Markets News, May 6, 2024: Stocks Close Higher Amid Hopes For Interest Rate Cuts; Dow Gains for 4th Straight Session

Biggest Movers Monday

GAINS

Super Micro Computer (SMCI) shares jumped 6.1% after Barclays boosted its price target on the stock. Analysts highlighted expected revenue growth, supply chain improvements, and artificial intelligence opportunities as reasons for bullishness. Monday's gains mark a recovery from heavy losses posted last week after the storage and server provider's earnings report raised questions about its potential to benefit from AI.

Airline sector stocks soared, led by American Airlines (AAL) with gains of 5.8%. Shares of Southwest Airlines (LUV) and United Airlines (UAL) were up 4.9% and 4.5%, respectively.

Quanta Services (PWR) added 5.1% on Monday after the electric infrastructure provider raised its full-year sales and profit outlook last week, citing robust demand for construction and engineering services from the electric power and renewable energy industries.

LOSSES

Tyson Foods (TSN) shares plunged 5.7% after the meatpacker said inflationary pressures and high commodity costs could weigh on its performance. Tyson's second-quarter profits beat forecasts, but softness in the pork and prepared foods divisions showed headwinds in the current quarter.

Amgen (AMGN) slipped 3.8%, giving back a portion of the 11.8% gains that were posted Friday after the biotech firm provided an update on weight-loss drug MariTide. Although there is speculation MariTide could compete with blockbuster anti-obesity medications already on the market, investors will have to wait until the end of the year for more detailed data from a mid-stage clinical study.

Walgreens Boots Alliance (WBA) shares fell 3.1%. The pharmacy giant is in the midst of a strategic review designed to turn around its business. Although Walgreens has made some progress on lowering costs and reducing debt, it faces challenges related to decreased consumer spending and a significant unpaid tax liability.

-Michael Bromberg

Reddit Gets BofA Price Target Boost Ahead of Earnings

Reddit (RDDT) shares closed 3.5% higher as Bank of America (BAC) analysts raised their price target on the stock, anticipating “opportunity for upside” when the social media company reports first-quarter earnings Tuesday, its first earnings report since its initial public offering in March.

Bank of America lifted its price outlook to $50 per share from the previous $46, while maintaining its "neutral" rating for the company's stock.

The analysts said they anticipate Reddit could beat the bank’s revenue estimate of $212 million, which is 29% higher than the year-ago quarter, with ad revenue at $199 million, a 21% increase year-over-year.

-Bill McColl

Disney Shares Rising Ahead of Tuesday Earnings Release

Shares of Disney (DIS) were 2.4% higher about an hour before Monday's closing bell ahead of the release of the company's earnings report tomorrow.

Analysts anticipate Disney to show subscriber growth for its fiscal second quarter as it benefits from the recent bundling of Disney+, Hulu, and ESPN+.

Investors will also be looking for updates about the path to profitability in its streaming business after CEO Bob Iger said the company expects it to be profitable by the end of the fiscal year.

UBS analysts, who have said that Disney's streaming segment is "the biggest source of near-term upside," noted that "the consolidation of Hulu in the U.S. should also drive engagement and help streamline operations, boosting streaming margins."

Analysts project Disney's revenue to be $22.08 billion for the second quarter of 2024, down from the previous quarter but up from $21.82 billion in the same period in 2023, according to estimates compiled by Visible Alpha.

Net income is expected to be $1.97 billion, also a decline from the first quarter but up from $1.7 billion in the second quarter of 2023. Diluted earnings per share (EPS) are projected at $1.09, compared with 93 cents in the same period a year earlier.

-Naomi Buchanan

Tyson Tumbles As CEO Cites Macro Concerns

Tyson Foods (TSN) shares were down nearly 8% in mid-afternoon trading Monday, leading S&P 500 decliners, as "macro environment" concerns raised by its chief executive during the company's earnings call offset higher-than-forecast quarterly profit.

Tyson reported adjusted earnings per share (EPS) of 62 cents for its fiscal second quarter, nearly double the consensus estimate compiled by Visible Alpha, and a turnaround from the loss per share of 4 cents it registered in the same period last year. Revenue declined over the year by 0.5% to $13.07 billion, just short of forecasts.

Chief Executive Officer (CEO) Donnie King said Tyson is "not immune to the macro environment" in the company's earnings call Monday.

-Bill McColl

Micron Leads Nasdaq Gainers Following Baird Upgrade

Micron Technology (MU) were up more than 4% in mid-afternoon trading Monday and were the biggest gainer on the Nasdaq after Baird upgraded the stock and raised the price target, saying it sees “meaningful upside opportunities ahead” for the semiconductor maker.

Baird boosted its rating to "outperform" from "neutral," and lifted the price target to $150 per share from $115. It also added Micron to its list of "top semiconductor ideas," which also includes Nvidia (NVDA), Broadcom (AVGO), and Semtech (SMTC).

Baird Senior Research Analyst Tristan Gerra wrote in a note to clients that Micron shares look attractive after a recent pullback, which came even as demand trends for DRAM chips have accelerated.

Gerra noted that DRAM chip pricing is stronger than anticipated, “while supply growth is expected to slow industry wide.”

-Bill McColl

Palantir Shares Jump Ahead of Earnings Report

Shares of Palantir (PLTR) were up more than 6% in late-morning trading Monday ahead of the release of the data analytics software maker's quarterly earnings report after the closing bell.

Analysts expect Palantir to report that revenue and earnings rose from the year-ago period amid a surge in demand for artificial intelligence, and market participants will be watching closely later Monday to gauge whether AI momentum can sustain Palantir's growth.

Investors are looking for sustained growth in the company's commercial segment, which accounted for about 45% of the company's revenue last year. Goldman Sachs analysts said they "believe the key debate on the stock will be the durability of growth in US Commercial as Palantir’s strengths with data stitching intersect with customers’ AI projects."

Palantir's stock has gained amid enthusiasm for its potential amid a boom in AI demand, with some analysts saying it's a key benefactor while others have suggested it's overvalued on AI hype.

-Naomi Buchanan

Apple in Focus After Berkshire Reduces Stake

Apple (AAPL) remains in focus Monday, after a big gain on Friday, following news over the weekend that Warren Buffett's Berkshire Hathaway had sliced its stake in the iPhone maker during the first quarter.

Though Apple remains by far Berkshire's largest stock holding, the latest reduction is far greater than the 10 million-share cut disclosed for the fourth quarter. Berkshire is also Apple's single largest shareholder.

Buffett assured investors at the company’s shareholder meeting on Saturday that his views on the tech giant’s business hadn’t changed, adding that it's “extremely likely” that Apple will remain Berkshire's largest stock holding at the end of 2024.1

When asked whether his view on Apple had changed, the Oracle of Omaha told shareholders that he thought Apple is an even better business than American Express (AXP) and Coca Cola (KO), two of Berkshire's other large holdings.

Buffett’s remarks may have helped alleviate investors’ concerns that Berkshire was reducing exposure to Apple over valuation concerns following its 48% gain in 2023 and forward earnings multiple of 28 times. Still, the stock may face short-term price fluctuations as investors digest Berkshire’s latest sales in the stock.

Apple shares, which were down 0.5% at $182.46 in early trading Monday, have oscillated roughly within a 30-point trading range since August 2023, with the price testing the pattern’s upper and lower levels several times over the past eight months. More recently, the stock gapped above the 200-day moving average on Friday after posting a better-than-expected earnings report and announcing a $110 billion stock buyback program.

If the shares continue to see follow-through buying, investors should monitor the $196 level, an area on the chart where the price may encounter overhead resistance from the range’s top trendline. However, during periods of weakness, watch for a potential gap fill down to around $173, which sits in close proximity to the 50-day moving average.

-Timothy Smith

Stock Futures Rise, Building on Two Weeks of Gains

Futures contracts tied to the Dow Jones Industrial Average were up 0.4%.

S&P futures gained 0.5%.

Nasdaq futures traded 0.4% higher about 45 minutes before Monday's opening bell.