S&P 500, Nasdaq Inch Higher as Stocks Stabilize After Last Week’s Wild Ride

Biggest S&P 500 Movers on Monday

4 hr 2 min ago

Advancers

• KeyCorp (KEY) shares surged 9.1%, marking the top daily performance in the S&P 500, after the regional bank announced a $2.8 billion investment from Bank of Nova Scotia (BNS). The transaction gives Scotiabank a 14.9% stake in KeyCorp. The company said the investment from the Canada-based financial giant represented an optimal way to raise capital and enhance its strategic position.
• Super Micro Computer (SMCI) shares added 6.3%, clawing back a portion of the losses posted last week after the server and data storage firm posted lower-than-expected quarterly profits. Supermicro noted that its decreased gross margins during the quarter reflected higher costs of ramping up production of its direct liquid cooling (DLC) technology for artificial intelligence (AI) data centers. A report in The Wall Street Journal over the weekend highlighted the potential for liquid cooling to improve data center energy efficiency, suggesting Supermicro’s DLC investments could pay off.
• Shares of AI chip behemoth Nvidia (NVDA) gained 4.1% as Bank of America named the stock one of its top “rebound” picks. Analysts pointed to Nvidia’s solid position in the data center market as tech giants prepare to boost infrastructure spending. More positive commentary came from analysts at UBS, who said a reported delay in the launch of Nvidia’s Blackwell AI chip could turn out to be less consequential than originally anticipated.

Decliners

• Shares of Albemarle (ALB), the world’s largest lithium producer, tumbled 6.9%, posting the widest loss of any S&P 500 stock. Slumping lithium prices, which have fallen more than 80% since the beginning of 2023 amid lower electric vehicle (EV) demand, remain an overhang on Albemarle stock. In its most recent earnings report, the company disclosed a $188 million net loss and said it would add to a growing list of cost-reduction initiatives.

• Solventum (SOLV) shares slid 4.8% on the day after analysts at Wells Fargo trimmed their price target on the stock. The medical technology company, which completed its spinoff from 3M (MMM) in April, reported second-quarter results last week, announcing a 70% year-over-year decline in net income, based on figures carved out from 3M’s health care business. Reduced sales growth for wound care and surgical sterilization products weighed on Solventum’s performance.
• Shares of Warner Bros Discovery (WBD) fell 4.5%, extending losses posted in the wake of Thursday’s earnings report. The entertainment giant reported a quarterly loss of nearly $10 billion, reflecting the impact of a write-down in the value of its cable networks. The cable business remains under pressure from cord-cutting and the success of streaming services.

–Michael Bromberg

Supermicro Claws Back Some of Last Week’s Steep Losses

4 hr 19 min ago

Super Micro Computer (SMCI) shares jumped on Monday, recovering a portion of the steep losses recorded last week after the server and data storage company released its fiscal fourth-quarter earnings.

In its latest set of quarterly figures, the server maker reported revenue had more than doubled from the prior year, edging out analysts’ sales forecasts. Profits, however, fell short of expectations, and Supermicro’s stock plunged 20% the next day.

Although Supermicro forecasted further sales growth, increasing costs contributed to a drop in margins that appeared to underpin the negative reaction to the earnings report.

On its earnings call, the company attributed the downtick in gross margins to product mix, competitive pricing aimed at securing new design wins, and elevated initial costs involved in increasing production of direct liquid cooled (DLC) technology for clusters of graphic processing units used in artificial intelligence (AI) data centers. As DLC production ramps up, the company believes it can slow manufacturing costs to drive margin recovery.

In addition to the company’s assertion that preliminary cost headwinds should be temporary, a report over the weekend in The Wall Street Journal suggested that Supermicro’s investments in liquid cooling technology could pay off. The article highlighted liquid cooling as a “novel method” for helping AI data centers without relying as heavily on energy-intensive air conditioners.

Supermicro gained 6.3% on Monday and was the biggest Nasdaq Composite advancer.

–Michael Bromberg

What We’ve Learned From Q2 Earnings

4 hr 50 min ago

Concerns about the economy and market volatility have clouded the outlook for U.S. equities coming out of what has for the most part been a solid earnings season.

The key takeaways so far:

1 – Profits are holding up – The S&P 500 as a whole was on track to report earnings growth of 10.8% as of Monday, according to data from FactSet. And companies have so far beat earnings estimates at a rate (78%) slightly above both the 5-year (77%) and 10-year (74%) averages. However, the magnitude of those beats (3.5% on average) has lagged the norm (8.6% over the last 5 years), suggesting some weakness lingers below the surface.

2 – Sales are lagging earnings – Despite resilient earnings, revenue growth has lagged profit as consumers and businesses alike have reined in spending. The S&P 500 is on track to report revenue growth of 5.2% for the quarter, below the 5-year average of 6.7%. And the percentage of companies reporting better-than-expected revenue is also below the 5-year average. 

3 – Wall Street has soured on big tech’s massive AI spending – Big Tech companies are spending big on AI, and they don’t plan to stop anytime soon. Alphabet (GOOGL) and Microsoft (MSFT) increased their capex by 91% and 55%, respectively, in the quarter, with much of that increase going toward semiconductors and other hardware for AI-powering data centers. Both companies said they expect to spend even more in the next year.  The cost of Big Tech’s AI arms race scared Wall Street last month. The Magnificent Seven stocks notched a few of their worst days on record during the two weeks when most of the group reported earnings. 

4 – Financial sector is itching for rate cuts – The financial sector has reported the third-largest increase in earnings of any sector this quarter. Profit grew by 17.6% from the same quarter last year, and all five sub-industries—Insurance, Capital Markets, Consumer Finance, Financial Services, and Banks—have reported earnings growth.  Elevated interest rates were once a boon to big banks, some of the sector’s largest players, as the interest they collected on loans grew. But their deposit costs have since caught up, eating into net interest income, a key financial metric for the industry. 

Read the full story here.

–Colin Laidley

Nvidia Jumps Following Bullish Reports from Analysts

7 hr 3 min ago

Nvidia (NVDA) shares rose Monday as Bank of America analysts called the stock a top pick and UBS analysts said a reported delay in Nvidia’s Blackwell artificial intelligence (AI) chip may be less significant than initially thought.

UBS analysts said they expect initial Blackwell shipments to be delayed four to six weeks, based on discussions with Nvidia customers, compared to a three-month delay that was earlier reported. The delay will likely be “invisible to most, if not all, end customers,” they said.

The analysts said they remained bullish on the stock, citing rising AI spending and enterprise demand growth Nvidia. They maintained a “buy” rating and price target of $150.

The comments came as Bank of America analysts called the stock a top pick Monday, referencing the AI chipmaker’s exposure to the data-center market and strength with cloud-computing giants set to raise spending on infrastructure.

Nvidia shares were up nearly 5% in recent trading.

–Naomi Buchanan

Starbucks Rises on Report Starboard has Taken Stake

8 hr 1 min ago

Starbucks (SBUX) shares rose Monday on word hedge fund Starboard Value has taken a stake in the world’s biggest coffee chain and is calling for efforts to raise the stock price.

The Wall Street Journal reported that the size of the investment and the demands were not known. Neither Starbucks nor Starboard immediately responded an to an Investopedia request for comment.

The Journal noted that the move came as Starbucks is in settlement discussions with activist investor Elliott Investment Management, which it previously reported had taken a large stake in the company and also called for changes. 

Last month, Starbucks reported lower year-over-year third-quarter revenue as global same-store sales fell 3%, including a 14% decline in China.

Starbucks shares were up about 2% in recent trading Monday. The stock has lost a fifth of its value since the start of 2024.

–Bill McColl

Apple Positioned for Strong AI-Fueled Growth, Wedbush Says

8 hr 56 min ago

Apple’s (AAPL) AI-fueled growth cycle could be stronger than expected, according to Wedbush analysts who lifted their iPhone 16 shipment estimates based on their outlook for Asian demand.

The analysts wrote that “recent Asia checks this week are giving us more confidence this upgrade cycle will kick off a long-awaited renaissance of growth for Cupertino over the next year.” Apple has struggled amid increased competition and pricing pressure in the China market but has recently said that discounting efforts could be paying off.

Wedbush analysts increased their estimates for iPhone 16 shipments to at least 90 million, higher than Street expectations of between 80 million and 84 million, citing “more indications across the Asia supply chain this iPhone upgrade cycle.” Roughly 300 million iPhone users have not upgraded in the past four years, the analysts said.

They highlighted the anticipation building around the iPhone maker’s AI opportunity with the Apple Intelligence-powered iPhone 16. The device is expected to launch in September with AI updates to roll out later.

Apple shares were up about 1% in recent trading. The stock is up 13% so far in 2024.

–Naomi Buchanan

KeyCorp Stock Soars as Scotiabank Acquires $2.8 Billion Stake

10 hr 12 min ago

Shares of KeyCorp (KEY) jumped Monday morning following news that the Bank of Nova Scotia (BNS) acquired a 14.9% stake in the bank, valued at roughly $2.8 billion.

Scotiabank will buy approximately 163 million shares over a pair of transactions, with the first being an $800 million investment at the end of the month. After the companies receive approval from regulators and the Federal Reserve, which they expect to take place by the first quarter of 2025, Scotiabank will invest another $2 billion in KeyBank.

“While we continue to be comfortable with our current capital position, we determined that the investment enables Key to accelerate our well-communicated capital and earnings improvement while bolstering our strategic position,”  KeyCorp CEO Chris Gorman said.

Scotiabank will be purchasing shares set at a fixed price of $17.17 per share, a premium of roughly 17.5% to Friday’s closing price of $14.61.

KeyCorp shares were recently up about 12% to $16.36, after moving as high as $17.09 early in the session, reaching levels not seen since early 2023. Scotiabank’s shares fell some 4%.

–Aaron McDade

Marathon Digital Stock Plunges on Debt Offering

11 hr 4 min ago

Bitcoin miner Marathon Digital Holdings, Inc. (MARA) is raising $250 million via a debt offering to buy more bitcoin, as the company appears to be following the MicroStrategy (MSTR) playbook.

The company’s convertible senior notes will bear semi-annual interest and are set to mature in September 2031, with provisions for early redemption and conversion into cash or MARA’s common stock.

MicroStrategy is the only publicly traded company that holds more bitcoin than Marathon. MicroStrategy employed this strategy of offering convertible notes in an effort to buy more bitcoin earlier this year. The data provider first adopted bitcoin as a reserve asset in 2020.

More companies are now getting on board with holding the cryptocurrency on their balance sheets. Fintech startup Fold and healthcare company Semler Scientific (SMLR) also made similar moves in recent months. Larger companies, such as Tesla (TSLA) and Block (SQ) (formerly Square), have also adopted a bitcoin strategy in recent years.

Marathon shares were down 7% in recent trading, after dropping as much as 12% early in the session.

–Kyle Torpey

Futures Point to Higher Open for Major Indexes

13 hr 4 min ago

Futures tied to the Dow Jones Industrial Average were up 0.2%.

S&P 500 futures were up 0.3%.

Nasdaq 100 futures were also up 0.3%.