These are the early headlines and other items poised to influence the market at the start of trading Wednesday. As we share this collection of market drivers, U.S. equity futures point to a mixed market open later.
1. S&P 500 and Nasdaq futures inched higher on Wednesday after two straight sessions of declines, as investors returned to technology shares following a sharp selloff that saw the Nasdaq 100 lose over $1 trillion in market value. Concerns over lofty hyperscaler spending through debt-funding and expectations of a more hawkish Federal Reserve drove the fall after a huge run-up in AI names that aided all three major indexes to record highs. (Reuters)
Yesterday, we discussed why we would be closely watching the 50-day moving average levels for the S&P 500 and the Nasdaq Composite. While the S&P 500 closed above that level with yesterday’s market close, the Nasdaq Composite’s close at 25,587.04 was below the 50-day moving average at 25,672.88. We’ll be watching to see if we get a positive test of that average, which would show support, or if that moving average becomes a level of resistance. Potentially helping determine that are our next two items.
2. Oil prices fell more than 1% on Wednesday, extending this week’s losses to hit fresh four-month lows on signs that more oil tankers are set to move out of the Strait of Hormuz. (Reuters) Oman said it would keep the Strait of Hormuz open to shipping without imposing any tolls and had designated two temporary routes north and south of the existing shipping lane to facilitate the safe passage of vessels departing the region. (Reuters)
Falling oil prices and their flow through are helping the market look past recent inflation reports and the potential for multiple Fed rate hikes in the coming quarters. We shared our view on this with you yesterday when we discussed the Flash June PMI report, and we touched on that as well during a visit with the Schwab Network. Given the delicacy of the ongoing negotiations, we’ll continue to track developments for U.S.-Iran peace talks and their wider implications.
3. Cerebras Systems reported better-than-expected third-quarter earnings results on Tuesday afternoon but the stock was falling 15% ahead of the open Wednesday… Revenue for the quarter reached $193 million, beating projections of $181 million, and up 94% on the year… Revenue guidance for the second quarter was also good, with an outlook for $194 million in sales, up 88% from last year and better than the $178 million in the Wall Street consensus. One wrinkle: Cerebras’ outlook for its annual adjusted gross margin shows that the company expects to see reduced profitability over the rest of the year as it ramps its $20 billion service contract with OpenAI. (Barron’s)
The issue, as explained by Cerebras (CBRS) management, is that OpenAI cloud demand is accelerating faster than it can bring new servers online. That led Cerebras to rent some of the equipment it sold to other customers and sell it back to OpenAI. As you can likely recall, this is not the first time we’ve seen company margins plagued by ramping AI and data center demand, and we are likely to see periods of this again as companies bring capacity online and then monetize it.
We’re also sharing this ahead of quarterly results after today’s market close from Micron (MU) as a reminder that given the market mood, unless a company’s quarterly results and guidance are pristine, the market reaction is likely to hit the shares. The more than 13% drop in MU shares yesterday should help reduce that pressure, but even after that fall, MU is still up ~200% QTD. In addition to Micron’s end market and memory pricing comments, capital spending to address memory market constraints, and what that means for our shares of Applied Materials (AMAT), will also be on our watch list.
4. FedEx margins in its core delivery segment dropped in the latest quarter from a year earlier, and shares fell 6% in extended trading on Tuesday even though the company beat profit estimates and projected 11% revenue growth this year. The operating margin in the Federal Express segment fell to 7.7% from 8.4% a year earlier as costs climbed for employee salaries and benefits, outsourced transportation and fuel. That matters because FedEx on June 1 spun off its trucking segment, FedEx Freight, to focus on that delivery business. (Reuters)
The margin performance at FedEx (FDX) reaffirms comments in recent PMI reports about rising input costs, like fuel, and the growing difficulty of passing those costs along to customers. As it became clear the duration of the U.S. and Iran war was going to be longer than initially expected, we flagged this margin concern, and it is likely to become a focal point during the Q2 2026 earnings season.
To the extent companies can deliver a message of improving margins in H2 2026 and 2027 as input inflation pressures fall, the market may look past Q2 2026 margins. If not, it could bring some new opportunities for the Portfolio, given the favorable impact falling input prices can have on margins after a company has instilled a round of output price hikes.
5. Google parent Alphabet will be added to the Dow Jones Industrial Average beginning Monday, the index’s operator, S&P Global, said Tuesday. The company represents the fifth of the so-called Magnificent Seven growth stocks to enter the price-weighted index, which has historically been less vulnerable to tech swings than the Nasdaq Composite Index or the S&P 500… Alphabet will succeed Verizon Communications, the index provider said. With a stock price above $300, Alphabet will have a much higher weighting in the average than Verizon has had with its stock price below $50. (WSJ)
We’re not surprised by the move by Dow Jones to bring the Dow Jones Industrial Average another step into the mainstream, thereby improving the index’s relevance. Adding Alphabet (GOOGL) to the Dow, alongside Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), and Nvidia (NVDA) also has the potential to make the index a bit more volatile.
Candidly, it’s still a bit perplexing as to why mainstream news media still leads any discussion of the stock market with the Dow and its performance, not the S&P 500, which is a broader measure of the market and the de facto standard by which money managers and investors are measured.
6. Polymarket and Kalshi, prediction markets where users can bet on outcomes as varied as the Super Bowl and the length of the State of the Union address, have been some of the fastest-growing destinations on the internet. Mark Zuckerberg has noticed — and he wants in on the action. Mr. Zuckerberg, the chief executive of Meta, recently dispatched a small team at his company to create a smartphone app similar to Polymarket and Kalshi, two employees with knowledge of the matter said. (NY Times).
While it may not generate as many headlines as AI, the growth and allure of prediction markets, like Polymarket and Kalshi, isn’t going unnoticed. Meta’s (META) move to gamify prediction markets is another way to serve more ad impressions across its, at last count, 3.56 billion users, to drive family average revenue per Person metrics higher. This wouldn’t be the first time, nor is it likely to be last, that Meta looks to incorporate market developments.
Now to see if this smartphone app is launched into the wild and gauge its reception.
7. Economic data today per TipRanks: MBA Mortgage Applications (Weekly), New Home Sales (May), EIA Crude Oil Inventories (Weekly), Fed Bank Stress Test Results.
8. Companies reporting today per TipRanks: AM – Paychex (PAYX). PM – Jefferies (JEF), Micron (MU), Trip.com (TCOM).
More Pro Portfolio:
- We’re Unwinding Our Hedging Positions, Adding to Two Others
- Tracking 21 Signals Across 10 of Our Investing Themes
- Weekly Roundup: Peace Deal, Warsh Arrives, and the Portfolio Moves Ahead
At the time of publication, TheStreet Pro Portfolio was long AAPL, AMAT, AMZN, GOOGL, META, MSFT, MU and NVDA.
