Market Awaits Services and Manufacturing Numbers

Overseas markets sold off tech, particularly AI-related companies, which is now leading to the second-straight day of selling off the Nasdaq. Even the rotation into blue-chips Monday seems to have exhausted itself, near-term. The Dow is off another -218 points at this hour and the S&P 500 is -103.

The Nasdaq is down a whopping -882 points currently — including Micron MU diving -8% two days ahead of its quarterly earnings release. The tech-heavy Nasdaq, now falling to second-place in equities gains year-to-date behind the small-cap Russell 2000, has dumped -1100 points since the first hour of trading yesterday. The Russell 2000 has given back -46 points at this hour.

Every so often, markets self-audit their more exuberant actions, and the AI trade would most certainly qualify here. This may be nothing more than a booking of profits ahead of the next leg in AI market development, or it could be that things like rotating the financing of chips from the biggest firms like NVIDIA NVDA are getting a hard look from investors as summertime trading volumes take hold.

Meanwhile, peace talks remain ongoing as oil tankers exit the Persian Gulf through the Strait of Hormuz by the dozens. Energy firms are still wary, however, as the road to peace has been a bumpy one. That said, WTI spot oil prices are down to $73 per barrel (/bbl) this morning — a downward adjustment of more than -60% from recent peak levels — with global Brent crude hovering around $78/bbl. Risks also remain, however, as strategic oil reserves had been reaching crucial levels ahead of the agreement.

What to Expect from the Stock Market Today

After the opening bell, we look for flash S&P PMI numbers in both Services and Manufacturing for the month of June. Both stayed above the important 50 threshold (which determines profit vs. loss) in last month’s print, although Services, at 50.7, was the lowest level since this metric dipped below 50 in March of this year.

Manufacturing, on the other hand, reached its strongest level in three years last month: 55.1. Data-center buildouts and further development from the Chips Act, which passed through Congress four years ago. Also, the stockpiling of goods in the wake of the ongoing conflict with Iran in May helped bolster this headline number. We’ll see if this continues at the same rate.

We’re on something of an “Earnings Island” this week, between two earnings seasons but with some key companies with something to say about the global and domestic economies. FedEx FDX seeks its fifth-straight earnings beat after today’s close, when it reports fiscal Q4 results. Expectations are for -2.6% earnings growth year over year, but +8.8% on the revenues side.

KB Home KBH has also outperformed estimates for four-straight quarters going into this afternoon’s print, but reflecting the ongoing challenges in the non-luxury housing market: earnings growth is projected to come in at a woeful -71.3%, -28.7% on the revenues side for its fiscal Q2 report. The average price of a newly-built home from the LA-based firm was down -10% to around $450K.

AI chip and supercomputer company Cerebrus CBRS posts its inaugural quarterly earnings since its IPO mid-May this afternoon. The supplier to OpenAI is expected to report a bottom-line loss of -$0.14 per share on $180.7 million in quarterly revenues. Depending on how impressive its report proves, this stock might be a bargain, currently -28% from its IPO price.

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