Key Takeaways
- Broad Market Rally Despite Global Uncertainty
- Boeing Talks Break Down
- Energy Sector Gains Driven by AI
Stocks staged broad rallies on Tuesday with the S&P 500 jumping nearly 1% and Nasdaq Composite gaining 1.45% Small cap stops were flat on the day and the Dow Jones Industrial Average gained 0.3%.
Markets have been swayed a bit by activity in China where some mixed messaging from the government has caused wide swings in prices. After recently announcing aggressive stimulus measures that boosted stock prices, many expected a furthering of those plans this week. However, when Chinese authorities hosted a press conference Tuesday, hopes for yet more stimulus were dashed. A couple weeks ago I made the comment that it felt as if China was throwing everything, including the kitchen sink, at their economy. The failure to announce any additional plans on Tuesday brings up concerns that China is running out of options. This is still an evolving story and one worth monitoring as it could have implications for U.S. markets.
Back here at home, there are a few stocks I’ll be following today. Boeing announced it was breaking off talks with its machinist union. The company withdrew its most recent offer to raise wages by 30% and as of now, there are no plans to restart the negotiations. In the wake of the contract negotiations breakdown, S&P Global Ratings said it may lower its rating on Boeing bonds to junk status which would likely be a significant blow to the company whose stock is already down around 40% for the year.
Shares of Google parent company, Alphabet are lower by 0.5% in premarket. The Department of Justice (DOJ) announced they may seek to have the company broken up, alleging the current structure creates a monopoly. This is an interesting story not just in terms of what happens to Alphabet, but also, what type of precedent this may set for other companies, some of which comprise the Magnificent Seven. Should the company be broken apart, I would not be surprised if it spurred activity around companies such as Meta or even Apple. The question I would have is whether those companies seek spinoffs before possibly being forcibly broken apart, or if the companies would instead fight the DOJ. I actually believe these types of breakups, although disruptive in the short term, can have potential to benefit shareholders, so it is something to keep an eye on.
Constellation Energy has seen its stock surge nearly 80% since early August. While we don’t typically think of energy stocks as exciting, the sector is in play because of Artificial Intelligence (AI). The computing power for AI and energy required is creating a lot of interesting activity in the sector. In addition to established players in the field, new entrants are also emerging. Companies such as Oklo Incorporated, whose stock has more than doubled from a low of $5.35 just last month, are drawing attention to a sector not typically considered as high growth.
Speaking of AI, chipmaker Taiwan Semiconductor reported strong earnings overnight. That stock is indicated higher by just under 1% in premarket. The positive news also has shares of Nvidia indicated higher by 1% and trading at a new all-time high. We’ll see if a breakout to new highs has the ability to excite the broader market as well.
For today, in addition to the stocks mentioned above, I am particularly interested in the release of the most recent Federal Reserve Open Market Committee (FOMC) minutes from last month’s reading. As I mentioned on Monday, given the magnitude of the cut to interest rates but continued indication of strength in the economy, I think these minutes will garner more scrutiny than we typically see. I also think the minutes will give some context to tomorrow’s Consumer Price Index (CPI) report and Friday’s Producer Price Index (PPI). Friday will also be the start to earnings season with both JP Morgan and Wells Fargo scheduled to report. As always, I would stick with your investing plans and long-term objectives.
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