a barrel, flirting with the $72 range.
To start the day, the Dow Jones Industrial Average is hugging the flat line, dipping slightly above and under it, while the S&P 500 Index is edging higher by 0.31%. The Nasdaq Composite —which saw deep dives yesterday before inching into positive territory at the close — is strengthening again, up 0.51%. We typically see this kind of summer trading in July, with lower volumes as folks take vacations and the like. What is surprising is that investors appear to be overlooking much of the friction in the Middle East.
Tech stocks were on an upward climb, with Micron shares trading higher by 6.5%, Marvell Technology gaining 6%, Broadcom up 3.7% and Advanced Micro Devices tracking up by 3.9%.
Software stocks aren’t trading as well. Microsoft and IBM shares were in a freefall early on after Bloomberg reported that Starbucks was developing in-house tools — aided unsurprisingly by artificial intelligence — that would replace the Microsoft and IBM inventory and management tools the company currently uses.
Some of those Starbucks systems could roll out before the end of the year, assuming testing works well, the company said in a presentation. We may see this happen more often AI is helping companies create their own software systems to replace those they now purchase at big price tags.
Among other major movers in the early going were shares of AstraZeneca, falling nearly 9% after reporting that testing of a drug to treat a rare heart condition failed to reach its goal. SpaceX shares are on the upside by about 2% after closing yesterday at $148 a share, below the initial trading price of $150 share and a bullish sentiment on Wall Street.
We got another glimpse of tightening consumer spending yesterday, when PepsiCo reported mixed quarterly results yesterday. Noting that consumer budgets were “tightening due to rising inflationary pressures,” the food and beverage giant’s earnings outpaced Wall Street’s expectations but its per-share profit missed, with pressures coming from North American food and beverages. Shares of PepsiCo were gaining momentum to the downside in the early going, falling deeper than 2%.
Levi Strauss shares were tracking nearly 3% slightly lower in the early going as well, despite strong results yesterday. The jeans maker beat on earnings and upped its dividend, but offered raised guidance that was short of Wall Street’s expectations.
The Federal Reserve’s Open Market Committee (FOMC) minutes did little to move the market on its own, but underscored how divided the members are over the direction of interest rates. Nine of the 18 members favored a rate increase before the year is out, a hawkish signal that they wanted to tame inflation pressures. We may find more insight when Federal Reserve Chair Kevin Warsh testifies, for the first time as the Fed leader, before the House Financial Services Committee on July 14. But, as we’ve seen in his early days, he wants to keep his interest rate thoughts close to his vest. Stay tuned.
As noted, yesterday’s trading was uneven, with the indices closing the session mixed. The Dow tumbled 1.09% and the S&P 500 Index gave back 0.28%. The Nasdaq eked out a gain after a turbulent session, finishing in positive territory by 0.20%.
Happy trading!
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