Stock prices opened higher on Monday but quickly became choppy as investors anticipated a busy week of inflation updates. Today’s economic calendar was relatively quiet, however, prompting market participants to analyze several individual stock headlines. Highlights included NVIDIA (NVDA) continued to recover and Starbucks (SBUX) became the target of not one, but two activist investors.
Finally Dow Jones Industrial Average fell by 0.4% to 39,357. S&P500 recorded a small increase to 5,344, while the technology-heavy Nasdaq-Composite rose 0.2% to 16,780 due to the strength of a number of Semiconductor stocks.
Nvidia was the best of all, rising 4.1%. Since the general market collapse last Monday, NVDA stock has risen 8.5%, bringing its market value back up to $211 billion. Advanced micro devices (AMD, +1.9%) and Micron technology (MU, +1.7%) was also able to gain ground.
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Starbucks shocked by news of activist investors
Starbucks was another notable winner on Monday, rising 2.6% after reports that Elliott Management is looking to add its managing partner Jesse Cohn to the coffee chain’s board of directors. The firm has built up a roughly $2 billion stake in Starbucks, but is not the only activist investor keeping an eye on the Large-cap stockAccording to a report late Friday in The Wall Street JournalStarboard Value also acquired a position in SBUX.
Despite today’s increase, SBUX is still down 20% year to date, partly due to pressure from disappointing returns. In his latest printStarbucks reported a 3% year-over-year decline in store sales and a 7% decline in earnings per share.
Bank of Nova Scotia invests $2.8 billion in KeyCorp
However, KeyCorp (KEY) was the best performing stock in the S&P 500 today, rising 9.1% on the news Bank of Nova Scotia (BNS, -3.6%) will invest approximately $2.8 billion in the Cleveland-based lender, representing a 14.9% stake.
The minority stake enables KEY to “raise capital on attractive terms,” said KeyCorp CEO Chris Gorman in a press release. It will give the company “greater growth capacity” and increase its strategic agility in an uncertain environment.
Following this news, CFRA Research analyst said: Alexander Yokum upgraded KEY from “sell” to “hold.” “We view the investment positively as KEY shares have been weighed down by large unrealized losses in the bank’s securities portfolio in recent years,” he wrote in a note. “After the investment, KEY will be well positioned to reposition its securities portfolio, thereby improving the bank’s prospects for improved net interest income.”
Most analysts are already optimistic about the financial stock. Of the 20 analysts who follow KEY and S&P Global Market Intelligenceeight strongly recommend buying the stock, five recommend buying the stock and seven recommend holding the stock. This corresponds to a general buy recommendation.
Inflation data and blue chip profits in sight
Looking ahead, inflation data will be of utmost importance to investors. While the release of the Producer Price Index (PPI) for July, which measures the change in wholesale prices, will certainly attract attention tomorrow morning, the most widely followed inflation indicator – the Consumer Price Index (CPI) – will be released on Wednesday morning.
Mark HackettHead of Investment Research at Nationwide, says the next CPI report and earnings of blue chip retailers Walmart (WMT, +1.1%) – released Thursday morning – “will be crucial in determining the direction of investor sentiment. A quarter ago, it was retail earnings that first set off alarm bells, gradually shifting the investor perspective from “Goldilocks” to a recession.”
Hackett adds that given the heightened emotional reactions in the market recently, it would not be surprising to see “potentially overreactions” to this week’s inflation data and retail earnings.
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