4:05pm: Meme stocks dominate headlines
US stocks closed mixed on Monday as a resurgence in meme stock trading captured attention alongside anticipation for an upcoming inflation report, which could signal the beginning of interest rate adjustments.
While the S&P 500 closed nearly unchanged at 5,221, the Nasdaq Composite saw a modest increase of around 0.3% at 16,388 points, while the Dow Jones Industrial Average ended its eight-day winning streak with a 0.2% decline to finish at 39,432.
Notably, meme stocks like GameStop and AMC experienced significant gains, with GameStop shares jumping 74% amid the return of the social media figure "Roaring Kitty."
Meanwhile, May saw a robust market performance driven by positive earnings reports and optimism surrounding potential Federal Reserve policy adjustments.
The upcoming Consumer Price Index update for April is anticipated to provide insights into inflation trends and could influence market sentiment regarding future rate cuts.
“This is the first major inflationary number the market will digest since the last FOMC meeting and should have a significant market impact if it misses the mark,” Freedom Capital Markets (NASDAQ:FRHC) chief global strategist Jay Woods commented.
“The Fed will have this reading as well as the May CPI reading to digest ahead of their June meeting. For the rate cut narrative to gain momentum the street will want to see this number resume its downward trend towards 3%.”
Also on deck this week are earnings releases from major retailers such as Home Depot and Walmart.
1.59pm: S&P 500 joins Dow Jones in red
Both the S&P 500 and Dow Jones failed to hold onto earlier gains come Monday lunchtime, having fallen four and 81 points respectively.
The Nasdaq remained in positive territory though, up 31 points at 16,372, as eyes appeared to be firmly fixed on Wednesday’s consumer inflation data after producer prices on Tuesday.
“The latest PPI and CPI data for April carry the potential to significantly amplify or alleviate inflation concerns, depending on the direction of any surprises,” City Index analysts said.
“CPI has consistently outperformed expectations since the beginning of the year.
“The Federal Reserve and those bearish on the dollar will be hoping to see a more subdued reading this time, as failure to deliver could further delay expectations of a rate cut.”
Some enjoyed gains over the day though, with Moderna Inc (NASDAQ:MRNA, ETR:0QF) up almost 8% after a dip last week and Incyte Corp climbing 7.4% on news of a US$2 billion share buyback.
Walgreens Boots Alliance Inc (NASDAQ:WBA, ETR:W8A) climbed 5.4% in the meantime, after it emerged the US group was in talks to sell its UK Boots arm.
In the red was Chevron Corporation (NYSE:CVX, ETR:CHV), after senate majority leader Chuck Shumer publicly called for its takeover of Hess to be stopped.
Heavyweight Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) added to downward pressure too, falling nearly 2% during the day.
12.30pm: Wall Street mixed at midday
The Dow Jones looked to give up earlier gains come Monday afternoon, slipping into the red with an eight-point loss to take the index to 39,504.
Up 1 point and 50 points respectively, the S&P 500 and Nasdaq continued in green territory in the meantime.
Apple Inc (NASDAQ:AAPL, ETR:APC) was among companies buoying indexes, climbing 1.8% following weekend reports that a deal with OpenAI to roll out ChatGPT-style software to its products was all but done... Read more
Intel Corp (NASDAQ:INTC, ETR:INL) enjoyed strong gains of 3.2% too, on reports the firm was nearing an US$11 billion deal with Apollo over a new chip-making plant in Ireland.
GameStop Corp (NYSE:GME) continued to be the talk of the day though, with shares up 74% as a second meme stock frenzy looked to be on the cards with the return of Roaring Kitty to X.
Following a three-year absence from social media, the former Massachusetts Mutual Life Insurance trader - legally known as Kieth Gill - continued posting throughout the day as shares in the company, of which almost a quarter are shorted, climbed... Read more
Eyes elsewhere appear to have turned to Wednesday’s consumer price index reading though, according to Scope Markets analysts, given hopes for rate cuts sooner rather than later.
“On a day that is largely devoid of major news, traders will be looking closely at the potential scenarios on Wednesday,” Scope Markets’ Joshua Mahony said.
“Given the recent resurgence in US inflation, we could potentially see fresh risk-off sentiment emerge should monthly inflation come in above 0.2% yet again.”
11.03am: Short sellers hit on GameStop rally
As GameStop is rallying, up over 200% since the beginning of the month, short sellers are reportedly taking huge losses.
Since the beginning of the month, short sellers have now lost $1.45 billion, $1 billion of that just today, according to short-selling platform Ortex.
"When a highly shorted stock like GME, with almost 25% of it's free floating shares shorted, has a sudden price increase, short sellers are losing money, and quickly," Ortex noted in an email.
"To stop losing money, a short seller would have to close the position, and to do so, they have to buy the shares, this in turn, adds additional buy pressure to the stock, which often result in a further price increase.
"During these times, it's important to keep an eye on the short interest moves to be able to determine if short sellers have closed out, and how much."
10.59am: GameStop to the moon?
One notable stock on the rise is GameStop Corp (NYSE:GME), which has jumped close to 70% this morning - not quite to the moon but almost.
This followed a noted meme stock trader reemerging on social media after a three-year absence.
All that it took was a post on X from Roaring Kitty of a sketch portraying a video gamer sitting forward on a chair.
GameStop was one of the key 'YOLO stocks' to attract the WallStreetBets Reddit (NYSE:RDDT) forum’s attention back in 2021, resulting in handsome ‘Tendies’ for some of its more famous users such as Roaring Kitty.
Kitty, aka YouTuber Keith Gill, invested US$53,000 in the video game retailer in 2019, the value of which then apparently ballooned to around a US$48 million stake early in 2020.
10am: Open in the green
US stocks have indeed started the week on the front foot despite falls by the tech megacaps creating a large headwind.
The Nasdaq Composite index was up 0.24% and the Dow Jones 0.23%, while the S&P 500 gained 0.13%.
This was despite Microsoft, Nvidia, Alphabet, Amazon and Meta - five of the so-called Magnificent Seven - being in the red, with Alphabet and Meta down around 2%.
Apple and Tesla were the notable Nasdaq exceptions, up 1.1% and 3.7%.
Topping the Dow leaderboard was Walgreen Boots Alliance, up 5.8% on a report that potential buyers for its $8.8 billion UK drugstore chain are being contacted.
8am: US stocks tipped to open higher
Wall Street's main stock indices are set to open higher today, led by the tech-powered Nasdaq after a mixed end to last week.
Futures markets are anticipating a 0.35% rise for the Nasdaq 100, while S&P 500 futures are up 0.26% and for the Dow Jones the premarket gain is 0.18%.
Analysts are all pointing to the consumer price inflation report, due for release Wednesday morning, as the key this week to the market's short-term fortunes, with CPI having been hotter than expected for the past three monthly prints.
A fourth could rule out a Federal Reserve rate cuts this year and sour the market mood.
Strategists at Stifel were of a bearish mind earlier. "The next 500 points for the S&P 500 are down," they say, predicting no rate cut any time soon.
The Fed has "already harvested all the normal post-recession disinflation we would expect. As a result, the sustained 2% core PCE inflation the Fed seeks is a pipe dream".
Market commentator Kenny Polcari at Slatestone Wealth says his guess is if CPI lands in line with forecasts "the market holds steady and churns right here".
But if they are worse than expected "then watch as the algos once again all go running for the door, causing stocks to decline…and if we see a drop beyond the expectation – then I do think they will try to push higher – but will have some difficulty in doing so – again because it feels like it already priced in a ‘better than expected’ result – so I’m not sure there is much more gas in the engine to push us significantly higher just yet."