Article published at 8:55 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:
- All eyes are on Micron’s earnings after the bell
- WTI crude prices are falling, but maybe not fast enough
- FedEx shares declining after mixed earnings results yesterday
A sense of calm is taking over the markets in early trading after the tech sector took a deep dive Monday and Tuesday. Oil prices are sliding again and tech investors are waiting on Micron’s earnings after the bell to give them insight on the trajectory and sustainability of AI spending.
The Nasdaq Composite and the S&P 500 are treading slightly higher while the Dow Jones Industrials is straddling the flat line.
Much tech trading looks to be all about Micron. Expectations are high for the semiconductor giant that has become a bellwether of the sector, which has had investors on edge in recent weeks. Billions of dollars, much of it borrowed, are pouring into building out the infrastructure without anything – yet – to show for it. That’s not necessarily unusual, but the magnitude of it is triggering skepticism.
Ahead of the earnings, Micron’s implied move is 13% in either direction. Let’s translate that into real dollars and we’re looking at a more than $130 move. Let’s not forget, too, that on June 24 last year, Micron shares closed at $127.91, meaning they’re up more than 722% since.
Consider what Wall Street is anticipating to see in Micron’s report: Earnings per share are expected to run from $20.39 to $20.98, which would represent as much as a 1,000% vault on a year-over-year basis. Revenues are expected to jump some 280% year-over-year to as much as $35.9 billion. Hefty numbers indeed and for many investors, worth the wait.
Good news for drivers: Oil prices continue to fall amid easing tensions between the U.S. and Iran as ship traffic has begun to trek through the Strait of Hormuz again. However, risks still remain. WTI crude prices dropped nearly 3% to $71 a barrel in early trading.
Yesterday prices dipped below $73 a barrel for the first time since mid-March, closing at roughly $73 a barrel, down 1%, but still up some 9% since the war on Iran began.
FedEx turned in mixed results yesterday that led to a 7% share price drop in early trading. The international shipping company, considered somewhat of an indicator of overall economic health, turned in higher than expected revenue and per-share earnings but the operating margins shrank to 8.4% from last year’s 9.1%. FedEx noted “the financial impacts of global trade policy changes” were a headwind, hiking costs to deal with tariffs, changing regulations and geopolitical trade tensions coupled with rising transportation and labor outlays.
There’s still some confusion over how its June 1 spinoff of FedEx Freight is impacting overall results. FedEx Freight is slated to reports earnings tomorrow. Stay tuned to that, but remember FedEx shares are still some 65% higher on a year-over-year basis
Investors are still trying to find where SpaceX shares should be trading after its initial public offering. SpaceX shares were falling better than 1% in early trading after yesterday’s rocky trading movement, which saw shares jump in and out of the green before finally settling 1% higher, closing at $156.11.
Throughout most of the tech selloff session, it appeared the stock might hit its fourth straight day to the downside in a rout that cost it $600 billion in market capitalization. Shares sank close to 5% and jumped as much as 7%, before closing to the upside. Its market cap fell below $2 trillion for a bit, but recovered. Besides the overall tech selloff yesterday, SpaceX investors are also dissecting the AI and space giant’s $25 billion it raised in a bond offering this week to fund it ambitions.
There’s a shakeup in line for Dow and S&P components at the start of trading next Monday. Late yesterday S&P Dow Jones Indices said it was adding Alphabet to it 30-stock roster, kicking Verizon out as it aims to become a little more tech heavy “to strengthen the DJIA’s exposure to these dynamic areas of the U.S. economy,” according to the announcement. Remember the Dow is a price-weighted index and it noted that “persistently lower-priced stocks have an immaterial impact on the index.” Alphabet’s $350-range share price compared to Verizon’s $47-range will make a difference, considering, too, that Verizon’s low price “represents only one-half of one percentage point” of the Dow. That’s hardly a smidgen.
The S&P, meanwhile, is making some changes too. Honeywell Aerospace, recently spun off from Honeywell International, will be added to the S&P 500 and the S&P 100 on Monday, replacing Conagra, which is moving to the S&P SmallCap 600 on Tuesday.
Good trading!
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