Martin Gamble on US markets: Nike stumbles, profit taking in semiconductor stocks

In a shortened trading week due to the 250th Independence Day holiday on 3 July, US stock markets finished with a flurry, emboldened by increased hopes of a benign interest rate backdrop after June’s non-farm payrolls report came in weaker than expected.

Traders scaled back expectations for Federal Reserve interest rate hikes, with chances of an increase in July dropping to 17% from 28% before the jobs report.

Markets experienced another week of diverging performances characterised by a sharp sell-off in semiconductor stocks, profit taking in large technology companies and weakness in smaller companies with the Russell 2000 index losing 0.5% on the week.

Memory chips maker Sandisk was one of the biggest casualties of profit taking with shares dropping 16%, wiping $40 billion off the company’s market value.

The rotation out of technology stocks benefitted defensive sectors like healthcare, with biotechnology firm Moderna rising 18%, with shares touching their highest levels since 2024.

Nike - running in quicksand

The sportswear giant continues to struggle, with the shares marking new 12-year lows this week despite fourth quarter earnings beating analysts’ estimates. Investors appear to be losing patience with the company’s prolonged turnaround efforts.

Analysts at Berstein commented: “We expect Fiscal 2028 to be the first 'normal' year with both top-line growth and continued margin improvement from cost initiatives and improved full priced selling."

CEO Elliot Hill acknowledged “the results aren't there yet” after the company projected first half revenues would decline by low to mid-single digits.

Long time Nike veteran Hill took over the reins in late 2024 and vowed to refocus the company on sports like running and football, whilst rebuilding relationships with wholesalers.

The tough economic backdrop has not helped, with outgoing chief financial officer Matthew Friend commenting: “Our consumer is under pressure around the world, and we can particularly see it having a larger impact on sportswear.”

The shares are down 32% year-to-date compared with a 9% advance in the S&P 500 index.

Constellation Brands – events boost beer sales

Constellation Brands revealed first quarter earnings ahead of consensus estimates driven by demand for its beer brands such as Corona Extra and Modelo Especial.

US beer sales rebounded by 2% after a sluggish start to 2026, providing a boost for an industry tackling a shift towards heathier lifestyles and the popularity of weight loss drugs, which suppress hunger and alcohol intake.

A rare convergence of events including the NBA (National Basketball Association) finals, where the New York Knicks won their first championship since 1973, the FIFA World Cup, and The 4th of July have spurred more social gatherings and lifted consumption.

CEO Nicholas Fink commented: “It was great to see both World Cup and some of the energy that we saw in one of our key markets like New York, (from) the Knicks which ... (provided) some lift.”

Despite the comfortable earnings, the company decided not to raise its fiscal 2027 forecast but reaffirmed its outlook for comparable earnings per share in a range of $11.20 to $11.90, falling shy of consensus estimates of $11.70.

The shares fell around 6% and remain slightly lower on the year.

General Mills – better than feared

Resilient demand for pantry staples and price hikes helped General Mills deliver better than expected fourth quarter results as budget-conscious consumers continued to eat at home rather than dine out.

The shares were down by almost a third coming into the results after the company cut its forecast in February, but they gained as much as 9% on 1 July on relief things could have been worse.

Investors also welcomed the company’s plans to make $3 billion of cost saving by 2030, with $750 million expected in fiscal 2027, laying out a roadmap to profitability.

The maker of iconic US brands like Cheerios, Pillsbury and Betty Crocker said net sales declined 4%, which was a big improvement on the 10% decline seen earlier, driven by promotions.

CEO Jeff Harmening commented: “We finished fiscal 2026 on a positive note, delivering fourth quarter adjusted results that met our expectations while continuing to strengthen our foundation to position General Mills for long-term success.”

Looking ahead, the company expects organic net sales to be in the range of a 1.5% drop to a 0.5% rise, compared to a 2% drop in fiscal 2026, and adjusted earnings per share between $3 and $3.20, compared with consensus forecasts of $3.13.