Stocks mixed as inflation data draws attention

U.S. stocks were mixed in early trading on Tuesday, with technology stocks providing a bright spot while Wall Street started a holiday-shortened week with its eyes on an upcoming inflation report that will be closely watched by the Federal Reserve.

The benchmark S&P 500 Index (^GSPC) was flat, while the tech-heavy Nasdaq Composite Index (^IXIC) rose about 0.5% after a strong closing gain on Friday. The tech-light Dow Jones Industrial Average (^DJI) fell about 0.3%.

As traders return from the Memorial Day holiday, major indexes are regrouping after a volatile week. Stocks are being driven by two factors: fading optimism about interest-rate cuts on the one hand, and rising hopes for AI on the other. The latter is being driven by Nvidia (NVDA), whose shares extended their post-earnings surge, up 3% in premarket trading.

Investors are now firmly back on the inflation radar, awaiting the release of the Federal Reserve's preferred PCE measure on Friday. Fed officials have repeatedly warned, joined by Neel Kashkari, that the data must show inflation is actually slowing to prompt a policy shift.

read more: How does the labor market affect inflation?

Those comments, along with better-than-expected economic data and hawkish Fed minutes, have traders scaling back bets that rates will be cut again this year. Data trackers expect updates on first-quarter GDP and consumer confidence later this week that could provide a trigger.

Among other individual stocks, GameStop (GME) shares surged 22% on Tuesday after the video game retailer said Friday it made nearly $1 billion in profits selling stock during the meme rally in early May, while Apple (AAPL) rose after data showed iPhone sales in China rose more than 50% in April as retail partners slashed prices.

live7 Updates

Tuesday, May 28, 2024 at 8:15 a.m. PDT

GameStop shares soar after completing nearly $1 billion in stock sale

Shares of GameStop Corp. (GME) surged 22% on Tuesday, opening at about $23. The move came after the video game retailer announced it had raised about $1 billion in its latest initial public offering.

While the stock price is still well below the nearly $65 level it reached during the brief meme rally earlier this month, the share price movement reflects investor enthusiasm for the meme trade.

Yahoo Finance's Ines Ferré reports:

“If this were a normal market, people would be panicking a little bit,” Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance.

He added: “If you think your stocks are undervalued, don't sell them in the market. The time to sell is when you think your stocks are overvalued.”

GameStop is a heavily shorted stock, with short interest exceeding 21% of shares outstanding.

The company capitalized on an unexpected meme rally in mid-May, selling 45 million shares to raise about $933 million, according to a statement on Friday.

GameStop said it plans to use the net proceeds for general corporate purposes, including acquisitions and investments.

The IPO was first announced on May 17th, alongside the company's preliminary financial statements, causing its stock price to fall 30% that day.

Some Wall Street analysts see the IPO as a smart move given the video-game retailer's deteriorating financial situation. GameStop's most recent earnings report showed quarterly sales were down sharply from the same period a year ago.
Tuesday, May 28, 2024 at 7:38 AM PDT

San Diego home prices rise to record high

Home prices hit a record high in March, but some cities remain vulnerable to rising prices.

Regionally, San Diego continued to see the highest year-over-year increase among the 20 largest metros, rising 11.1% in March, followed by New York and Cleveland, with increases of 9.2% and 8.8%, respectively.

Rising mortgage rates, soaring home prices and a lack of housing inventory are troubling homebuyers. Mortgage rates hovered in the mid-6% range in March. Last week, they fell below 7% for the first time since early April.

Despite the pent-up demand for housing, inventory shortages remain an issue, preventing prices from falling. However, this is expected to change.

“We expect mortgage rates to decline over the next few years, while we also expect inventory to gradually normalize, easing the market's cooling.” Thomas Ryan, North American economist at Capital Economics, wrote in a client note after the announcement. Ryan and his team expect home prices to rise 3% in 2025 and 2.5% in 2026.
Tuesday, May 28, 2024 at 7:28 a.m. PDT

Home prices hit new record, data reveals

The seasonally adjusted S&P CoreLogic Case-Shiller National Home Price Index (HPI) rose 0.3% month-on-month in March and 6.5% year-on-year, the second-biggest annual increase since the second half of 2022, Oxford Economics said in a client note after the data was released.

“We expect home price growth to remain positive over the next few quarters, but risks are tilted to the upside,” wrote Bernard Jarosz, chief economist at Oxford Economics. “Lack of supply in the existing home market, a strong labor market, and pent-up demand from millennials as they reach the peak of their household formation years could support stronger home price growth than our baseline forecast.”

Prices in the 20 largest U.S. metropolitan areas hit record highs again in March, the data showed.

(Source: Oxford Economics/Haver Analytics)

Jarosz added that while he expects “mortgage rates to fall as the Federal Reserve's first rate cut comes into sight,” home prices should remain elevated amid a “historically tight” supply of homes for sale.

Meanwhile, the seasonally adjusted Federal Housing Finance Agency (FHFA) home price index also rose in March, but at a slower rate than the previous month: the index rose just 0.1% month-on-month after rising 1.2% in February.

“Base effects are starting to become unfavorable for the FHFA index, but it is still rising faster on an annual basis than it will for most of 2023,” Yaros said.
Tuesday, May 28, 2024 at 7:08 a.m. PDT

Consumer confidence recovers for the first time in three months

Consumer confidence unexpectedly rose in May.

The Conference Board's latest index came in at 102, up from 97.5 in April and above the forecast of 96 economists surveyed by Bloomberg. May's reading ended a three-month streak of declines.

“Consumers' assessment of current business conditions is somewhat less favorable than last month,” Dana Peterson, chief economist at the Conference Board, said in a statement. “However, strength in the labor market continues to support consumers' overall assessment of the current situation. Fewer respondents said it was 'difficult' to find a job in May, and their views of the current work environment improved.”

“The expectations index rose as fewer consumers expect future economic, employment and income conditions to worsen,” Peterson added.
Tuesday, May 28, 2024 at 6:32 AM PDT

Dow falls, Nasdaq rises

U.S. stocks opened mixed on Tuesday, with tech shares providing a bright spot ahead of a key inflation report due later this week.

The benchmark S&P 500 (^GSPC) rose about 0.2%, while the tech-heavy Nasdaq Composite Index (^IXIC) added about 0.4% after a strong closing gain on Friday. The Dow Jones Industrial Average (^DJI) was the biggest loser of the morning, down 0.3%.
Tuesday, May 28, 2024 at 3:53 AM PDT

Foot Locker isn't out of the woods yet

The past 12 months have been awful for Foot Locker (FL).

The stock has fallen 16% over the past year as weak performance led to an unexpectedly worsening outlook.

Markets are bracing for another dismal quarter when the sneaker and sportswear retailer reports earnings on Thursday morning.

Evercore ISI analyst Michael Binetti said investors should expect a “very tough quarter” and the company may issue another warning for the full year.

He pointed to a few reasons why.

“We believe this is due to pressure on lower-income consumers, disappointing key product releases such as the Air Max DN, and the recent Jordan 4 Industrial Blue being sold below MSRP in resale channels ($185 vs. $215 MSRP).”
Tuesday, May 28, 2024 at 3:47 AM PDT

Evercore ISI's take on Trump 2.0 tariffs

We're starting to see Wall Street crunch the numbers on the economic impact of new tariffs that former President Trump wants to implement if he's re-elected.

Today, Evercore ISI shared the following insight:

“Presidents rarely go all-in on campaign ideas, and Trump in particular likes to use bold ideas as starting points. That said, understanding the dramatic starting point Trump has laid out is crucial, as it will influence where we ultimately land. Taken at face value, the proposed 10% across-the-board tariffs, combined with the 60% tariffs on China, would bring the weighted average U.S. tariff rate to nearly 17%, the highest since the Smoot-Hawley Act of the 1930s. On a static basis (i.e., without assuming any dynamic economic effects), the tariffs would rise from 0.3% to 1.9% of GDP, an increase of more than $400 billion per year. Such a dramatic move would almost certainly lead to massive retaliation by trading partners.”

Are Markets Underestimating President Trump's New Trade War? (Evercore ISI)