Traders work on the floor of the New York Stock Exchange during morning trading on May 31, 2024 in New York City.
Michael M. Santiago | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Wall Street little changed
The S&P 500 and the Nasdaq Composite largely held on to gains in choppy trade ahead of key inflation data. The S&P 500 closed virtually unchanged, up 0.23 points, while the Nasdaq Composite added 0.21%, boosted by a surge in Nvidia shares. However, the Dow Jones Industrial Average fell 0.36%. The yield on the 10-year Treasury edged lower.
Mid-East tensions
U.S. crude oil prices rose over 4% on Monday, surpassing $80 per barrel, as the Pentagon deployed additional forces to the Middle East in response to heightened tensions. Defense Secretary Lloyd Austin ordered a carrier strike group, including F-35 warplanes, and a guided-missile submarine to the region. Israel has been preparing for retaliatory strikes by Iran and Hezbollah after the assassination of a Hamas leader in Tehran.
Inflation outlook
U.S. consumers believe price increases will gradually decline, with expectations for three-year inflation hitting a record low of 2.3%, according to a New York Federal Reserve report. While inflation is expected to remain elevated over the next year, consumers anticipate a decline in the following years. The report comes amid expectations that the Federal Reserve may reduce interest rates next month. The Labor Department’s consumer price index report, due Wednesday, is expected to show a 0.2% increase last month and an yearly rate of 3%, still above the Fed’s 2% target.
Elliott-Starbucks settlement?
Activist investor Elliott Management and Starbucks are in settlement talks, with potential terms including a board seat for Elliott’s Jesse Cohn and governance improvements, according to CNBC’s David Faber. CNBC previously reported the talks held last week would allow CEO Laxman Narasimhan to keep his job and position on the board. Starbucks Chairman Emeritus Howard Schultz has been opposed to the settlement. Elliott has built a $2 billion stake in Starbucks.
Adani shares drop
Shares in the Adani Group of companies dropped on Monday following a Hindenburg report alleging conflicts of interest involving the chair of India’s market regulator. Although shares recovered sharply, the companies lost $2.4 billion in market value. Hindenburg accused Madhabi Puri Buch, chairperson of India’s market regulator SEBI, of having invested in offshore funds linked to the Adani Group. Buch has denied the allegations.
[PRO] Two-month struggle
Investors may face a tough two months as Wall Street’s fear gauge recently spiked to its highest level since the pandemic. Bank of America notes the S&P 500 typically falls after such volatility spikes.
The bottom line
Nvidia gave Wall Street a boost at the start of the week, jumping 4% to bring its gains to over 120% so far this year. However, the chip giant has fallen more than 11% in the third quarter, as investors express concerns about returns from AI investments and shift their focus to the neglected areas of the market.
Despite this, UBS Analyst Timothy Arcuri reiterated his buy rating on Nvidia ahead of its Aug. 28 earnings report, setting a price target of $150, which represents a 37% upside from Monday’s close. Arcuri also raised his forecast for the company’s 2025 earnings per share.
Steve Grasso, CEO of Grasso Global, told CNBC’s “The Exchange” that Nvidia could soon see a return to $120. “This is definitely a momentum stock,” Grasso said, noting it was “a blink of an eye” away from $115 during Monday’s session. “I think you’re going to see a 120 frame sooner rather than later.”
A more cautious Dan Niles, from Niles Investment Management, believes the stock has yet to hit a low for 2024.
Capital investment is “going to be the lynchpin around which this market advances or goes down pretty hard from here,” Niles said, adding that the supply of AI chips is catching up with demand.
“I firmly believe they’ll beat the quarter on revenues and EPS but much like you saw with, you know, Microsoft, Amazon, Google or Tesla. I personally think the guidance could be weak.”
Investment research firm TS Lombard also issued a note of caution to investors, highlighting the high expectations for earnings. However, the firm still sees megacap technology as the key driver of the market.
“Make no mistake, it is still the US tech giants that set equities’ tone,” Konstantinos Venetis and Davide Oneglia wrote to clients. “Their weight – in terms of market cap, earnings and profit margins – is simply too heavy to allow a sustained broad market divergence at this stage.”
Meanwhile, Savita Subramanian, head of U.S. equity strategy at Bank of America Securities, has advised investors to focus on large-cap value stocks, particularly in the industrials, financials and materials sectors.
“We’re at a point where you don’t necessarily want to sell the market wholesale, you want to pick your spots,” Subramanian said on CNBC’s “Squawk on the Street.” “I really like large-cap value stocks here. I think that’s an area of the market that’s underappreciated and is poised to do quite well in the months, if not years, to come.”
— CNBC’s Alex Harring, Jeff Cox, Sarah Min, Sam Meredith, Rohan Goswami, Brian Evans, Tanaya Macheel and Spencer Kimball contributed to this report.