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:
- Markets mixed in early trading
- Chips stocks fall amid profitability worries
- United Healthcare share jump on better-than-expected results
The markets were mixed in early trading as investors processed the goings on in the Middle East and earnings reports, particularly across the tech sector.
Fighting intensified again in the Middle East after the U.S. and Iran traded antagonistic barbs, with few prospects of negotiations ahead, at least publicly. WTI Crude Oil prices were rising, up nearly 1% to over $80 a barrel as oil supply fears bubbled up again. While prices continue on an upward path this week, they’re not near where they peaked in April at $113 per barrel.
In a sign that tech investor apprehension is on the upswing, chip stocks are in pullback mode even after Taiwan Semiconductor Manufacturing turned in record earnings. The world’s largest maker of microscopic microchips delivered its fifth straight quarter of record earnings, with results that soared 77% higher. However, citing elevated demand for advanced chips that power AI, it also substantially upped its global capital budget as much as 14% from $60 billion to $64 billion. That appears to have investors again worried about the potential returns with such massive spending.
Taiwan Semiconductor shares fell 4.2% in early trading, also leading to share price pulldowns of Nvidia, off 1.8%, Advanced Micro Devices lower by 2.7%, Micron gave up 2.4% and Intel fell 1.9%. Not surprisingly, the tech-laden Nasdaq Composite Index tumbled more than 1% in early trading.
The Dow Jones Industrial Average was edging slightly above the flat line while the S&P 500 Index was off 0.33%.
United Healthcare shares were moving solidly higher, approaching an 8% uptick, after the insurance and services giant delivered profits and earnings that outstripped expectations and raised its profit outlook for the third time this year. For a perspective on its per-share guidance year-to-date, United Healthcare expected earnings per share of $17.75 at the beginning of year, raised it to $18.25 in April and it now stands at $19.50 to $20. The company said its growth is being driven by better aligned pricing, tighter management of medical costs and higher premium payments as it resets its priorities.
Elsewhere, GE Aerospace turned in per-share profits and revenues that exceeded Wall Street’s expectations and upped its forward guidance as the jet engine maker said total orders vaulted 17%. However, shares were off some 2.8% as the firm said it is facing supply shortages and inflationary pressures.
United Airlines shares were tumbling 3.3% in early trading, a day after the airline reported earnings and sales that outpaced Wall Street’s expectations but offered guidance that was a bit shy of estimates. The results underscore the ongoing demand for travel that is mostly driving travel stocks across the board.
Part of the softer outlook could be tied to the uncertainty surrounding fuel costs. United said it used Tuesday’s numbers – when oil prices were back on the rise – to compute its forecast. So far, United said it could face a nearly $6 billion upcharge to fuel prices this year. In the second quarter alone, fuel costs sprung up 84% higher on a year-over-year basis to $2.3 billion.
Apple shares tapped a new high, up better than 4% yesterday, after clearing some hurdles in China to comply with Beijing rules. Shares ended the session at $327.50 and are trending upward in early trading. Shares are up 20.5% year-to-date.
SpaceX fell below its initial public offering price in intraday trading yesterday, but are edging above it in early trading today. Shares ended the session slightly lower at $135.27 at $132.15, but were at $136 and change at the open.
Keep watch on Netflix, which opens its books after the bell. The stock is down deeper than 30% in the last three months and Wall Street expects the stock to move 8% in either direction after the results are released. Stay tuned.
Happy trading!
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