If you tuned in Tuesday, investors were anxious to react to a number of big moves in the markets. Mixed results for big companies moved a market hand, affecting forward market trading signals. Homebuilder KB Home, one of the country’s largest homebuilders, cut its full-year housing revenue guidance for the second time. At the same time, Chewy, the online pet supply retailer, unveiled a 500 million public offering and 200 million share repurchase authorization. In other market related news, President Donald Trump finally announced a ceasefire timeline to the potentially dangerous conflict between Iran and Israel. This announcement had the desired effect of juicing up stock futures.
KB Home subsequently reduced its full-year housing revenues guidance to a range of $6.3 billion-$6.5 billion. This amendment is a $2.6 billion drop from its last forecast of $6.6 billion to $7 billion. The announcement prompted a 2% decline in KB Home’s share price. Investors are understandably spooked by how the homebuilding sector would perform in this new and uncertain economy.
On Thursday, Chewy announced an ambitious $1 billion public offering of its Class A common stock. JPMorgan is leading this underwritten offering. As part of this shift, the company announced a $100 million share repurchase plan. Those announcements sent Chewy’s stock reeling and immediately lost 3% of its stock market value. Market participants are still trying to figure out how that increased stock supply meshes with the broader economic headwinds at play.
The market sentiment shifted positively following President Trump’s announcement regarding a ceasefire timeline between Iran and Israel, shared via Truth Social. Just that news alone was enough to lift Dow Jones Industrial Average futures by 122 points, or 0.3%. At the close of regular trading today, the Dow skyrocketed up almost 375 points! At the same time, the S&P 500 and Nasdaq Composite both posted resounding daily victories of 0.96% and 0.94%, respectively.
As noted oil analyst and former investment banker Arjun Murti observed about the recent jumps in oil prices associated with the geopolitical turmoil. He stated, “We probably built as much as a $15 to $20 per barrel premium in oil over the last week versus where we were trading pre-Israel, Iran. And we’re now in the process of eliminating that.” West Texas Intermediate futures plunged more than 7% after touching their highest marks since January overnight. This drop is indicative of a market reacting to diminishing tensions on the affordability front.
How did the markets react to these new appearances? At the same time, Federal Reserve Chairman Jerome Powell was preparing to testify before the House Financial Services Committee on Tuesday morning. His presentation will be all about the central bank’s monetary policy report. That’s all the more important right now as the White House pushes the Fed to cut rates, citing fears over economic growth.
The market is saying, ‘Hey, it looks like the worst of this turmoil is behind us.’ If we really are on track to prevent a much wider war, then that is without a doubt great news, said Murti, providing an upbeat take on what he hopes will be the new normalization of a more stable international relations landscape, leading to better market performance.