Bookends: Friday 02/23/24
Closing Out the Week of Feb. 19th
Close out your trading week here with Ledger Island Bookend Friday where we recap our favorite stories and give you, our takeaways.
Clint’s Takeaways:
On Monday, I said I was eager to see (3) things. First were Initial Jobless Claims and whether they would indicate the end of this “roaring” economy. How do potential rate cuts make you want that somehow? In any case, it did not. Weekly new claims were down 12K, and continuing claims declined 27K.
Second was Existing Home Sales. There, we saw some movement (up 3.1% in January 2024), but we needed more than where we needed it. Although the best levels we’ve seen since last August, most of the sales were primarily homes valued at $750K-$1M, where inventory is higher than the sub $250K valued homes still trending flat. On the bright side (short of cuts), home prices rose 5.1% from last year. People have jobs and are happy with their homes, which are increasing in value. Bummer.
Finally, like many others, I was eager to hear earnings from Nvidia NVDA 0.00%↑ on Wednesday. Actually, by Wednesday, I was just happy to stop having to listen to the speculation of NVDA’s earnings. They did not disappoint and quickly regained all of their downturns from the previous trading days, hit a new all-time high every couple of minutes, and then their market cap far surpassed the GDP of Australia.
Positive economic reports and NVDA 0.00%↑ soaring are starting to become like both Groundhog’s Day, the holiday, and the movie. As CPI, PPI, labor reports, and housing numbers peek their heads out, seeing their shadow indicating higher for longer, we continue to go into every week needing something to change but end up stepping off the curb into a sludgy pothole. Phil Connors adapted! Why can’t we? (I am realizing now seeing Groundhog’s Day is something of a prerequisite for that point. Fingers crossed.)
Next week I am going with it. Back on Monday, we touched upon some smaller companies NVDA 0.00%↑ was invested in, and we will put together what we call the NVDA Jet Stream vETF (virtual Exchange-Traded Fund). Our little experiment will take the best of NVDA’s recently disclosed holdings, find price points, distribute accordingly, and see what happens. The link below is for a quick overview of NVDA’s stake in those companies.
https://www.reuters.com/technology/arm-soundhound-ai-shares-jump-nvidia-builds-stake-2024-02-15/
My favorite thing Phil wrote this week:
“That approach is not problematic as a business model since they appear to have plenty of cash on hand. They had $40.7M at the end of Q3 compared to an operating cost of $7.2M for the same quarter. But when stocks are judged on their earnings, having that significant backlog is a potential source of volatility in both directions.”
from Intuitive Machines Inc. (LUNR)
Enjoy the weekend!
Phil’s Takeaways:
Happy Friday, Everyone!
It’s officially NVIDIA’s world; we’re just living in it. This week, NVDA 0.00%↑ joined the $2 trillion club as their earnings report beat expectations. That gave an optimistic market all they needed to push the DOW to a new record close. Amongst the AI hype winners was SMCI 0.00%↑ , who climbed to nearly $1K a share before having their wings clipped on Friday. Sources of vulnerability in the AI hype will be interesting to monitor. Is NVDA the only stock that can do no wrong, or did its recent performance show that doubting the power of chip manufacturers is a surefire way to lose money? Also, how much money does the fear of missing out on the AI explosion suck out of the rest of the market? NVDA gained $277B just on Thursday. It took a lot of money to get that high. Watching sector performances throughout March is going to be interesting. If the AI gold rush doesn’t slowdown, who suffers?
This week did little to improve the prospects for those hoping for rate cuts in May. New home sales, consumer confidence, and initial jobless claims all came in higher than expected. Goldman Sachs’ analysts said they no longer expect a rate cut in May and now project just 4 basis cuts this year. The fact that a whole lineup of Fed Presidents came out this week and put severe dampers on rate cuts, and the market held its own either shows how much the NVDA 0.00%↑ news mattered or that the market’s performance last week priced in the May disappointment.
My favorite thing Clint wrote this week:
“If we start to see higher-than-expected claims (while unlikely), this might be the beginning of a trend that could pave the way for the ever-elusive rate cuts so many investors and companies are waiting on. Simply put, if "Column A" (layoffs) starts to impact "Column B" (initial claims), then we might have a clearer indication of a slowdown.”
from Bookend Monday: 02/19/24
In case you missed it…
We posted our take on Intuitive Machines Inc. LUNR 0.00%↑ who went to the moon (actually not the stock price) this week.
Also fueled with anger and regrets we posted our view on Vizio Holding Corp. VZIO 0.00%↑ deal to be bought by Walmart WMT 0.00%↑ .
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