(Anna Moneymaker/Getty Images)

Post-shooting, investors are doubling down on a Trump second term

Market prices in a bigger boost to Trump than it did after stunning debate

7/15/24 10:02AM

The attempted assassination of Donald Trump at a rally this weekend has investors betting on stocks that are supposed beneficiaries of his presidency, as well as Republican political success more broadly.

On PredictIt, odds of Trump winning the presidency rose to as high as 68% versus 59% on Friday.

Investors are running back the “post-debate” playbook: the price action on Monday resembles June 28, the session after Joe Biden’s poor debate performance seemingly fortified Trump’s electoral prospects.

A thematic basket of stocks compiled by Goldman Sachs of companies that should benefit from Republican victory in the November election are having their best day of the year, up about 1.8% as of 10:40 am ET. They’re outperforming a basket of stocks that would purportedly stand to gain from Democratic political successes by the most this year.

Some companies poised to ride this political wave are posting large gains. Private prison companies GEO Group, and CoreCivic (formerly Corrections Corporation of America) are surging. So are Fannie Mae and Freddie Mac, which would stand to gain from renewed privatization efforts.

Private education firms such as Grand Canyon Education, and private college operator Laureate Education are also trading to the upside.

Coal companies Peabody Energy and Arch Resources are having strong good days, as some traders seemed to bet on reversal of some climate-related Biden administration initiatives.

On the opposite side of the ledger are shares of firms associated with Democratic policies priorities, including solar firms like Maxeon Solar Technologies, Sunnova Energy and First Solarand health-insurance companies that’ve built large businesses around Obamacare’s insurance plan exchanges including HCA Healthcare and Tenet Healthcare.

One big exception from this pattern: Shares of Trump Media & Technology Group are up over 30% this morning after inexplicably having fallen double digits the day following the presidential debate.

In the bond market, the spread between 2- and 30-year US Treasury yields uninverted this morning for the first time since January, driven by higher 30-year yields.

Higher odds of a Trump win aren’t seen as impacting the trajectory for the Federal Reserve’s policy rate in the near term, but are associated with a higher floor for – and more uncertainty surrounding – growth and inflation over the medium term.

“If the market senses that Trump’s chances to win are higher than they were on Friday — then we would expect the back end of the bond market to sell off in the manner we saw in the immediate aftermath of the debate,” writes Michael Purves, CEO and founder of Tallbacken Capital Advisors.

However, foreign exchange markets continue to defy Wall Street’s top prognostication for a second Trump term in office: US dollar strength.

The Dollar Spot Index is flat this morning, and down slightly against the euro — even as economists at Goldman Sachs spotlight the potential negative macro effects Trump’s economic agenda may have on growth and inflation outcomes in the euro area.

Nia Warfield, Luke Kawa

53m

Megacap tech and the AI trade power US stocks to fresh records

The S&P 500 rose 0.5%, the Nasdaq 100 was up 0.8%, and the Russell 2000 advanced 0.3% on Monday.

Matt Phillips

Analysts on hard drives: “Supply remains tight”

Bank of America analysts bumped up price targets for hard disk drive (HDD) industry leaders — and S&P 500 top stocks — Seagate Technology Holdings and Western Digital as surging AI data center demand for these low-cost, long-term data storage devices continues to ramp up. They wrote:

“We raise our calendar year hard disk drive exabyte shipment forecast to 1,602 exabytes (+28% y/y) from 1,575 exabytes (+26% y/y) and see room for further upside as demand continues to outpace supply. Despite double digit percentage increases in total capacity... from STX & WDC so far during C25, HDD industry supply remains tight.”

BofA boosted its price target for Seagate from $170 a share to $215, slightly above where the stock is trading on Monday. The analysts also increased their stock price target on Western Digital from $100 to $123, implying a roughly 20% premium to where its share were trading Monday afternoon shortly before 2 p.m. ET.

Besides being an influential market driver this year, demand for hard disk data storage also reflects the vast amounts of data that the boom in AI is expected to generate. (A single exabyte is the equivalent of 1 billion gigabytes.)

As a result, hard drive makers like Seagate and Western are focusing on the next generation of high-capacity data storage gizmos that pack more data bits. These devices are also more profitable than traditional disk drives, which has helped to boost the profitability of the industry, BofA analysts said.

“As HDD demand continues to outpace supply, STX & WDC have seen profitability metrics hit all-time highs,” they wrote.

Those profitability metrics could help explain why the stocks have suddenly caught the fancy of traders.

“We estimate that STX & WDC can get above 42-43% corp gross margin levels exiting [calendar year 2028],” they wrote. “But if pricing is stronger than expected or if manufacturing efficiencies lower COGS, we believe margins could go even higher. Key risks include pause in hyperscaler capex (low probability) and tariffs.”

Max Knoblauch

Alaska Air declines as it warns its profit will be dinged by fuel costs, weather, and air traffic control problems

Seattle-based Alaska Air is trading lower Monday afternoon after the airline warned investors that its third-quarter profits will likely come in on the low end of its prior outlook.

When Alaska Air reported its second-quarter results in July, the airline said it expected third-quarter earnings to land between $1 and $1.40 per share. As of early Monday, analysts polled by FactSet estimated $1.35.

A host of issues are behind the company’s expectations of a dent to earnings. ALK said it’s projecting fuel costs to climb to between $2.50 and $2.55 per gallon, up from its previous estimate of $2.45, due to West Coast refinery disruptions. Weather and air traffic control issues “led to increased costs from overtime, premium pay and passenger compensation,” Alaska said.

With Monday afternoon’s move, ALK shares are down about 8% year to date.

Matt Phillips

Intel cuts expense forecast, sees best gain in weeks

Intel shares jumped after the partially nationalized US chip giant snipped its forecast for operating expenses this year to $16.8 billion from $17 billion after finalizing the divestiture of 51% of its stake in its Altera programmable chip unit to private equity firm Silver Lake.

Shortly after 12 p.m. ET the stock was up 4%, Intel’s best gain since August 22, when the Trump administration announced the extraordinary step of having the federal government take a 10% ownership stake in the private chip company.

Intel trims full-year expense outlook following Altera stake sale

OpenAI doesn’t have the cash to pay Oracle $300 billion — raising it will test the very limits of private markets

The ChatGPT maker plans to burn though $115 billion by 2029. No company in history has ever lit that much money on fire intentionally, let alone tried funding such a splurge through private markets alone.

David Crowther6h