Article published at 10:05 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:
- Is the doom and gloom over? Earnings boost markets
- Caterpillar powers Dow; Palantir helps boost Nasdaq
- SpaceX earnings expectations are a wild card
For all the consternation and handwringing over the last few weeks, the markets continue to perform, taking the high ground in early trading and gliding toward fresh peaks amid strong earnings results and anticipation that a deal to open the Strait of Hormuz might happen soon.
The Dow Jones Industrial Average is poised to close with another record run, popping 600 points, or 1.13% after a strong session yesterday that pushed the 30-stock index into a new peak. The index vaulted 693.38 points, or 1.3% to finish the day.
Caterpillar shares are the top Dow performer, rising 12% after the power-generator and construction equipment rang up a record $20 billion in sales fueled by data center build. Net income climbed 65% and per-share earnings of $8.17 easily outpaced Wall Street’s expectations. It also raised full-year guidance.
McDonald’s shares were edging higher in early trading after the fast-food giant reported better-than-expected profits despite a dip in sales. Same-store sales at U.S. stores slowed moderately, but the share price increase is a sign that pricing pressure are not as great as widely expected. McDonald’s also named Skye Anderson as its new U.S. president.
The Nasdaq Composite is up another 1.31% in early trading after tacking on 2.13% Monday, while the S&P 500 Index is edging 0.80% toward a record high after adding 1.48% yesterday.
Palantir shares were heading higher by 20% after the software maker and military vendor reported off-the-chart results and set high goals for full-year profits and sales. A 149% year-over-year gain in U.S. commercial revenues coupled with a 90% leap in government-related sales pumped the results.
That’s boosting the technology sector again today with other notable gains. Sandisk is adding another 5.3% after a near 6% close yesterday, Nvidia is again advancing by 3% and Western Digital is tracking higher by 6.8%. Microsoft reversed course to head higher by 1.3% after Monday’s 5% gain.
WTI Crude Oil prices are taking another spill in early trading, falling into the mid-$76 range, down 4.7%, as investors hold on to upbeat comments out of Washington that oil shipping could pick up as soon as today or tomorrow.
SpaceX is set to open the books with its first quarterly earnings report since going public after the bell. Wall Street has pegged second-quarter revenue expectations at $6.9 billion, but it’s a wild card – and that’s not unusual for earnings debuts. In this case, it’s not the numbers, but Chief Executive Elon Musk’s comments that will matter most.
SpaceX shares are moving 2% to the upside, after closing higher by 5.68% Monday. They have lost their initial public opening momentum, falling 46% from an intraday high in June. Investors are hoping to see it rally back to the IPO level with a 15% implied volatility for share pricing in either direction. Volatility like this is high for a reason and we’ve seen investors buying 120 calls and 110 puts, both well inside the implied move.
Numbers that will matter are sales results from Starlink – its biggest revenue generator – and free cash flow, plus updates on the Starship mega-rocket’s launch for commercial use. Capital expenditure spending also is top of mind, expecting to reach $13.2 billion for the quarter, with a forecast of negative free cash flow of $1.9 billion, according to reports. Full-year cap ex is expected at $46 billion with another $87 billion next year.
The long-rumored merger between SpaceX and Tesla is likely to be a focus on the conference call as well, mirroring the Tesla call two weeks ago. Musk said he was unable to answer then. Will he be able to reply today?
Amazon joined the $3 trillion market capitalization club for the first time Monday, making it only the fifth mega-cap on the list in what is still an exclusive alliance. Shares are pulling back 2.5% today after closing 5% higher in an active trading session, boosting market cap to $3.06 trillion. Nvidia grab backed its No. 1 position at $5 trillion recently, Alphabet sat Monday at $4.57 trillion while Apple, which had a short-lived appearance in the top spot, now sits at No. 3 at $4.46 trillion. Its shares have given up 12% since last Wednesday. Microsoft, a recent newcomer, carried a $3.62 trillion market cap after the close and Amazon is at $3.06 trillion.
Happy trading!
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