Traders work on the floor of the New York Stock Exchange during morning trading on August 6, 2024 in New York City.
Michael M. Santiago |
This report is from today's edition of the CNBC Daily Open, our newsletter covering the international markets. CNBC Daily Open informs investors what they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Wide demonstration
Wall Street posted a broad-based rally, ending a three-day losing streak. The Dow Jones Industrial Average rose nearly 300 points, while the S&P 500 and Nasdaq Composite each gained more than 1%. All 11 sectors of the S&P 500 closed higher. Mega-caps rebounded from Monday's losses, with Nvidia and Meta Platforms up 3.8% and 3.9%, respectively. The yield on the 10-year U.S. Treasury note edged higher, while U.S. oil prices rose after hitting a six-month low on Monday.
Not so great
Shares of Super Micro Computer fell 13% after the company's fourth-quarter earnings fell short of estimates. The company, whose first-quarter revenue forecast beat Wall Street estimates, also announced a 10-for-1 stock split. Super Micro is a key server supplier to Nvidia, a major player in the AI boom, and has seen significant growth in recent years. But the company's profitability is now a concern for investors. Gross margin fell to 11.2% in the quarter, down from 17% a year earlier.
Microsoft vs Delta
Microsoft accused Delta Air Lines of using outdated technology after an IT outage forced the airline to cancel more than 5,000 flights in July. The company, which suffered $500 million in damages from the incident, is seeking damages from Microsoft and CrowdStrike. A botched software update from CrowdStrike affected millions of computers running Microsoft Windows last month. Microsoft questioned why Delta had struggled to recover compared to other airlines, suggesting that Delta had failed to modernize its IT infrastructure. Delta denies that claim.
X sues advertisers
Elon Musk's X, formerly Twitter, is suing a group of advertisers for allegedly orchestrating an illegal boycott that cost the platform billions in revenue. The suit, filed in Texas, accuses the World Federation of Advertisers and its members of violating antitrust laws by stopping advertising after Musk's takeover. X's Musk declared “war” on advertisers, while X CEO Linda Yaccarino cited evidence uncovered by the U.S. House Judiciary Committee to back up the lawsuit's claims.
Airbnb shares fall
Airbnb shares fell 14% in extended trading after second-quarter earnings missed expectations. The company also warned of slowing growth, particularly in the U.S. It reported net income of $555 million, or 86 cents per share, down 15% from the year-ago period ($650 million, or 98 cents per share). The company expects third-quarter revenue of $3.67 billion to $3.73 billion, but warned that it is seeing “shorter booking lead times globally and some signs of slowing demand from U.S. guests.”
[PRO] When should you buy more?
The Magnificent Seven lost nearly a trillion dollars in value at one point during Monday's global stock market crash, but some losses were later recovered. That's what investors look for before buying more.
The conclusion
Wall Street had to dig itself out of a hole during the session, but Goldman Sachs warned that the correction may not be over yet. And indeed, futures pointed to a lower open on Wednesday.
Peter Oppenheimer, chief global equity strategist at Goldman Sachs, told CNBC that the market correction was “healthy and in some ways inevitable” after a very strong first half of the year, especially given signs of a slowdown in the U.S. economy and growing “complacency” in the market.
“My feeling is that this correction, although it is stabilizing, is not over. I think we will still see some turbulent times in the short term as investors really start to recalibrate and regain more confidence in the direction of interest rates and the economy. At the same time, though, I don't think we are in a bear market and there will be some good opportunities here.”
When asked by CNBC's David Faber if now is a good entry point to get investors back into the market, as the Nasdaq's price-to-earnings ratio has fallen to 24 times earnings, Oppenheimer said, “I don't think it's gone down far enough yet.” He expects further declines before value investors see this as a good buying opportunity.
Mega-cap stocks plunged on Monday, losing $1 trillion in early trading before recovering somewhat. There were major concerns about earnings and the billions spent on AI data centers by Microsoft, Meta, Amazon and Alphabet. Hedge fund Elliott Management reportedly told clients that Nvidia was in a “bubble” and the AI hype was “overrated.”
Ankur Crawford, portfolio manager at Alger, urged investors to look beyond short-term gains and focus on the long-term earnings power of the companies leading the AI revolution.
“If you just look at Microsoft's Azure numbers, the company has grown from a zero-dollar business seven quarters ago to $6 billion in revenue today. I would challenge anyone to tell me what other company has grown from zero to $6 billion in a year and a half. And that's just the beginning of this AI business.”
— CNBC's Hakyung Kim, Samantha Subin, Sean Conlon, Jeff Cox, Rohan Goswami, Leslie Josephs and Spencer Kimball contributed to this report.
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