The S&P 500 futures are up 2 points, trading slightly above fair value. The Nasdaq 100 futures are up 5 points, also slightly above fair value. Meanwhile, the Dow Jones Industrial Average futures are down 14 points, trading just below fair value.
Stock futures are mostly unchanged as investors await the July Consumer Price Index report at 8:30 ET. Yesterday's stock market rally was driven by the July Producer Price Index, which showed lower inflation in both total and core PPI. Treasury yields remain steady from yesterday, with the 10-year note yield at 3.83% and the 2-year note yield at 3.93%.
Other data today includes the weekly MBA Mortgage Applications Index, which rose 16.8% as rates fell. The weekly EIA Crude Oil Inventories will be released at 10:30 ET.
In corporate news:
- Alphabet (GOOG 163.79, -2.14, -1.3%): The Justice Department is considering breaking up Google following a court ruling.
- Kellanova (K 80.14, +5.61, +7.5%): Mars confirmed it will acquire Kellanova for $83.50 per share in cash.
- UBS (UBS 30.15, +0.90, +3.1%): UBS beat earnings estimates by $0.05 and provided a positive outlook. It also agreed to sell Credit Suisse's US mortgage servicing business.
- Southwest Airlines (LUV 25.80, +0.38, +1.5%): Elliott Investment Management is planning a proxy fight.
- Cardinal Health (CAH 108.01, +5.43, +5.3%): The company beat earnings estimates by $0.10 and provided guidance for FY25 EPS above consensus.
Reviewing overnight developments:
Today's News
The Consumer Price Index (CPI) increased by 0.2% month-over-month in July, aligning with expectations and showing a slight firming from the previous month. Year-over-year, the CPI and core CPI, which excludes volatile food and energy prices, logged their smallest increase since spring 2021. The headline inflation year-over-year increase was 2.9%, slightly under the expected 3.0%. Core CPI rose by 3.2% year-over-year, matching economists' consensus and easing from the previous 3.3% rise. The indexes for shelter and motor vehicles saw increases in July.
In a major development in the snack industry, Mars has inked a $35.9 billion deal to acquire Kellanova (K, Financial), including assumed net leverage. This acquisition will bring together Mars' popular brands like M&M’s, Snickers, and Skittles with Kellanova's Pringles, Cheez-It, and Pop-Tarts. Shares of Kellanova surged 8% premarket, nearing the $83.50 per share level agreed upon in the all-cash deal.
Investment firm Barclays provided updates on the technology supply chain, focusing on companies like Nvidia (NVDA, Financial), Coherent (COHR, Financial), Marvell (MRVL, Financial), and Apple (AAPL, Financial). Nvidia's Blackwell line of GPUs will face delays, but this has not yet impacted the supply chain or upcoming quarterly results. Analyst Tom O'Malley noted that capacity for Hopper GPUs reached 400K units/month in Q2, with expectations of 600K units/month by the end of Q3.
Iron ore futures plummeted to their lowest since May 2023 after China Baowu Steel Group, the world's largest steel producer, issued a grim outlook for the steel industry. The company warned of a "longer, colder, and more difficult" period for the sector. This led to a 3.4% drop in Singapore iron ore futures to $95.20/ton and a more than 4% plunge in Shanghai rebar futures, marking the lowest level since 2017. Shares of BHP (BHP, Financial) were affected by the news.
Generative artificial intelligence startup xAI introduced new versions of its Grok models, Grok-2 and Grok-2 mini. The company claims that Grok-2 outperforms both Anthropic's Claude 3.5 Sonnet and OpenAI's GPT-4 Turbo. Google's (GOOG) (GOOGL) Gemini chatbot recently stated that OpenAI's GPT-4 is the most advanced large language model, according to Baird.
Intel (INTC, Financial) sold its stake in British chip designer Arm Holdings (ARM) during Q2, valued at over $147 million at the end of Q1. Intel has been struggling with weakening margins and intense competition, leading to a 30% decline since issuing weaker-than-expected guidance and announcing layoffs and dividend suspension. Moody's downgraded Intel's outlook to negative, expecting significantly weaker profitability over the next 12-18 months.
Spotify (SPOT, Financial) announced that Apple's (AAPL, Financial) iPhone consumers in the EU will now see pricing information in the app and can go to Spotify's website for purchases. However, Spotify criticized Apple's continued demand for "illegal and predatory taxes" despite a European Commission ruling. The Commission had previously labeled Apple's App Store rules for music streaming providers as "abusive."
Super Micro Computer (SMCI, Financial) replaced Tesla (TSLA, Financial) as the most shorted large-cap stock in the Americas in July, according to Hazeltree. SMCI saw 5.41 million shares shorted, representing 9.67% of its shares shorted. Tesla, which had been the most crowded security since May, dropped to a score of 94, falling behind Chevron (CVX, Financial).
Victoria’s Secret (VSCO, Financial) announced a leadership change, appointing Hillary Super as the new CEO effective September 9, 2024. The company also shared its preliminary Q2 results, expecting net sales and earnings to fall within or exceed previous guidance ranges. CFO Timothy Johnson will serve as interim CEO until Super takes over.
Brinker International (EAT) reported a miss in fiscal fourth-quarter profits despite an 11% revenue increase. The company's FY25 profit expectations also fell short of forecasts. Comparable restaurant sales increased 13.5%, mainly from Chili’s, but adjusted profit of $1.61 per share was 11 cents less than expected.
Foxconn Technology (FXCOF) reported a 6% increase in Q2 net profit, driven by strong demand for AI servers. The company maintained its full-year revenue outlook and announced it would start shipping servers containing Nvidia's (NVDA, Financial) next-generation chips in Q4. Foxconn will be the first supplier to deliver these servers, expected to increase further in early 2025.
GuruFocus Stock Analysis
- Coca-Cola and PepsiCo Are Both Resilient, but One Is More Attractive by Akim Guerreiro
- Booking Holdings a Buy Amid Strong Results, Good Value and High Growth by Oliver Rodzianko
- If Only Ben Graham Could Speak to Us by John Dorfman
- A Stellar Quarter for Kinsale Capital by Renato Neves
- Amazon Offers Attractive Growth at a Reasonable Price by Blue Chip Portfolios
