The Dow Jones fell slightly in trading on Monday morning, while the S&P 500 index and the Nasdaq composite rose after last week’s big gains. Crude oil prices rose due to a surprise production cut in Saudi Arabia. Meanwhile, apple (AAPL) is expected to have a big product reveal, with Tesla (TSLA) and Palo Alto Networks (PANW) also rally.
With the debt ceiling now raised, the Treasury is set to issue a huge amount of short-term T-bills starting Monday.
Apple is rumored to be showing off its mixed reality headset on Monday, with one analyst calling the annual WWDC event a “flex-your-muscles moment” for the Dow tech giant. AAPL stock rose slightly, hitting a new all-time high.
Among other megacap stocks, Google parent Alphabet (GOOGL), Microsoft (MSFT) and Meta platforms (META) edged higher. Nvidia (NVDA) tilted lower. TSLA shares rose modestly amid strong selling in China, after breaking into a buy zone on Friday.
Meanwhile, PANW stock jumped on news that it will be added to the S&P 500, among many looming changes in the Standard & Poor’s indexes.
Big banks may have to boost capital levels by as much as 20%, The Wall Street Journal reported Monday, one of many steps regulators could take to shore up the banking system. Major bank stocks were modestly active in the premarket.
Immunogenic ( IMGN ) rose 7% after the biotech reported positive results for its late-stage ovarian cancer drug.
Tesla stock joined the IBD Leaderboard on Friday, joining META stock and Palo Alto Networks. Microsoft stock is on the IBD Long-Term Leaders. PANW stock is on the IBD Big Cap 20.
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Dow Jones today
The Dow Jones Industrial Average fell 0.25 percent. The S&P 500 edged higher and the Nasdaq gained 0.1%.
The ISM non-manufacturing index for May, released at 10 a.m. ET, fell 1.6 points to 50.3, just above the break-even 500 level. Economists had expected the services index to rise 0.1 point to 52.
Oil rises on Saudi production cuts
U.S. crude oil prices rose less than 1% to $72 a barrel, well off early highs. Saudi Arabia said on Sunday it will unilaterally cut production by 1 million barrels per day in July. OPEC+ also agreed on Sunday to extend current production levels until 2024.
Weaker-than-expected demand in China and overproduction from Russia have combined with strong pressure on the markets from short sellers, pushing crude oil prices towards 52-week lows. OPEC officials had warned short sellers of action ahead of Sunday’s meeting.
Last week, crude oil futures fell 1.3% to $71.74 a barrel as shorts piled in ahead of the meeting, but prices jumped 2.3% on Friday.
Issuance of the treasury
When President Biden signs the agreement on the debt ceiling, the Treasury Department will now rush to issue new short-term debt. The Treasury may auction off $170 billion worth of Treasury bills on Monday.
That could affect government bill rates, even though the markets were well aware that the sale was coming. Further pent-up Treasury selling will quickly follow. The renewed issuance of Treasuries will absorb significant market liquidity, having offset much of the Fed’s quantitative easing in recent months. It can affect the shares.
The 10-year Treasury yield fell to 3.67%, reversing modest early gains. The benchmark interest rate fell 13 basis points to 3.69% last week. Government interest rates were reduced.
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Stock market rally
The stock market rally last week showed strong, broad gains, especially on Friday.
The Dow Jones Industrial Average jumped 2% in last week’s trading, reclaiming its 50-day line on Friday after testing its 200-day line intraday on Thursday. The S&P 500 rose 1.8%, clearing the 2023 range. The Nasdaq composite rose 2%, hitting a 13-month high. The small-cap Russell 2000 jumped 3.3%, roaring back above its 200-day line.
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) rose 2.1%. The MSFT share is a large IGV holding. PANW is also a top-10 stock for IGV. VanEck Vectors Semiconductor ETF ( SMH ) fell 0.8%. NVDA stock is a huge SMH component.
Reflecting more speculative history stocks, the ARK Innovation ETF ( ARKK ) rose 6.45% last week and the ARK Genomics ETF ( ARKG ) rose 4.9%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs.
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Apple Mixed Reality Headset
Apple is expected to release its long-awaited mixed reality headset during a keynote presentation at 10 a.m. at the annual Worldwide Developers Conference. Possibly called the Reality Pro, the headset would be the tech titan’s first new hardware product line since the Apple Watch in 2015.
But the price tag, reportedly around $3,000, could deter buyers and limit its mass-market appeal. Meta Platforms recently unveiled its latest Meta Quest headset. Other rivals include Microsoft HoloLens as well as offerings from HTC and Sony (SONY).
Apple is also expected to detail the latest operating systems for iPhone, iPad, Mac, Apple TV and Apple Watch. CEO Tim Cook could also discuss Apple’s AI efforts.
“We expect WWDC to be another ‘flex your muscles moment’ for Apple,” Wedbush analyst Dan Ives wrote in a note to clients on Sunday.
Meanwhile, Evercore analysts raised their AAPL price target to 210 from 190.
Apple shares rose nearly 2% to above 184 on Monday morning, surpassing the January 2022 record high of 182.94. Last week, AAPL stock rose 3.15% to 180.9. The company is also nearing a market cap of $3 trillion, ending Friday’s session at $2.85 trillion.
Other Megacap Technologies
MSFT was just above break-even. Shares rose 0.75% last week to 335.40, hitting a 17-month high, not far from the record set in November 2021.
Google shares rose more than 1% early Monday. Last week the shares rose 6 cents to 124.67. Google stock has traded tight in recent weeks at a 52-week high. It had almost a three-week tight pattern, and only missed it because one of the weekly gains was 1.51%, just above the maximum of 1.5%. But investors could use a move above the May 22 high of 126.43 as a place to increase their position slightly.
META shares edged higher, with Oppenheimer lifting its META price target to 350 from 285. The Facebook parent jumped 4% last week to 276.21, a fresh 52-week high.
Nvidia shares lost around 1 percent. Shares rose 1% last week to 393.27, but came off Tuesday’s intraday all-time high of 419.38. NVDA stock, up 169% in 2023 and 96% above its 200-day, may need a longer break.
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Tesla shares rose 2 percent. Shares rose 10.8% to 213.97 last week. On Friday, TSLA stock rallied past a 207.89 buy point from what is either a cup or double bottom. The EV giant has advanced on above-average volume for five straight sessions, after a few such days over the previous three months.
Tesla sold 77,695 Chinese-made vehicles in May, including exports, according to data released Monday by the China Passenger Car Association. That is up 2.4% from April. A breakdown of local sales vs. export will arrive in a few days.
Tesla now says the base Model 3 gets the full $7,500 tax credit in the US, along with all other Model 3 and Model Y vehicles.
Palo Alto Stock
PANW shares rose nearly 4% on Monday. Stocks last week just managed a long-term consolidation.
Palo Alto Networks will join the S&P 500 before the June 20 open, replacing Dish Network (PARK).
It is part of a series of changes in the S&P indices. Doximity (DOCS), Berry Global (BERRY), BWX Technologies (BWXT), Planet Fitness (PLNT) and Crown Holdings (CCK) is among those joining the S&P MidCap 400.
Artisan Partners Asset Management (APAM) and CarGurus (CARG) is among the new additions to the S&P SmallCap 600.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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