Nasdaq leads stocks higher after Biden backs out

US stocks rose on Monday as investors assessed the potential fallout from President Joe Biden’s exit from the presidential race.

The S&P 500 (^GSPC) gained roughly 0.7% while the tech-heavy Nasdaq Composite (^IXIC) rose more than 1%, both coming off their worst weekly losses since April. The Dow Jones Industrial Average (^DJI) moved up 0.1% in the wake of the index’s own sharp fall.

Investors are surveying a changed political landscape after Biden called off his reelection bid on Sunday and backed his vice president, Kamala Harris, to replace him as the Democratic nominee. The political shock could inject more volatility into an already battered stock market, distracting focus from this week’s flood of earnings and key inflation release.

Biden’s move, while not unexpected after weeks of pressure, is seen on Wall Street as eroding the odds of Republican contender Donald Trump securing a return to the White House. That could prompt a light unwinding of recent “Trump trade” bets on assets seen as benefiting from a second Trump presidency, such as bitcoin, bank stocks, and higher US bond yields. The yield on the benchmark 10-year Treasury (^TNX) slipped in Monday’s early hours.

Meanwhile, earnings season is about to kick into higher gear, with a stream of S&P 500 companies expected to report in a week headlined by Alphabet (GOOGL, GOOG), Tesla (TSLA), and Chipotle (CMG).

Those results will give insight into the economy and the consumer ahead of Thursday’s report on second quarter GDP and Friday’s update on the Federal Reserve’s preferred inflation metric, the Personal Consumption Expenditures (PCE) index.

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Mon, July 22, 2024 at 9:33 AM EDT

Nasdaq open higher after Biden backs out of presidential race

The major averages opened higher on Monday as investors assessed the direction of the elections after President Joe Biden exited the 2024 race.

The S&P 500 (^GSPC) rose while the tech-heavy Nasdaq Composite (^IXIC) soared 1% at the open after both indexes ended Friday with their worst weekly losses since April. The Dow Jones Industrial Average (^DJI) moved up 0.1%.

On Sunday Biden called off his reelection bid and backed vice president Kamala Harris to replace him at the top of the democratic ticket.

Investors await a flood of earnings and key PCE inflation release this week.

Alphabet (GOOGL, GOOG), Tesla (TSLA), and Chipotle (CMG) are some of the companies reporting quarterly results this week.
Mon, July 22, 2024 at 5:23 AM EDT
Starbucks finds Elliott at its doorstep

Good to see Starbucks (SBUX) getting a wake-up call.

WSJ reported late Friday that Elliott Management took a stake in the struggling coffee seller.

In typical Starbucks form, they told Yahoo Finance that they “do not comment on rumor or speculation.” However, Elliott is now involved here, based on my understanding of the situation.

I outlined 10 things wrong with Starbucks on X. Many of these are deeply rooted issues I have seen spread over the past decade, so Elliott, despite all of its power, is unlikely to fix them.

But Bernstein restaurant analyst Danilo Gargiulo sees a path to unlocking shareholder value at Starbucks.

Here they are:

Invest in top-level talent and leadership with operational and restaurant experience.

Reduce unit growth and expedite the transition to more purpose-built stores.

Reset the value perception.

Accelerate throughput and improve predictability of service times.

Enhance consumer experience.

Invest in purposeful innovation to attract core consumers and younger generations.

Reestablish neutrality of the brand on political stances (move HQ away from Seattle?).

Franchise China operations.

Optimize expenses.

Reset long-term guidance and market expectations.
Mon, July 22, 2024 at 5:13 AM EDT

Eyes on: Nvidia

Nvidia (NVDA) is catching a bid this morning, up 2% pre-market on a bullish 30-day trading call by Citi.

Says Citi’s Atik Malik:

“We are opening a positive catalyst watch on NVDA into SIGGRAPH 2024 conference for three reasons. First, NVIDIA CEO Jensen Huang and Meta (META) CEO Mark Zuckerberg will likely discuss the future of AI and we believe NVIDIA could announce the much-anticipated standalone Arm-Based Grace CPU for servers. Second, the CEO discussion should shed positive light on how NVIDIA’s end customers make money or their ROI profile, a key topic on investors’ minds these days. Third, we expect to hear accelerating AI demand trend at the conference with no signs of an air pocket and view the recent pullback in the stock (13% P/E discount to 3-year average) on geopolitical concerns as a buying opportunity.”

SIGGRAPH kicks off on July 28. Huang is slated to perform two fireside chats.
Mon, July 22, 2024 at 5:06 AM EDT

One thing to watch in today’s session following Biden’s decision

Keep an eye on the “Trump Trade” following Biden’s decision to not seek re-election.

Over the past month, stocks seen as tied to Trump’s possible policies have risen nicely — for example, shares of Exxon Mobil Corporation (XOM) are up 5% in the past month. Lockheed Martin (LMT) is up 1.6%, outperforming the S&P 500 (^GSPC).

Here’s the vibe on Trump Trade, according to BTIG’s policy expert Isaac Boltansky:

“With a new Democratic presidential challenger expected, we could see a reversal in some market moves linked to the “Trump Trade.” This is understandable as markets will be forced to reassess the odds of Trump winning without knowing his official challenger. Furthermore, we believe that Biden exiting leaves the House as more of a toss up than leaning Republican. With that being said, we continue to view Trump as the slight favorite and note that many beneficiaries of a second Trump administration are based on administrative shifts rather than legislative changes. These beneficiaries include private prisons, digital assets, and firms exposed to an uptick in M&A. Trump’s trade policy would likely be largely the same in a divided government scenario as well. We continue to expect a punt and extension of most of the $4.6T in expiring tax provisions, but as a general matter spending should be relatively easier in a divided government scenario.”