Stocks opened higher Monday but quickly turned choppy as investors looked ahead to a busy week of inflation updates. Today's economic calendar was relatively quiet, though, which had market participants parsing several single-stock headlines. Among the highlights, Nvidia (NVDA) continued to bounce, and Starbucks (SBUX) found itself the target of not one but two activist investors.
At the close, the Dow Jones Industrial Average was down 0.4% at 39,357. The S&P 500 eked out a fractional gain to 5,344, while the tech-heavy Nasdaq Composite added 0.2% to 16,780 on strength in a number of semiconductor stocks.
Nvidia was the best of the bunch, surging 4.1%. Since last Monday's broad-market meltdown, NVDA stock is up 8.5% to regain $211 billion in market value. Advanced Micro Devices (AMD, +1.9%) and Micron Technology (MU, +1.7%) also gained ground.
Starbucks pops on activist investor news
Starbucks was another notable gainer Monday, rising 2.6% on reports Elliott Management wants its managing partner, Jesse Cohn, to join the coffee chain's board of directors. The firm has built a roughly $2 billion stake in Starbucks, but it's not the only activist investor with its eyes on the large-cap stock. Indeed, according to a late-Friday report in The Wall Street Journal, Starboard Value has also taken a position in SBUX.
Even with today's pop, though, SBUX remains 20% lower for the year to date, pressured in part by disappointing earnings. In its most recent print, Starbucks disclosed a 3% year-over-year drop in same-store sales and a 7% decline in earnings per share.
Bank of Nova Scotia to invest $2.8 billion in KeyCorp
However, KeyCorp (KEY) was the best S&P 500 stock today, jumping 9.1% on news Bank of Nova Scotia (BNS, -3.6%) will invest roughly $2.8 billion in the Cleveland-based lender, equivalent to a 14.9% stake.
The minority investment allows KEY to "raise capital on attractive terms," said KeyCorp CEO Chris Gorman in a press release. It will give the company a "greater capacity for growth" and increase its strategic agility amid an uncertain environment.
As a result of the news, CFRA Research analyst Alexander Yokum upgraded KEY to Hold from Sell. "We have a positive view of the investment as shares of KEY have been bogged down over the past few years by large unrealized losses in the bank's securities portfolio," he writes in a note. "Following the investment, KEY will be well positioned to reposition its securities portfolio, thus improving the bank's net interest income outlook."
Most analysts are already bullish on the financial stock. Of the 20 analysts following KEY that are tracked by S&P Global Market Intelligence, eight say it's a Strong Buy, five have it at Buy and seven call it a Hold. This works out to a consensus Buy recommendation.
Inflation data, blue chip earnings on deck
Looking ahead, inflation data will be top of mind for investors. While tomorrow morning's release of the July Producer Price Index (PPI), which measures the change in wholesale prices, will certainly draw attention, the most widely followed measure of inflation – the Consumer Price Index (CPI) – will be released Wednesday morning.
Mark Hackett, chief of investment research at Nationwide, says the next CPI report and earnings from blue chip retailer Walmart (WMT, +1.1%) – due out Thursday morning – "will be crucial in determining the direction of investor sentiment. A quarter ago, retail earnings were the first to sound the alarm on the consumer, gradually leading to a shift in investors' outlook from 'Goldilocks' to a recession."
Hackett adds that it would not be surprising "to see potentially overblown reactions" to this week's inflation data and retail earnings "given the heightened emotional responses in the market recently."
