Southwest Airlines Soars as Activist Pushes for Change

Major U.S. equities indexes ticked higher to kick off a new trading week that will see the Federal Reserve take center stage with its latest policy decision set to be announced Wednesday.

Although markets overwhelmingly predict policymakers will maintain interest rates at current levels for the seventh straight meeting, investors will be looking for indications of how recent signs of stubborn inflation have affected the likelihood of future rate cuts. Consumer Price Index (CPI) from May, also due Wednesday, will provide the latest gauge of inflation.

The S&P 500 added 0.3% on Monday, posting the highest-ever close for the benchmark index. The Dow and the Nasdaq were up 0.2% and 0.4%, respectively.

Shares of Maryland-based utility Constellation Energy (CEG) jumped 8.4%, notching the top performance of any S&P 500 component. With a focus on nuclear generation and other renewable sources, Constellation has drawn attention from investors for its opportunity to meet the demand for energy required to power artificial intelligence (AI) processes. Including Monday’s solid gains, the stock is up more than 80% so far this year.

Southwest Airlines (LUV) shares soared 7.0% after activist investor Elliott Investment Management said it had acquired a stake in the airline worth $1.9 billion. In a letter to the board, Elliott blamed Southwest’s woes on poor execution and leadership’s unwillingness to transform the company, calling for a comprehensive review of the business. The investment firm believes Southwest’s stock price could move significantly higher if the company carries out the recommended changes.

Shares of solar technology and battery system provider Enphase Energy (ENPH) advanced 6.5% after analysts at HSBC upgraded the stock to “buy.” Monday’s gains reversed a portion of the declines posted on Friday following the disclosure of a class action lawsuit filed against Enphase related to irregularities in its earnings forecasts from the first quarter of 2023.

Huntington Bancshares (HBAN) stock suffered Monday’s steepest losses in the S&P 500, tumbling 6.1% after the regional bank’s chief financial officer (CFO) said the company expects its net interest income (NII) to fall 1% to 4% year over year, a greater decline than previously forecast. When the bank reported first-quarter results in April, its NII was down 9% from the previous year.

Shares of Advanced Micro Devices (AMD), which manufactures graphics processing units (GPUs) and other semiconductors, dropped 4.5% after Morgan Stanley downgraded the stock to “equal weight.” Although analysts believe AMD remains well positioned in its core markets, they expressed concerns about overly optimistic expectations for the firm’s AI products.

Illumina (ILMN) shares sank 3.4% following an announcement by S&P Dow Jones Indices on Friday that the genetic analysis company’s stock would be removed from the S&P 500 Index, effective June 24. Consulting firm Robert Half (RHI) and regional bank Comerica (CMA) were also tagged for removal from the benchmark index. The departing companies will be replaced on the S&P 500 by private equity firm KKR (KKR), cybersecurity company CrowdStrike (CRWD), and internet domain provider GoDaddy (GDDY), and all three of those stocks traded higher on Monday.