Nvidia Earnings, FOMC, Unpleasant Breadth, Shrinking Disney, Investing in SoFi, Palantir

For Those About to Rock:

Hail, hail to the good times

'Cause rock has got the right of way

We ain't no legend, ain't no cause

We're just livin' for today

For those about to rock, we salute you

- Johnson, Young, Young (AC/DC), 1981

Ninety-One Days

It's been ninety-one days since we've heard from Nvidia NVDA. Three months after the last time Nvidia reported quarterly earnings, CEO Jensen "The Fonz" Huang held a post-earnings conference call. Jensen truly is "the Fonz", the coolest CEO of the modern era.

The stock closed at $953.86 on Tuesday afternoon, just 2.1% short of its record high print of March 8th, which was an intraday high. Last night's close was the firms' record close. The stock is up 41.4% since releasing its fiscal fourth quarter results on February 21st. The stock is up 92.6% year to date and up 212.4% since launching this whole AI-manic ball of wax with tremendous forward-looking guidance a year ago, last May.

Rock on. For tonight is the night and I have written a separate Nvidia earnings preview for you also here at TheStreet PRO this morning.

Helene's Question

For the second straight day this week, it felt as if financial markets walked softly upon eggshells, trying not to break anything ahead of this afternoon's FOMC Minutes and of course ahead of Nvidia earnings. The S&P 500 tacked on 13 points or 0.25% to close at yet another record high. The Nasdaq Composite gained 37 points or 0.22% to close at (say it with me) yet another record closing high. The Dow Industrials were also up small, but failed to retake the 40,000 level and failed to make a new record closing high. All good. Right?

Funny you ask. Anyone else read Helene Meisler last night? If not, just a heads up... her nightly column is a quick read and for me, a ritual. Helene notes that the Dow Transports had the head handed to them on Tuesday, giving up 1.67%. Helene asks if the Transports are the "canary in the coal mine" and we'd like to know. Are they? We all know that the Transports as well as the small-caps are more reflective of expectations for a healthy economic environment going forward than are large-caps in the broad sense.

Well, the Nasdaq Composite and S&P 500 are up 12.13% and 11.56%, respectively, year to date, while the Dow Transports are down 4.58% in 2024 and the Russell 2000 is up just 3.52%. Ooh, gross.

While the S&P 500 and Nasdaq Composite set new record closing highs, or at least flirt with doing so almost daily, the Dow Transports are still 9.6% below their cycle high and 16.9% below their all-time high set in November 2021. The small-cap Russell 2000 closed last night just 1.7% shy of its cycle high, but 14.7% shy of its record high also set in November 2021.

Perhaps "Dow Theorists" should cover their eyes and not watch. Perhaps forward-looking economic growth just will not be what it's supposed to be. Perhaps backwards looking economic growth is facing huge downward revisions from the Bureau of Economic Analysis. Actually, just based on the Bureau of Labor Statistics BED report released in April, we already know it is. Then again, can we trust anyone in 2024?

Remember GDP equals GDI. When the two don't match or come close to matching, then somebody screwed something up. Full year GDP growth for 2023 came to 2.5%. Full year GDI growth for 2023 came to 0.5%. As I've told you before, when the two are not close, apolitical economists average the two.

That means that an honest economist would say that the economy grew 1.5% in 2023, yet all you've heard in the financial media is that the economy was strong and grew 2.5% in 2023. Wonder why? Things that make you go hmmm...

Tuesday's Bad Breadth

Six of the eleven S&P sector SPDR ETFs closed in the green on Tuesday led by the Utilities XLU at +0.9%. That can't be a surprise. Surging demand for electricity has boosted prices and margins for this group. Four of these funds closed in the red, led lower by Energy XLE as crude oil and natural gas both had a rough day. In case you noticed that 6+4 makes 10, the Materials XLB closed the session unchanged.

Losers beat winners at the NYSE by just a smidge (11-10), while losers beat winners by about 4 to 3 at the Nasdaq. Advancing volume took a 45.6% share of composite NYSE-listed trade, and just a 38.9% share of composite Nasdaq-listed trade.

Aggregate trade was up 7.1% on a day over day basis for NYSE-listings, which would be sort of damning if the major indexes had not closed in the green. Aggregate trade contracted by 8.9% on a day over day basis for Nasdaq-listings as last weeks' surge in the trading of penny stocks and stocks with elevated short interests continues to fade.

Good to Know

Bloomberg News reported on Tuesday that in the event of a Chinese invasion of Formosa, both ASML Holding ASML and Taiwan Semiconductor TSM have ways to remotely disable their sophisticated chip manufacturing equipment. This is something that has concerned US government officials for some time.

For those that don't know, TSM is easily the world's largest semiconductor foundry and ASML provides EUVs to TSM, which are machines that harness high-frequency light waves that help in the printing of the smallest microchip transistors possible. These chips and that equipment is required to produce the high-end chips necessary in creating AI-capable chips that would also obviously have military applications.

Everybody's Doing It

Bloomberg also reported that in recent weeks, Mexico, Chile and Brazil have followed the US and Europe and have implemented tariffs on steel products manufactured in China. In some cases, these duties have been more than doubled. Additionally, Colombia is expected to potentially join the group shortly. Somewhat surprising given how China has pushed to integrate itself into Latin American economies over recent years. Hmmm.

Small, Smaller World

Apparently, the Walt Disney Company's DIS Pixar unit cut about 14% of its staff on Tuesday., which comes to 175 layoffs. This reduction is said to reflect a refocusing of Pixar back towards feature films and away from producing material for the Disney+ streaming business. Pixar has not done so well of late. The unit released three films on the streaming service during the pandemic era and the film "Elemental" in 2023. Elemental went on to deliver a very disappointing $496.4M in global ticket sales.

Waller Said...

I really overdid the "Fed Speak" in yesterday's Market Recon, but I think one quote dished out by Fed Gov. Christopher Waller on CNBC on Tuesday really said all that needs to be said on the matter.

On cutting short-term rates... "If the data were to continue softening throughout the next three to five months, you can even think about doing it at the end of the year. If we get enough data going the right way, then we can think about cutting rates this year, beginning of next year."

Investing (Notice I did not say "Trading")

I added to long positions in both SoFi Technologies SOFI and Palantir Technologies PLTR on weakness on Tuesday.

Economics (All Times Eastern)

07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 7.08%.

07:00 - MBA Mortgage Applications (Weekly): Last 0.5% w/w.

10:00 - Existing Home Sales (Apr): Expecting 4.19M, Last 4.19M SAAR.

10:30 - Oil Inventories (Weekly): Last -2.508M.

10:30 - Gasoline Stocks (Weekly): Last -235K.

10:30 - Natural Gas Inventories (Weekly): Last -86B cf.

13:00 - Twenty Year Bond Auction: $16B.

The Fed (All Times Eastern)

14:00 - FOMC Minutes.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: ADI (1.27), TGT (2.05), TJX (.87), WSM (2.22)

After the Close: NVDA (5.57), SNOW (.17), SNPS (3.05)

At the time of publication, Stephen Guilfoyle was long NVDA, SOFI, PLTR, TJX equity.