This report is from today's CNBC Daily Open, the international markets newsletter. CNBC Daily Open keeps investors informed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Traders work on the floor of the New York Stock Exchange during morning trading on July 6, 2023 in New York City.
Michael M. Santiago | Getty Images
What you need to know today
Dow lags behind tech sector's rise
The Dow Jones Industrial Average has gained about 3.8% in the first six months of the year, lagging the Nasdaq, which has gained 18.1%, and the S&P 500, which has jumped 14.5% — as investors flocked to stocks related to artificial intelligence. On Friday, the S&P 500 and Nasdaq hit record highs before retreating. The yield on the 10-year Treasury note rose as investors digested the latest inflation data. U.S. oil prices rose for a third straight week amid concerns about a war between Israel and the Iranian-backed Hezbollah militia.
Boeing pleads guilty
U.S. prosecutors plan to seek a guilty plea from Boeing on a charge related to two fatal 737 MAX crashes in 2018 and 2019, lawyers for the victims' families said. The Justice Department is looking into whether Boeing violated a 2021 settlement that protected the company from federal charges. Boeing then agreed to pay a $2.5 billion fine for conspiracy related to the two incidents. The Justice Department reconsidered the agreement after a door panel exploded from a new 737 Max 9 plane in January, sparking a new safety crisis. Separately, Boeing agreed to buy Spirit AeroSystems for $4.7 billion in an all-stock deal to improve safety and quality.
Far-right gains
Marine Le Pen’s far-right National Rally party made big gains in the first round of France’s parliamentary elections, taking 34 percent of the vote, according to exit polls. The left-wing New Popular Front coalition took 28.1 percent, while President Emmanuel Macron’s centrist bloc fell to third place with 20.3 percent. Macron called for early elections to counter the influence of the far right, but his gamble appears to have strengthened his political opponents. The final result will be determined after a runoff on July 7.
Under pressure at bay
Nike CEO John Donahue is facing mounting discontent after the company's shares fell 20% on Friday, its worst day since 1980, after it forecast a significant drop in sales. As Wall Street digested the bleak outlook from the world's largest sportswear company, at least six investment banks downgraded Nike's stock. Analysts at Morgan Stanley and Stifel went further, directing pointed questions to the company's management.
Asian stocks mixed, China down
Mainland China's CSI 300 index fell 0.1% as official PMI figures showed manufacturing contracted for the second straight month. However, the private manufacturing survey showed the largest improvement in working conditions in three years. The Hang Seng Index in Hong Kong was closed for a public holiday. Elsewhere, Japan's Nikkei 225 was little changed as revised first-quarter GDP data showed the economy contracted 2.9% year-on-year, from the 1.8% reported earlier. Taiwan's weighted index – the best-performing market in Asia so far this year – rose and South Korea's Kospi rose, while Australia's S&P/ASX 200 fell.
(PRO) The pool will expand
The tech sector has been the driver of market performance in 2024, with the S&P 500 tech group up 28% and Nvidia up 149%, while small-cap stocks have lagged. Oppenheimer chief market strategist John Stoltzfus thinks the rally will expand. CNBC’s Lisa Kaylai Han weighs in on his arguments.
Bottom line
The New York Times editorial board has lost confidence in President Joe Biden, calling on him to step down. Iranians will need another try to elect a new president, French voters cast their ballots in the first round of snap elections that saw big gains for Marine Le Pen’s far-right party, and Britons head to the polls on Thursday.
It’s a crowded political environment for markets to navigate. Wall Street has shown remarkable resilience thanks to an AI-fueled rally in the first half of the year, which has seen the Nasdaq up 18% year to date. Nvidia shares are up nearly 150%. There could be more to come; Bank of America believes Nvidia and Apple can still deliver “outperforming returns.”
While one of the Street’s biggest bulls is expecting the rally to extend beyond the big companies, Wall Street has been feeling no love for Nike’s CEO. The company had its worst trading day since its December 1980 IPO, losing $28 billion in market value on Friday after it cut its sales forecast.
John Donahue has been brought in from eBay to transform the sportswear giant's digital channels. The company shed its retail partners, became overly reliant on older sneaker collections and lost ground to newer competitors like Hoka and On Running. It is sure to be an interesting case study for MBA programs for all the wrong reasons. While Wall Street has questioned Donahue's position, he still has the approval of its founder.
Friday also saw the Fed's preferred inflation gauge come in in line with expectations, raising the prospect of a rate cut later this year.
“I really think the Fed should decide to cut rates at their July 31st meeting, then confirm it at Jackson Hole in August and then do it in September,” Jeremy Siegel, a finance professor at the Wharton School, told CNBC, adding that one or maybe one-and-a-half rate cuts were already priced in.
“I think the bull market will go higher because the economy may see some weakness and better inflation numbers, both of which feed into better interest rates,” Siegel added. Siegel also said that it is “difficult to determine” the path of the bull market currently.
In a four-day trading week — markets are closed for the July 4 Independence Day holiday — the big economic number to watch is June unemployment data on Friday. CNBC's Sarah Main has more on what to expect.
— CNBC's Lisa Kaylai Han, Yun Lee, Jeff Cox, Leslie Josephs, Gabrielle Fonrouge, Hakyung Kim, Brian Evans, Spencer Kimball, Ryan Brown, Mackenzie Sigalos, Holly Elliatt and Lim Hui Ji contributed to this report.
