Markets News, August 19, 2024: S&P 500, Nasdaq Composite Surge to Extend Winning Streaks

Big S&P 500 Movers on Monday

Advancers

• Shares of independent natural gas producer EQT Corp. (EQT) popped 4.9% higher, notching the top daily performance in the S&P 500. EQT stock got a boost from an uptick in natural gas futures prices, which were up around 5% on Monday. Forecasts of hot weather and light production suggest tightening supply and demand for natural gas. Last week, analysts at Wells Fargo upgraded EQT stock to "overweight," citing operational and balance sheet improvements.
  
• Advanced Micro Devices (AMD) shares gained 4.5% after the semiconductor firm announced its planned acquisition of ZT Systems, a provider of data center infrastructure. AMD says the cash-and-stock deal, which was valued at $4.9 billion, will enhance its artificial intelligence (AI) ecosystem.
  
• After dipping during the first half of August amid concerns about soft lithium prices, Albemarle (ALB) shares resumed the recovery that began late last week, jumping 4.3%. On Friday, BMO Capital Markets reiterated its "outperform" rating on Albemarle stock. Analysts remain optimistic about a recovery in the lithium market and expressed confidence in the upcoming performance of the metal's largest producer.

• Goldman Sachs reaffirmed its positive outlook on Nvidia (NVDA), and shares of the AI chip behemoth advanced 4.4%. Analysts expect robust demand from cloud service providers (CSPs) to drive outperformance by Nvidia's data center segment, despite concerns about the delayed launch of the company's next-generation chip architecture called Blackwell.

Decliners

• Shares of Match Group (MTCH), operator of Tinder, Hinge, and other online dating platforms, added 4.0%. In its most recent earnings report, released July 30, Match announced plans to cut its global workforce as it aims to reduce costs. The stock has drawn attention throughout the year from activist investors, including Starboard Value and Elliott Investment Management, which have encouraged Match to explore a variety of value-creation opportunities.
  
• Shares of printer and computer manufacturer HP (HPQ) slipped 3.7%, posting the biggest loss of any S&P 500 constituent on Monday, after Morgan Stanley downgraded the stock to "equal-weight." Analysts said they saw limited upside potential for HP's valuation and forward earnings estimates, arguing that markets have already priced in the likely catalysts for the company including a potential recovery in the PC market. 
• Starbucks (SBUX) shares cooled down on the first day of the new trading week, falling 2.7%. The stock posted massive gains early last week after the announcement that current Chipotle Mexican Grill (CMG) CEO Brian Niccol would be moving to the coffee giant. While Niccol hopes to duplicate the turnaround he oversaw at Chipotle, he will face numerous challenges in his new position, including increasing competition in China, which is currently Starbucks' second-largest market.
• Shares of Estee Lauder (EL) lost 2.2% after the company reported results for its fiscal fourth quarter. Although quarterly sales and profits topped forecasts, the company guided below expectations for the year ahead, citing soft demand in China and North America. Estee Lauder also announced CEO Fabrizio Freda plans to retire at the end of fiscal 2025.

-Michael Bromberg

S&P 500, Dow Back Near July Highs

The recovery for U.S. stocks over the past couple of weeks has put the S&P 500 and Dow Jones Industrial Average back near their record-high levels from last month.

The S&P 500 is now just 1% away from its record closing high set on July 16. The index is up 9.6% from its low for the month set on Aug. 5, when markets tumbled amid concerns that the U.S. economy could be headed toward a recession.

The Dow is just 0.7% away from its record closing high set on July 17.

The Nasdaq Composite remains 4.1% below its all-time high set on July 10.

Stocks That Could Benefit From AI-Driven Power Demand

Power demand for data centers in the U.S. is expected to triple by 2030, fueled by artificial intelligence applications, Mizuho Research analysts said.

The rise in demand could drive growth for electric utilities stocks, the analysts said, as well as companies in the renewable energy industry, and more.

Electric utilities stocks such as Constellation Energy (CEG), Duke Energy (DUK), and NextEra Energy (NEE) could be poised to benefit, the analysts said, as well as infrastructure providers including Equinix (EQIX).

The analysts said they expect AI to increase demand for renewables like solar and wind energy as well, given the tech sector's climate commitments. They added that based on their models, clean energy resources could supply more than half of electricity in the U.S. by 2030, supported by heightened demand driven by AI data centers.

First Solar (FSLR), GE Vernova (GEV), and Nextracker (NXT) are among the stocks that could get a boost from this trend, they said.

The analysts also said natural gas demand is expected to rise in the near term to keep up with the growing power needs of data centers.

They named Chesapeake Energy (CHK) and EQT (EQT) as natural gas stocks that could gain, as well as infrastructure picks including Kinder Morgan (KMI) and Williams Companies (WMB).

-Naomi Buchanan

Palo Alto Networks Rises Ahead of Earnings Report

Palo Alto Networks (PANW) is set to report results for its fiscal fourth quarter after markets close on Monday, with investors likely watching for a strong 2025 outlook and updates on its "platformization" strategy.

Analysts project revenue to grow to $2.16 billion from $1.95 billion a year ago, according to estimates compiled by Visible Alpha. Net income is expected to come in at $234.97 million, or 66 cents per share, a slight increase from the year-ago period but also a sequential drop.

Spending fatigue among Palo Alto Networks' customers has been a major theme of the company's results in recent quarters, signaling headwinds in the cybersecurity industry. Palo Alto Networks' guidance has been used as an indicator for the sector.

Palo Alto Networks has been leaning into its platformization efforts, where it consolidates its cybersecurity services on its platform and bundles offers, a bid to become a one-stop shop and offset spending fatigue.

While Palo Alto Networks has indicated that platformization has been positively received by customers, the recent global outage caused by a faulty CrowdStrike (CRWD) update could raise questions about the outlook for the market.

Palo Alto shares were up 2.2% Monday afternoon, trading near their highest level since February.

-Naomi Buchanan

AMD Expands Its Reach Into AI

Advanced Micro Devices (AMD) took another big step in expanding its reach into artificial intelligence (AI) with the purchase of data center infrastructure provider ZT Systems.

AMD said the cash-and-stock deal was valued at $4.9 billion, which includes a contingent payment of $400 million if certain milestones are reached after the close.

AMD CEO Lisa Su called the acquisition "the next major step in our long-term AI strategy to deliver leadership training and inferencing solutions that can be rapidly deployed at scale across cloud and enterprise customers." Su said that adding ZT Systems "will significantly strengthen our data center AI systems and customer enablement capabilities."

AMD shares were up nearly 2% in early trading Monday.

-Bill McColl

Futures Point to Flat Open for Major Indexes

Futures tied to the Dow Jones Industrial Average were fractionally lower.

S&P 500 futures were up less than 0.1%.

Nasdaq 100 futures were also up less than 0.1%.