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Two of the three main equity indexes traded in record territory Tuesday as Wall Street returned from a three-day weekend, and markets looked beyond continuing uncertainty in the Middle East. Apple (AAPL, -0.2%) hit a new high on optimism about its artificial intelligence (AI) initiatives amid broad gains for tech-related names, while energy, consumer staples and healthcare stocks struggled.
At the closing bell, the tech-heavy Nasdaq Composite had added 1.2% to 26,656, and the broad-based S&P 500 had risen 0.6% to 7,519 — new all-time closing highs.
But, despite celebrating the 130th anniversary of its May 26, 1896, debut, the Dow Jones Industrial Average was down 0.2% at 50,461.
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“The stock market’s focus on AI, oil prices, and geopolitics has recently been getting a challenge from interest rates,” E*TRADE Managing Director Chris Larkin observes. “While the twists and turns of the story in the Middle East have continued to drive short-term momentum, a sustained increase in longer-term yields could prove to be a persistent headwind for stocks.”
The front-month West Texas Intermediate crude futures contract settled at $93.69 per barrel, down 3% for the day.
The 2-year Treasury yield, seen by investors, traders and speculators as an indicator of short-term policy direction for the Fed, was down 8.5 basis points to 4.042% vs 4.127% on Friday. The 10-year Treasury yield, which impacts the cost of mortgage rates as well as corporate bonds, fell 8.1 basis points to 4.491% from 4.572%.
Meanwhile, The Conference Board’s Consumer Confidence Index slipped to 93.1 in May from 93.8 in April, declining for the first time in four months. According to The Conference Board Chief Economist Dana Peterson, “Consumer confidence edged downward in May as the inflationary impacts of the war in the Middle East intensified.”
UBS analyst triples MU target price
Micron Technology (MU, +19.3%) joined the trillion-dollar market cap club Tuesday after President Donald Trump mentioned the tech stock during his speech at a rally in New York on Friday.
“Micron, boy Micron’s great. They’re investing hundreds of billions,” Trump said, citing Micron’s commitment to spend $100 billion to build the biggest-ever U.S.-based chip factory in the Empire State.
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Meanwhile, UBS analyst Timothy Arcuri reiterated his Buy rating and raised his 12-month target price from $535 to $1,635 for the tech stock, citing long-term agreements that lock in solid pricing and allow better visibility and a smoother earnings profile.
“In contrast to prior periods where offtake agreements were simply volume based,” Arcuri explains, “these new ‘enhanced’ LTAs now incorporate longer durations, fixed volume commitments and — most importantly — a partially fixed pricing framework.”
The analyst expects earnings per share “to remain comfortably >$100” through 2029, with Micron generating more than $400 billion in free cash flow during the same period.
“We believe the market will start to put a more ‘normal’ multiple on the stock,” Arcuri writes, “and MU will continue to re-rate higher as more details emerge about the structural changes AI has driven to the entire memory complex.”
AZO hits the brakes
AutoZone (AZO, -8.9%) was one of the worst-performing S&P 500 stocks on Tuesday after management beat Wall Street’s forecast for earnings per share but came up short of expectations for revenue and international growth.
High-priced AZO, a natural fit for conversations about the next stocks to split, reported EPS of $38.07 on revenue of $4.84 billion vs a consensus estimate of $36.22 on $4.86 billion.
Same-store sales growth in the U.S. was 4.1% on a constant-currency basis. AutoZone’s stores in Mexico and Brazil combined for year-over-year sales growth of 1.6%.
CEO Phil Daniele noted impressive growth for domestic DIY and commercial segments, and acknowledged that international sales “continued to be challenged,” with flat sales in Mexico and Brazil.
Still, the CEO said, “We believe our market share continues to grow as we outpace our competition in both international marketplaces.” AutoZone opened 82 new stores globally, in line with its plan to open approximately 355 to 365 stores for the full fiscal year as part of its strategy to add market share.
