US stocks finished little changed Friday, with the S&P 500 and Nasdaq logging strong weekly performances as Apple’s (AAPL) AI strategy and Elon Musk’s pay package win at Tesla (TSLA) took center stage.
The Dow Jones Industrial Average (^DJI) lost about 0.2%, while the S&P 500 (^GSPC) tipped just below the flatline. The tech-heavy Nasdaq Composite (^IXIC) gained 0.1% to eke out its fifth consecutive record close.
The S&P 500 finished up around 1.5% this week, while the Nasdaq gained more than 3%. The S&P notched record closes for four days in a row, while the Nasdaq pulled off the improbable five straight, boosted by strength in techs.
A surprise cooling in wholesale price pressures gave heart to investors betting on two interest rate cuts this year since the decline is likely to be reflected in the coming PCE inflation reading watched by the Federal Reserve.
Read more: How does the labor market affect inflation?
But the Fed this week dialed down its projected rate cuts from three to one in 2024, keeping the market guessing and leaving stocks vulnerable to shifts in mood. Strength in technology names has driven broader gains, earning the S&P 500 and the Nasdaq multiple record closes for the week. But the Dow suffered a loss for the week, as questions persist about the breadth of this year’s rally.
Meanwhile, Tesla shares were down 2% Friday after shareholders reapproved CEO Elon Musk’s pay package. Despite opposition from some large investors, 77% of votes were cast in favor, the EV maker said.
Weighing down spirits Friday more generally was a slump in European stocks (^STOXX). Investors are concerned about the fallout for markets if the far right makes political gains or even wins France’s snap election, whose first round will begin at the end of the month.
In other individual movers, Adobe (ADBE) shares jumped close to 15% after an upbeat AI sales projection from the Photoshop maker.
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Nasdaq ekes out a gain to end week full of records
Stocks cooled off some to end the trading day on Friday, but investors still won out on the week, which featured a more optimistic inflation outlook from the Fed, the debut of Apple’s AI plans, and a major shareholder victory for Tesla’s Elon Musk.
The Dow Jones Industrial Average (^DJI) lost about 0.2%, while the S&P 500 (^GSPC) tipped just below the flatline. The tech-heavy Nasdaq Composite (^IXIC) gained 0.1%.
A look at the week ahead
Investors are in for a relative lull next week, coming off major developments from Apple (AAPL), Tesla (TSLA), and the Federal Reserve.
Earnings season too is winding down, although Accenture (ACN), Kroger (KR), and CarMax (KMX) are among the tickers set to report next week.
Investors will be greeted with a shortened schedule as markets will be closed on Wednesday in honor of the Juneteenth holiday. But a smattering of economic indicators will give the market some metrics to chew on as the broader story over inflation and interest rates continues to play out with sudden shifts in sentiment.
Retail sales and industrial production figures will arrive on Tuesday, followed by S&P flash US PMI on Friday, offering insight into business conditions as central bankers and market participants look for signs of economic weakness.
Wall Street will also brace for further concerns from Europe, where markets have been rattled by the prospect of political advances of the far-right party in France. President Emmanuel Macron called for snap elections that will begin later this month after his party was beaten badly by the far right in European Parliament elections.
Yahoo Finance’s Brent Sanchez has a graphical breakdown of what to watch next week:
Why Apple’s OpenAI deal is bad for Google
Now that Cupertino has unveiled its AI plans, the relationship between frenemies Apple and Google just got more complicated.
That’s because the sometimes-gadget rivals work as partners when it comes to search and online advertising. But the tie-up, which has featured heavily in a landmark antitrust lawsuit against Google’s dominance in the search engine market, will come under new strain as AI changes how people seek out information online.
For more than two decades, Apple has fixed Google as the default search engine in its Safari browser. Apple steers the traffic of its huge user base into Google’s search business. And in exchange for the default privilege, Google pays the iPhone maker around $18 billion a year.
But Apple, to the delight of investors, has another deal going.
Apple is partnering with OpenAI to bring ChatGPT to the iPhone. It’s part of a bold effort to catch up to Big Tech rivals that have gone all-in on AI. Later this year, iPhone users will get free access to the chatbot, which will mesh with Siri and other apps, giving people access to a repository of knowledge and granting OpenAI a ticket to mainstreaming AI technology.
Apple’s iPhones infused with increasingly capable versions of ChatGPT would lessen the need to use Google search. If users in significant numbers start interacting with the web primarily through Siri instead of a search bar, even the heavy influence of default status might mean very little for the future of search traffic.
If chatbots and other software powered by large language models (LLMs) are as transformational as tech executives claim they are, the business of search is poised for major disruption.
Price pessimism continues despite positive inflation data
The disconnect between positive inflation data and negative public sentiment continues to reveal itself, based on a new reading of consumer perceptions.
The latest University of Michigan consumer sentiment survey released Friday showed sentiment hit its lowest level in seven months during June. The index reading for the month came in at 65.6, down from 69.1 in May and lower than the 72 economists had expected.
Broadly speaking, the decline in the index represents a continued trend among consumers who are fed up with higher prices regardless of whether inflation is cooling and the labor market remains on solid footing, reports Yahoo Finance’s Josh Schafer.
Experts have argued that the incongruence stems in part from how people perceive their own financial circumstances versus how they see the health of the national economy.
The degree of negativity that isn’t always connected to a person’s own circumstances reflects the disorienting period of the pandemic and its aftermath, market observers have argued. And the rapid changes that followed — high inflation and high interest rates — could have amplified those negative perceptions.
Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Friday.
RH (RH): The home furnishings company shed 17% Friday afternoon after missing earnings expectations and forecasting second quarter guidance that fell below estimates. RH reported a wider-than-expected first quarter loss amid softening demand in the housing market.
Royal Caribbean (RCL): The cruise line and its peers tumbled Friday after Wall Street expressed concerns of some industry weakening. “Based on cruise prices pulled in early June, there was modestly softer pricing in ocean markets relative to early May,” said Bank of America analysts in a research note Friday. Royal Caribbean gave up more than 5%.
Adobe (ADBE): Shares of the software company surged close to 15% after reporting fiscal second quarter earnings that beat expectations and boosted guidance for the year. A rosier outlook for sales of its creative products suggests increasing adoption of the company’s new AI tools.
Shopify (SHOP): Shares of the e-commerce company gained 5% following an analyst upgrade that implied a 16% increase in the stock price. Evercore ISI analyst Mark Mahaney upgraded Shopify from In-Line to Outperform after the stock’s pullback created an entry point for investors.
Stocks tick down in afternoon trading
US stocks pulled back on Friday just as a new reading of consumer sentiment tumbled in June, as higher prices remained a pain point for Americans.
The Dow Jones Industrial Average (^DJI) sank about 0.3% to lead the declines, while the S&P 500 (^GSPC) shed 0.2%. The tech-heavy Nasdaq Composite (^IXIC) dropped about 0.1%.
Trump offers a low-tax pitch to business leaders
The Trump campaign engaged in fresh outreach to the business world that crystallized his promises to corporate America should he win the election.
Donald Trump met with prominent CEOs in the nation’s capital, speaking to a group supremely focused on tax reform, reports Yahoo Finance’s Ben Werschkul.
The former president was interviewed on stage by Larry Kudlow, his former top economic adviser, and appeared before an audience that included figures like Jamie Dimon of JPMorgan Chase (JPM), Tim Cook of Apple (AAPL), Bechtel CEO Brendan Bechtel, and Walmart (WMT) CEO Doug McMillon and dozens more top executives.
According to one CEO who was in attendance, Trump was focused on favorably comparing his own record on issues like taxes, regulation, and inflation to Biden’s time in office. Trump also offered attacks on Biden, but the CEO was skeptical that the back-and-forth moved the needle on business leaders’ overall views.
The plan Trump has outlined centers on an extension of his 2017 tax cuts, which cut costs for many individuals and businesses. He is promising to extend those cuts and also potentially make new ones, including an idea to further lower the corporate tax rate.
Musk doubles down on Tesla growth after successful shareholder vote
Tesla CEO Elon Musk, fresh off a major win in which shareholder’s reapproved his record-breaking pay package, is doubling down on the company’s enormous potential for growth.
After Tesla confirmed that 72% of votes cast by shareholders were in favor of a $56 billion compensation package, Musk reiterated his vision for Tesla that goes beyond cars.
Musk predicts that Tesla’s humanoid robot prototype, called Optimus, will surpass the size of the company’s vehicles business.
“If the price-to-earnings multiple is, say, I don’t know, 20 or 25, something like that, that would mean a $20 trillion market cap from Optimus alone,” Musk said at the company’s annual shareholder meeting.
But Musk’s optimism for the future of Tesla faces multiple hurdles. For one, even after the majority of voting shareholders backed his pay package, other stakeholders could challenge its legality before the same Delaware court that voided Musk’s pay earlier this year.
In addition, Musk has previously threatened to develop AI technology outside of Tesla if he is not given sufficient voting control over company decisions.
Stocks trending in morning trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday.
Adobe (ADBE): Shares of the software company surged 15% after reporting fiscal second quarter earnings that beat expectations and boosted guidance for the year. A rosier outlook for sales of its creative products suggests increasing adoption of the company’s new AI tools.
GameStop (GME): The meme stock rose almost 3% Friday morning, riding the momentum from the earlier session after Keith Gill, the folk-hero retail trader, shared a screenshot of an account that showed a massive increase in his GameStop position. The image appeared to show more than 9 million GameStop shares, up from Monday’s 5 million shares from a similar screenshot that the account posted on Reddit.
Shopify (SHOP): Shares of the e-commerce company gained 3% following an analyst upgrade that implied a 16% increase in the stock price. Evercore ISI analyst Mark Mahaney upgraded Shopify from In-Line to Outperform after the stock’s pullback created an entry point for investors.
Zscaler (ZS): The cloud security company increased nearly 2% following an upgrade from JPMorgan. Analysts said Zscaler is a “next generation” security company that is poised for growth, which is currently trading at a discount. JPMorgan upgraded the stock from Neutral to Overweight.
RH stock plunges after retailer posts wider-than-expected loss
RH (RH) stock sank more than 17% Friday morning after the luxury home goods retailer reported a wider-than-expected loss the previous day and said it expected business conditions to remain challenging until interest rates ease and the housing market rebounds.
RH posted a loss of $0.40 per share, wider than analyst estimates for a loss of $0.09.
“I don’t think there’s going to be a sustained inflection in luxury home sales at these interest rates,” RH chairman and CEO Gary Friedman told investors and analysts on the company’s earnings call on Thursday, noting that mortgage rates may not meaningfully move downward until next year.
“Home prices went up 42% in the two years of COVID, and then they’ve continued to compound the last two years. … And now you’ve got interest rates 7% or higher when they were 2.6% to 3.3%. I mean it’s just simple affordability now,” the executive added.
The comments come after the Federal Reserve held interest rates steady this week and signaled it expects just one interest rate cut this year, down from three previously. The Fed doesn’t directly set mortgage rates, but its policy moves impact them.
The average weekly rate on the 30-year fixed mortgage slightly declined to 6.95% from 6.99% the prior week, per Freddie Mac data.
Read more: Mortgage rates hover around 7% — is this a good time to buy a house?
Stocks tick lower as European markets recoil
US stocks pulled back from all-time highs as investors reacted to jitters in Europe, where the coming snap election in France could bring advancements for the nation’s far-right party.
The Dow Jones Industrial Average (^DJI) sank about 0.5%, while the S&P 500 (^GSPC) shed 0.3%. The tech-heavy Nasdaq Composite (^IXIC) dropped 0.2%.
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