Equity Indexes Wrap: AI Beneficiaries Super Micro, Micron Jump; Mega Caps Slip

The Dow

Disney (DIS) rose 3% after Barclays upgraded the stock to buy, citing benefits from cost-cutting measures and Hulu’s consolidation, which could extend the stock’s year-to-date outperformance. 

Boeing (BA) climbed 1.4% after it announced CEO Dave Calhoun would retire at the end of the year. 

Chevron (CVX) added 1.2%, following oil prices higher. 

Intel (INTC) and Microsoft (MSFT) fell 1.7% and 1.4%, respectively, amid reports the Chinese government was enforcing new restrictions on the use of foreign chips and software in government devices. 

The S&P 500

Super Micro Computer (SMCI) surged 7.2% after J.P.Morgan analysts initiated coverage of the stock with an overweight rating, citing its strong position within the fast-growing AI server market. 

Oil companies were buoyed by rising oil prices, with APA Corp. (APA) rising 3.4% and ConocoPhillips (COP) gaining 2.6%. 

United Airlines (UAL) fell 3.4% after the Federal Aviation Administration said it was stepping up oversight of the carrier.

Meta (META) and Alphabet (GOOGL) fell 1.3% and 0.5%, respectively, after the European Union said it would investigate each company’s compliance with the bloc’s new Digital Markets Act. Apple (AAPL), which will also be investigated, shed 0.8%

The Nasdaq 100

Micron (MU) rose 6.3%, adding to its gains from last week when it blew past Wall Street’s earnings estimates on higher-than-expected AI demand. 

Take-Two Interactive (TTWO) fell 4.2% amid reports the company could delay the release of Grand Theft Auto VI, which has been slated for 2025. 

Lululemon athletica (LULU) continued to slide after last week’s disappointing earnings report. The stock shed 3.5% on Monday.

Fisker's Talks with a 'Large Automaker' End and Stock is Halted From Trading

Shares of Fisker Inc. (FSR) plunged to their all-time low and trading was halted Monday after the struggling electric vehicle (EV) maker reported an unidentified “large automaker” that it was in negotiations with for a potential transaction had ended the talks. The news added to concerns that the maker of the Ocean SUV could be forced into bankruptcy.

Last week, Fisker said it had secured $150 million from an investor, while also announcing it was pausing production for six weeks to “align inventory levels and progress strategic and financing initiatives.”

The company warned in a regulatory filing late Friday that because of the discussions' termination, it could not meet the closing conditions of that $150 million investment. Fisker said it plans to discuss with the investor the possibility of a waiver of the conditions or, alternatively, receiving the financing on different terms.

Fisker shares have lost about 95% of their value in 2024. Trading was halted early Monday, with shares worth about 9 cents each, and had not resumed shortly before markets closed.

-Bill McColl

Intel, Microsoft Slip as China Blocks Foreign Chips, Software in Government Computers

Shares of Intel (INTC) and Microsoft (MSFT) slipped Monday, following a report that China is enforcing new restrictions on government purchases of chips and operating systems by foreign companies as it tries to boost its domestic tech sector.

The Financial Times said the enforcement of the new Chinese guidelines will affect American microprocessor manufacturers, as Beijing prevents their chips from being used in government PCs and servers. In addition, the regulations seek to replace Microsoft’s Windows operating system and foreign-made database software with those made in China.

The moves to block the use of foreign chips from government computers will affect U.S. firms. China was Intel’s largest market last year, providing 27% of its $54 billion in 2023 sales, while the country accounted for 15% of Advanced Micro Devices's (AMD) $23 billion in 2023 sales, according to the FT report.

Intel shares slipped 1.1% to $42.09 Monday afternoon. Microsoft was also 1.1% lower at $424.05. AMD, however, recovered from earlier losses to trade 0.3% higher.

-Bill McColl

S&P 500 Enters 11th Year of Secular Bull Market

The S&P 500 is entering its eleventh year of a secular bull market, according to Bank of America. And if history is anything to go on, it could just be reaching middle age.

A secular bull market refers to a prolonged uptrend that contains within it shorter cyclical bull and bear markets. The secular bull market we’re in now began in 2013 when the S&P 500 surpassed its 2000 and 2007 peaks.

The two secular bull markets preceding today’s lasted from 1950 to 1966 and 1980 to 2000. If this one lasts as long as either of them it would extend into 2029 or 2033. “In our view, the 2020 dip resembled the dips in 1987 and 1957,” BofA analysts wrote in a March 22 note. After each of those dips, the S&P 500 resumed its march higher for at least 9 years.  Though, that outcome is not a given. “If [the 2020 dip] was ‘halftime’ for the current secular bull market, it does not rule out a 14-year secular bull market ending in 2027,” the analysts warned. The S&P index is up more than 200% since the start of the ongoing bull market and has risen 46% from October 2022, the trough of the most recent cyclical bear market. “The medical rally from a big low of 106% last approximately four years, suggesting that SPX 7000 is not ruled out into late 2026,” said analysts. 

-Christiana Schiaudone

Super Micro Gets Boost From JPMorgan's Bullish Call

Super Micro Computer (SMCI) was the best-performing stock in the S&P 500 Monday after J.P.Morgan initiated coverage of the stock with an overweight rating, citing the company’s leading position in the fast-growing AI compute market. 

J.P.Morgan analysts led by Samik Chatterjee assigned the computing hardware company a price target of $1,150, implying 18% upside from Friday’s close. That makes them one of Wall Street’s more bullish firms on the stock, which has price targets ranging from $250 to $1,350 and a median target of $950, according to FactSet data.

“Super Micro has disrupted the Server market with its balance of capabilities in relation to custom built solutions that provide better efficiency relative to branded companies as well as faster time to market for solutions relative to ODM companies,” the analysts wrote. And the AI server market that Super Micro leads is expected to grow from $21 billion in 2023 to $283 billion in 2028. 

“We are forecasting +43% CAGR between FY23 and FY27, and the 2027 revenue forecast implies that Super Micro will have 10%-15% shares of the AI Server market, which we view as conservative given its early lead,” said analysts.  The stock trades at a steep valuation—it has risen more than 270% this year alone—which “leaves material room for volatility in the shares.” Still, JPMorgan believes the multiples are justified given how quickly the AI server market is growing. The firm also sees potential upside to earnings. Margins are expected to improve in the coming years as new enterprise customers, who lack the pricing power of the big cloud providers who are Super Micro’s primary customers now, increase their AI investments. Shares of Super Micro Computer were up 9.6% at $1,065.68 early in the afternoon Monday. 

United Airlines Stock Declines on FAA Safety Investigation

Shares of United Airlines Holdings (UAL) headed lower Monday after the Federal Aviation Administration (FAA) said that it is “increasing oversight” of the carrier, which could impact some of its future operations.

In a statement to Investopedia, the FAA explained that the move was to ensure that the airline was “complying with safety regulations; identifying hazards and mitigating risk; and effectively managing safety.”

The announcement came following a series of recent incidents, including one earlier this month when a wheel came off a United flight from San Francisco to Osaka, Japan, causing it to be diverted to Los Angeles, and another a week later as one of its jetliners landed in Portland, Ore., missing a side panel.

In a letter to employees sent to Investopedia, Sasha Johnson, United's Vice President of Corporate Safety, wrote that “the number of safety-related events in recent weeks have rightfully caused us to pause and evaluate whether there is anything we can and should do differently.” Shares of United Airlines Holdings were down 4.3% at $44.51 as of midday Monday, but are up about 8% this year.

-Bill McColl

EU Opens Investigations Into Apple, Meta, and Alphabet Under New Tech Law

The European Union (EU) is investigating several tech giants over concerns about whether changes they made to comply with the Digital Markets Act (DMA) were enough to meet the new law's requirements and whether their policies could still harm EU consumers.

Apple (AAPL), Meta Platforms (META), and Google parent company Alphabet (GOOGL) are being investigated for several issues related to consumer choice and data, the European Commission, the EU's executive body, said Monday. The tech companies all said they would make changes to comply with the DMA by a deadline earlier this month, but the Commission suggested they may not have gone far enough.

The Commission said Monday that it will look to finish the investigation within a year, and the companies could face significant fines if they are found to be in violation of the DMA. Apple was already fined nearly $2 billion by the EU earlier this month over its App Store rules for music services, which the company said it will appeal.

Shares of Apple were down 1.3% late Monday morning, while Alphabet and Meta each slipped 1.1%.

-Aaron McDade

Read the full story.

Masimo Stock Surges After Proposed Spinoff of Consumer Business

Shares of Masimo (MASI) surged in early trading on Monday after the company announced that it is planning a spinoff of its consumer unit to improve the profitability of its primary healthcare business.

The Irvine, California-based medical devices company said it expects the separation to include its consumer audio and consumer health products, including the Stork baby monitor and the Freedom smartwatch, but said it will retain its professional healthcare and telehealth products.

The company, which also reaffirmed its guidance for the first quarter and fiscal year 2024, said Friday it seeks to complete the spinoff as soon as feasible after it undergoes due diligence and gains regulatory approval.

Masimo shares jumped as much as 13% early Monday before paring its gains to trade about 5% higher.

-Timothy Smith

Boeing CEO To Step Down at End of Year Amid 737 Max Issues

Boeing Co. (BA) said Monday Chief Executive Officer Dave Calhoun plans to step down at the end of 2024 as part of a broader management shakeup at the aircraft manufacturer, which has faced production and quality issues that have led to investigations and a steep share price decline.

In addition to Calhoun's departure, independent board chair Larry Kellner won't seek re-election at this year's annual shareholders meeting, and Boeing Commercial Airplanes CEO Stan Deal is retiring, the company announced Monday.

The executive changes come amid a rocky 2024 for Boeing, which through the end of last week had seen its stock fall by about 25% already this year as issues with its 737 Max planes have led to criticism and investigations from regulators and law enforcement. Boeing shares jumped nearly 3% at the market open, before paring gains to trade up 0.7% about twenty minutes into the session.

-Aaron McDade

Stocks Making the Biggest Moves Premarket

Gains:

• Masimo Corp. (MASI): Shares of the medical device maker rose more than 14% after announcing late Friday it would spin off its consumer audio and health units to focus on the professional healthcare business. 
• Digital World Acquisition Corp. (DWAC): Shares of the blank check company rose about 5%, rebounding from a sell-off Friday after shareholders approved the proposed merger with former President Donald Trump’s Truth Media & Technology Group. 
• Boeing Co. (BA): Shares of the plane maker rose more than 3% after it announced CEO Dave Calhoun would step down at the end of the year. The company also announced the departure of its commercial airplane chief and board chair. 
  

Losses:

• Advanced Micro Devices Inc. (AMD): Shares of the semiconductor company slipped more than 3% after the Financial Times reported China intends to block the use of it and competitor Intel’s chips in government computers. Intel (INTC) shares also fell more than 3%. 
• United Airlines Holdings Inc. (UAL): Shares fell more than 2% after the Federal Aviation Administration said it was upping its oversight of the airline to ensure compliance with safety regulations. 
• Reddit Inc. (RDDT): Shares of the social media company fell more than 1%, continuing to slide after jumping nearly 50% on its first day of trading last Thursday. 

Stock Futures Fall To Start the Week

Futures contracts connected to the Dow Jones Industrial Average were down about 0.2% in premarket trading on Monday.

S&P 500 futures slipped 0.4%.

Nasdaq 100 futures traded 0.6% lower about an hour before markets opened.