Good morning ☀️ and welcome to Fed week. The two day FOMC meeting starts tomorrow, and on Wednesday, we’ll get the latest statement from the Fed on inflation and its policies. Economists expect that the Fed will maintain its 5.25% to 5.50% range on interest rates. Wall Street will seek information indicating a potential rate cut at the meetings in September or November. This morning, the CME FedWatch Tool shows the probability of a cut in September at 49%.
📊 Monday’s Performance
10:15 AM EDT
🍎 Apple’s Byte at AI
Apple CEO Tim Cook
The $471 billion rally in Apple (AAPL) is the warm up for today’s WWDC. Shares opened lower ahead of the annual WWDC which starts at 1 pm EDT. All eyes are on CEO Tim Cook who earlier this year hinted that Apple would layout its plans for AI integration in iPhones and Macs.
Despite recent gains, Apple’s year-to-date rise of 2.3% lags behind the Nasdaq 100 Index’s 13% advance. Other tech giants with more direct AI exposure, such as Microsoft Corp., Amazon.com Inc., Alphabet Inc., and Meta Platforms Inc., have posted double-digit gains. AI-focused chipmaker Nvidia Corp. has soared 144%, briefly overtaking Apple in market size.
Wedbush analysts labeled the conference “the most important event for Apple in over a decade.” Greg Martin, co-founder of Rainmaker Securities, emphasized the stakes: “If Apple doesn’t come out with compelling reasons to upgrade, that’s a real problem. If the event is uninspiring, I think the stock will be stagnant for a while.” Conversely, a positive event could be a significant catalyst for the stock.
🛫Elliot Investment Knows Something About Southwest You Don’t
There’s a $2 billion reason Elliot Investment Management is taking a big stake in Southwest Airlines (LUV). The Wall Street Journal reports that activist firms are expected to push for changes at the airline to enhance shareholder value. Southwest shares have fallen 45% over the past five years, while competitor Delta’s shares are down 8.4% for the same period.
Southwest Airlines has faced several financial challenges in recent years. In April, the airline announced that it expected higher costs and slower-than-anticipated revenue growth. This was partly due to U.S. planemaker Boeing's inability to deliver more than 20 aircraft to Southwest this year. The airline's financial struggles have been a point of concern for investors, making Elliott's intervention particularly timely.
➡️ Who the Analysts are Upgrading and Why
Truist must find Krispy Kreme’s donuts pretty sweet because they upgraded them to a buy today. They cited the stock as "underappreciated," one of several significant Monday morning market moves made on Wall Street. On that note, New Street initiated its coverage of Microsoft with a buy rating, highlighting its strong growth potential. Morgan Stanley resumed coverage of Broadcom with an overweight rating, pointing to AI growth and VMware synergies. TD Cowen raised Nvidia's price target to $140, reiterating it as their "best idea." Jefferies upgraded Planet Fitness to buy, noting positive catalysts like a new CEO and franchisee model adjustments. JPMorgan upgraded both Walmart and PG&E, citing strong growth prospects. It wasn’t just bullish news today, however. Morgan Stanley downgraded AMD to equal weight, citing high investor expectations, and UBS reiterated its neutral stance on Apple, noting muted interest in AI. Additionally, Bernstein maintained its underperform rating on Tesla and reiterated its outperform rating on Disney despite potential softness in park attendance. Despite recent tax issues in Illinois, Morgan Stanley also named DraftKings a top pick.
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