Article published at 9:05 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 climb again
- Investors struggle with AI trade
- Chipmakers move to the upside
The markets are back on the seesaw today, rising after investors look to be shrugging off the most hard-hitting military action since the ceasefire. The U.S. launched a series of multiple targeted strikes in Iran last night with promises today to keep it up. Iran has retaliated and also vows to continue.
That news aside, there are a number of issues affecting trader sentiment. The hype surrounding SpaceX’s initial public offering tomorrow, of course, is front of mind for many, prompting substantial rotation as folks struggle to get their arms around the AI trade.
Remember, too, we’re nearing the end of the second quarter and portfolio managers are reassessing their investment decisions for the rest of the year. What’s more, tomorrow is triple witching day, which typically triggers pronounced price and volume volatility. Adding to all that is the European Central Bank’s decision to up interest rates by 25 basis points for the first time in nearly three years. That underscores the worldwide challenges amid the Iranian war.
All three major indices were trending marginally higher in premarket trading. WTI Crude oil began on a slide, only to bounce around $90 a barrel after President Trump said on social media this morning that the U.S. would continue to be aggressive in attacks on Iran today. Treasury notes were holding steady.
Chip stocks were devasted yesterday but are rebounding again today, with AMD, Broadcom, Marvell and Micron all trending to the upside.
Super Micro Computer suffered a 28% pullback yesterday after it said it plans to raise some $7 billion through a combination of equity and equity-linked financing, aimed at covering the costs of a massive order backlog. Yet, in this topsy-turvy market, shares today are up 2%.
Oracle shares, however, were getting hit for the same reason and are still declining. Late yesterday, the firm turned in record earnings, beating expectations. But investors were spooked after the software and cloud computing company said it expects to raise $40 billion next year in debt and equity financing, including its previously announced $20 billion at-the-market equity issuance. This year it already has raised $43 billion in debt financing and another $5 billion in equity financing. Shares were down about 9% ahead of the bell, off some 40% since its September high.
Wednesday’s session was a rough one, first sparked by the president’s early morning threats against Iran and another noteworthy rotation out of tech stocks into energy, healthcare and consumer stocks.
Add to that growing inflation, expected but still jarring after the Consumer Price Index notched higher to 4.2% last month, a peak we’ve haven’t seen in three years. Given the CPI is among the most watched measures by the Federal Reserve, it appears interest rates will stay in lock step when the Fed meets next week. The CME Fed Watch tool notched higher to better than 71% odds that rates will move forward in December. That’s a full six percentage points higher than it was Wednesday.
The Dow Jones Industrial Average was smacked firmly, giving up 1.9% in its worst showing since October. Ditto for the Nasdaq Composite, which gave up nearly 2% of ground and putting it in line for back-to-back losing weeks, which is still possible. Same goes for the S&P 500, slumping 1.6%, hit hard by materials and industrials that sent it to its lowest close in five weeks. It, too, is on track for back-to-back negative weeks.
Not surprisingly, the Cboe Volatility Index (VIX® Index) surged nearly 13% intraday and is still higher.
As we’ve seen all week, market activity isn’t shaped by the open, but by the close. There’s plenty of news that can shift them either way.
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