The S&P 500 futures are down 16 points (0.3% below fair value), Nasdaq 100 futures are down 53 points (0.3% below fair value), and Dow Jones Industrial Average futures are down 154 points (0.4% below fair value).
Early trading shows a negative bias after yesterday's rebound, which saw the S&P 500 and Nasdaq Composite hit record highs. This bias is partly due to normal consolidation and pre-open losses in mega-cap stocks.
Today's economic data includes the NFIB Small Business Optimism survey, which rose to 90.5 in May from 89.7 in April. Tomorrow will feature the May Consumer Price Index and the latest FOMC policy decision.
Investors are hesitant ahead of these market-moving events, contributing to this morning's downside. Treasury yields are lower, with the 10-yr note yield down three basis points to 4.43% and the 2-yr note yield down four basis points to 4.84%.
In corporate news:
- Apple (AAPL 192.42, -0.70, -0.4%): Consumers may need to upgrade iPhones due to Apple's hardware requirements for AI features. Upgraded to Buy from Neutral at DA Davidson. Tesla (TSLA, Financial) CEO Elon Musk says, "If Apple integrates OpenAI at the OS level, then Apple devices will be banned at my companies. That is an unacceptable security violation."
- DXC Technology (DXC 18.93, +0.48, +2.6%): Up premarket on news that Apollo (APO) and Kyndryl (KD) are in talks about a joint bid for the company.
- Autodesk (ADSK 218.63, +0.43, +0.2%): Beats earnings estimates by $0.12 and beats on revenue.
- AT&T (T 17.94, +0.08, +0.5%): Updates progress on multi-year growth strategy ahead of today's conference and continues to expect 2024 capital investments of $21-22 billion.
- Coinbase Global (COIN 240.69, -9.12, -3.7%): Shares are sliding as Bitcoin trades below $67,000.
- Shopify (SHOP 63.53, +0.52, +0.8%): Initiated with an Overweight rating at JP Morgan.
- Oracle (ORCL 124.01, -0.49, -0.4%): Reports earnings after today's close.
Reviewing overnight developments:
Today's News
Ford Motor Company (F, Financial) is drawing attention after Morgan Stanley named it their top pick in the U.S. automobile sector. Analyst Adam Jonas and his team highlighted that Ford is increasingly aware that its current electric vehicle strategies need significant changes. The company is expected to reduce vertical integration and focus more on partnerships, including those with Chinese firms. This approach is similar to recent moves by Tesla (TSLA, Financial). Additionally, Ford's management is reportedly aware of the need to shift investment focus and business models, with potential catalysts including gains in the pickup segment and further collaborations with strategic partners like Volkswagen.
Apple (AAPL, Financial) was a focal point on Tuesday as multiple Wall Street firms praised its keynote address, calling it a "milestone moment" for artificial intelligence. The integration of new AI capabilities is expected to drive broader adoption. DA Davison analyst Gil Luria raised his rating on Apple to Buy from Neutral, citing the company's introduction of a "meaningful agent capability" with Siri. This updated voice assistant can now execute tasks across apps and answer user questions, marking a significant step forward.
Tesla (TSLA, Financial) has regained its status as the most shorted large-cap U.S. stock, according to Hazeltree's latest report. The electric vehicle maker's shares have plummeted over 30% year-to-date, reflecting a slowdown in demand and heightened competition in the EV market. Tesla has experienced declines in key metrics, including negative revenue growth and free cash flow deterioration. The company replaced Chevron (CVX) as the most crowded security in Hazeltree's community.
Chinese electric vehicle maker ZEEKR Intelligent Technology Holding (ZK, Financial) saw its shares rise in premarket trading on Tuesday, propelled by a 117% year-over-year increase in vehicle deliveries and a 70% gain in vehicle sales. The company reported total revenue of $2.04 billion, a 71% increase year-over-year, exceeding street expectations by $360 million. Gross profit surged 154.9% to $240.9 million, and the net loss narrowed by 18% to $280 million.
Crown Castle (CCI, Financial) announced that it expects its 2024 AFFO per share to be higher than initially predicted, thanks to a 10% reduction in staffing levels in its fiber segment. The telecom infrastructure REIT now anticipates its AFFO per share to range between $6.91 and $7.02, up from the previous range of $6.85 to $6.97. The company also plans to reduce discretionary capital expenditures and improve capital efficiency while achieving 2% annual organic revenue growth in 2024.
Spotify (SPOT, Financial) is set to launch a new, higher-priced subscription plan later this year, costing at least $5 more per month than existing plans. The new plan will offer better audio quality and new tools for creating playlists. This comes after Spotify announced price increases for its U.S. subscribers earlier this month, with individual plans rising to $11.99 per month and Family and Duo plans also seeing price hikes.
Apple's (AAPL, Financial) new AI offerings are not expected to disrupt Google's (GOOG, Financial) (GOOGL) core search business, according to Morgan Stanley. Analyst Brian Nowak noted that Apple's use cases do not pose a threat to broad-based internet search or commercial query search. The new Siri and Apple Intelligence products are seen as native assistants with limited capabilities, although the OpenAI partnership may help scale Siri's responses over time.
Main Street Capital (MAIN, Financial) completed a new portfolio investment totaling $36.9 million and realized a $10.4 million gain from a partial exit of another investment. The new investment was made to facilitate the management-led buyout of Nello Industries. Main Street's investment includes a combination of first lien, senior secured term debt, and a direct equity investment. Additionally, MAIN and its co-investor provided Nello with a revolving line of credit.
Nvidia (NVDA, Financial) shares started trading on a split-adjusted basis, reigniting speculation that the AI leader might be considered for inclusion in the Dow Jones Industrial Average (DJI). Nvidia's market cap reached $3 trillion again, making it the second most valuable listed company, edging out Apple (AAPL, Financial). Investors received nine additional shares for each one they already owned, potentially setting the stage for Nvidia's inclusion in the Dow.
J.P. Morgan initiated coverage on Shopify (SHOP, Financial) with an Overweight rating, citing its leading position in the e-commerce enablement sector. Analyst Reginald Smith highlighted Shopify's competitive advantages, including product breadth, ease of use, and scale, which are expected to fuel industry-leading growth. The firm set a price target of $74 per share, reflecting high-teens growth and margin expansion.
Target Hospitality (TH, Financial) and CoreCivic (CXW) shares plummeted after the companies confirmed that the government plans to terminate their contracts for a detention center in Dilley, Texas. Target Hospitality received notice that the contract would end in 60 days, significantly impacting its revenue and profit. CoreCivic also announced that the U.S. Immigration and Customs Enforcement agency intends to terminate its contract for the facility.
Academy Sports and Outdoors (ASO) saw its shares fall after missing consensus estimates in its Q1 earnings report. Revenue dropped 1.4% year-over-year to $1.36 billion, with comparable sales down 5.7%. The retailer's net income fell to $76.5 million from $94.0 million a year ago. Looking ahead, the company expects comparable sales to range between -4.0% and +1.0% for the full year, with full-year EPS projected between $6.05 and $7.05.
The California State Teachers' Retirement System announced it would vote against Tesla (TSLA, Financial) CEO Elon Musk's $56 billion pay package. CalSTRS holds just under 4.7 million shares of Tesla and has been a stakeholder since before the company went public in 2010. Opinions on Wall Street are divided on the outcome of the vote, with some analysts expecting the package to be approved again.
Sage Therapeutics (SAGE, Financial) traded sharply higher after announcing that its Phase 2 SURVEYOR study for its experimental therapy dalzanemdor (SAGE-718) met the primary endpoint in patients with Huntington's disease. The trial demonstrated a statistically significant difference in cognitive assessment measures, although it was not powered to measure differences between treated and placebo groups. The company plans to use these findings in further studies.
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