Market Overview
The S&P 500 (+0.4%) and Nasdaq Composite (+1.3%) closed near their highs of the day, driven by gains in mega cap and semiconductor-related names. Despite these gains, the overall market sentiment was negative, with declining issues outnumbering advancing ones by roughly 3-to-2 at both the NYSE and Nasdaq.
Index Performance
- Equal-weighted S&P 500: -0.7%
- Dow Jones Industrial Average: -0.8%
- Russell 2000: -0.4%
The downside moves were relatively modest, supported by NVIDIA (NVDA) which rallied after recent losses, and other mega cap names.
Top Performers
Carnival (CCL) was the top performer in the S&P 500, rising 8.7% after reporting better-than-expected earnings and revenue, along with above-consensus guidance. Other cruise line stocks also closed higher in sympathy:
- Norwegian Cruise Line (NCLH): +5.1%
- Royal Caribbean (RCL): +4.0%
Biggest Decliners
Pool (POOL) showed the largest decline among S&P 500 stocks, falling 8.0% after cutting FY24 guidance.
Sector Performance
Eight of the S&P 500 sectors logged declines. However, the heavily-weighted information technology (+1.8%) and communication services (+1.9%) sectors led the outperformers, supported by gains in mega cap components.
Economic Data
The market was also reacting to the Conference Board's Consumer Confidence Index for June, which slipped to 100.4 from 101.3 in May as expectations for future income weakened. Treasuries didn't move much in response to the data, settling little changed from yesterday. The 2-yr note yield was unchanged at 4.73%, and the 10-yr note yield fell one basis point to 4.24%.
The Treasury market was also digesting today's $69 billion 2-yr note sale, which met solid demand.
Year-to-Date Performance
- Nasdaq Composite: +18.0% YTD
- S&P 500: +14.7% YTD
- S&P Midcap 400: +5.0% YTD
- Dow Jones Industrial Average: +3.8% YTD
- Russell 2000: -0.2% YTD
Reviewing Today's Economic Data
- April FHFA Housing Price Index: 0.2% (Prior: 0.1%)
- April S&P Case-Shiller Home Price Index: 7.2% (Consensus: 6.9%, Prior: 7.5%)
- June Consumer Confidence: 100.4 (Consensus: 100.0, Prior: 101.3)
The key takeaway from the report is that expectations for future income weakened, which may detract from discretionary spending activity.
Looking Ahead
Market participants will receive the following data on Wednesday:
Guru Stock Picks
Third Avenue Value Fund (Trades, Portfolio) has made the following transactions:
- Reduce in HCC by 40.16%
- Sold out in HCTPF
- Add in HKSE:00001 by 234.8%
- New position in MEX:BOLSAA
Carl Icahn (Trades, Portfolio) has made the following transactions:
- Add in IEP by 5.29%
Today's News
FedEx Corporation (FDX) saw a significant post-market surge on Tuesday after exceeding consensus estimates with its fourth-quarter earnings report and delivering revenue guidance that surpassed expectations. The shipping giant reported a 0.9% year-over-year revenue increase to $22.1 billion for the quarter. The earnings per share (EPS) was $5.41, beating the consensus of $5.37 and last year's $4.94. Operating income also rose to $1.87 billion, surpassing both the consensus and last year's figures. However, the operating margin rate dropped to 7.0% from 8.5% a year ago. The company's Ground segment showed improved results due to reduced structural costs and increased yield, while the Freight segment benefited from higher yield and effective cost management.
SolarEdge Technologies (SEDG) experienced a dramatic 21.7% drop on Tuesday, nearing its lowest close in almost seven years. The decline followed the disclosure that a customer owing $11.4 million had filed for bankruptcy, potentially leaving the amount unpaid. Other solar stocks also traded lower, including JinkoSolar (JKS), Sunnova Energy (NOVA), and Enphase Energy (ENPH). SolarEdge reaffirmed its Q2 revenue guidance but projected a negative free cash flow of approximately $150 million due to higher working capital needs and slower manufacturing ramp-up in the U.S.
Google (GOOG, GOOGL) announced an earlier date for its Pixel reveal event, moving it from October to August 13. The "Made by Google" event will be streamed live and is expected to showcase the latest updates across Android, Gemini, and the Pixel device portfolio. This year's event comes ahead of Apple's (AAPL) anticipated iPhone 16 release in September.
Micron Technology (MU) is anticipated to beat Wall Street estimates when it reports third-quarter results on Wednesday, driven by increased AI exposure and higher DRAM pricing. Analysts expect the company to post EPS of $0.53 on $6.67 billion in revenue, reflecting a 77.9% increase. Micron has been gaining market share in high bandwidth memory chips, crucial for AI applications, and has started volume production for Nvidia's GPUs.
RTX's (RTX) Collins Aerospace is reportedly in discussions with NASA about potentially withdrawing from a contract to develop new spacesuits for the International Space Station. The contract, part of a $3.5 billion award to Collins and Axiom Space in 2022, has faced challenges, leading to NASA canceling two astronaut spacewalks this month due to spacesuit issues.
ZoomInfo Technologies (ZI) saw a nearly 5% rise amid vague takeover speculation. Reports suggest that an unidentified suitor has shown interest in the software and data company, which has a market cap of $4.4 billion. The speculation follows a recent downgrade by Piper Sandler due to weak growth in small and midsize businesses.
Apartment Income REIT (AIRC) shareholders approved the acquisition by Blackstone (BX) Real Estate Partners X. The all-cash deal, valued at approximately $10 billion including debt, is expected to close by June 28, 2024. Blackstone agreed to purchase AIRC for $39.12 per share.
Ginkgo Bioworks (DNA) hit a historic low after Cathie Wood's ARK ETFs sold approximately 41.6 million shares. The selloff resulted in a significant drop in the stock, which has faced challenges since its public debut via a special purpose acquisition company in 2021.
Senators Sherrod Brown, Robert Casey, and John Fetterman urged the Biden administration to block Nippon Steel's (OTCPK:NISTF) $15 billion acquisition of US Steel (X), citing threats to American workers and the steel industry. The United Steelworkers union president is set to testify at a Congressional hearing on the matter.
British American Tobacco (BTI) ended a six-day winning streak, closing down 0.71% on Tuesday. The stock has experienced mixed performance, with a Quant Rating of Hold due to high profitability and low growth prospects.
Goldman Sachs analysts rebalanced their "high Sharpe Ratio" basket, which includes 50 S&P 500 stocks with the highest prospective risk-adjusted returns. Despite recent underperformance, the basket has a long history of outperforming the S&P 500 on both absolute and risk-adjusted bases.
Chipotle Mexican Grill (CMG) edged higher ahead of its historic 50-for-1 stock split, effective after the closing bell. This split aims to make the stock more accessible to employees and a broader range of investors. The company has never executed a stock split since its IPO in 2006.
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