Ukraine Strikes Russia and Wall Street Ducks
The conflict could be at another level after moves by Biden, Putin. Also, a look at Palantir and the Nvidia-AMD chip wars.
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Ukraine's armed forces have carried out their first strikes on Russian territory using U.S. Army ATACMS armaments, according to breaking news reports at Bloomberg and elsewhere. Possibly in response to the strikes, as I am not sure which came first, Russian Pres. Vladimir Putin signed a revision to his nation's nuclear doctrine.
The new declaration states that a conventional attack on Russia by any nation that is supported by a nuclear power would be considered a joint attack on Russia. In short, Russia is threatening to go nuclear, now that the Biden administration has given Ukraine permission to strike back at Russia using U.S. long-range missiles.
This will put a bid under U.S. Treasuries, the U.S. dollar, gold, silver and potentially Bitcoin as well. As the morning unfolds, these early moves could exacerbate, or ease, given what develops overseas. Obviously, if the world becomes convinced that the Russian military is about to go to that next level, all market bets would be off. Right now, financial markets are clearly not fully convinced.
The ATACMS, which stands for Army Tactical Missile System and is a ballistic missile, is manufactured by Lockheed Martin LMT. The system was designed in 1986 and is considered by the U.S. military to be bordering on becoming obsolete. This weapon does not have the range of a cruise or intercontinental ballistic missile. We are talking about the low-single digits in hundreds of miles. These missiles cannot strike Moscow from Ukrainian soil.
Muted Monday
Sure, stocks posted something of a comeback on Monday. The response, though, was rather muted. Equities had taken something of letdown last week, with the Nasdaq Composite surrendering 3.15% and the S&P 500 giving back more than 2%. The giveback came on the ricochet coming off of the post-election "Trump Bump" and culminated with a weak session on Friday.
Fed Chair Jerome Powell, who has been unnecessarily putting himself at odds with the incoming and former president, correctly (in my opinion) started sounding more hawkish in terms of upcoming monetary policy decisions. Currently futures markets trading in Chicago are still pricing in a 65% probability for a quarter-point reduction to the target range of the Fed Funds Rate on Dec. 18, but only a half-percentage point worth of rate cuts over the calendar year 2025 in its entirety.
Looking somewhat past Powell's comments and forward to this week's key earnings results, financial markets looked stronger just after the opening on Monday and carried that strength into the afternoon. That's when the rally sort of fizzled out and traders took some short-term profits.
Interestingly: Hot Chips
This week's star earnings release will come from AI-GPU king Nvidia NVDA and Nvidia came out of the gate on Monday morning on a negative note following a report in the "The Information" stating that the company's latest design in AI-capable architecture, the Blackwell chip, has issues with overheating when integrated into large server networks. NVDA rallied later on in the session, still closing the Monday session down 1.29%.
Just as interesting, the hint of potential trouble for Nvidia put a bid under the shares of competitor Advanced Micro Devices AMD. AMD might not currently be considered close competition for Nvidia as a provider for the elite-end demand for AI-capable technology, but AMD probably is the closest competition Nvidia has. AMD was up more than 4% on this news, ending what had been a 6-session losing streak for Lisa Su's firm. I remain long both stocks.
Marketplace
The U.S. Dollar Index showed some weakness on Monday as the euro, pound and yen all showed some strength. The Treasury yield curve maintained its current slope as most of the Notes comprising the belly of said slop saw yields come in by low single digits in basis point.
As for equities, the S&P 500 gained 0.39% on Monday as the Nasdaq Composite gained 0.6%. Small to mid-cap indexes were relatively flat for the session, closing on either side of "unchanged" while semiconductors, despite what happened to Nvidia, outperformed and Transports underperformed. Impressively, 10 of the 11 S&P sector SPDR exchange-traded funds closed out the day in the green, led by Energy XLE as oil popped in response to the weaker dollar. Energy gained 1.33% for the day, trailed by Communication Services XLC. That fund was up 0.99%. The Industrials XLI at -0.14%, were the only fund among the 11 to close in the red.
Breadth was a little sloppy. Winners beat losers by a rough 7 to 5 at the New York Stock Exchange, but by less than a smidgen at the Nasdaq. Advancing volume looked a lot better than it probably felt, as there did seem to be increased trading volume on the intraday rallies. Not quite sure whether there's meaning there or not.
Advancing volume took a 61.8% share of composite NYSE-listed trade, but on a 13.2% day over day contraction in aggregate trading volume. Advancing volume, however, took a 69.2% share of composite Nasdaq-listed activity on 5.6% day over day growth in Nasdaq-listed trading volume. Is this meaningful? It could be. But there is breaking news impacting financial markets this morning.
In Other News...
The Biden administration's Department of Justice has made known its intention to ask a federal court to force Alphabet GOOGL to divest itself of its Chrome internet browser. The DOJ is also looking to force Alphabet to uncouple Android from other products including the Google search engine and its mobile app store. A list of proposals meant to remedy a decision made in August by judge Amit Meta that the company had built an illegal monopoly, is due by this Wednesday (tomorrow)
Trading: Palantir Beat Down
Yes, I saw the beat-down suffered by Sarge-name Palantir Technologies PLTR on Monday. The stock was slapped by the ugly stick for 6.86% on Monday and is down further ahead of the U.S. open. That pressure should not come as a complete surprise, as PLTR had been up 58.8% from its close on Nov. 4 ahead of its most recent earnings release. The stock desperately needs to consolidate. We know that, and we have spoken about that.
That said, PLTR will switch its listing from the NYSE to the Nasdaq this coming weekend. It should also come as no surprise to investors that PLTR will, once listed at the Nasdaq, be added to the Nasdaq 100 the next time such an announcement is made. I am not taking further profits until after I see that announcement. I am reiterating my $70 target price on those shares.
Economics (All Times Eastern)
08:30 - Housing Starts (Oct): Expecting 1.34M, Last 1.34M SAAR.
08:30 - Building Permits (Oct): Expecting 1.43M, Last 1.425M SAAR.
08:55 - Redbook (Weekly): Last 4.8% y/y.
4:30 p.m. - API Oil Inventories (Weekly): Last -777K.
The Fed (All Times Eastern)
1:10 p.m. - Speaker: Kansas City Fed Pres. Jeffrey Schmid.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: LOW (2.81), MDT (1.25), WMT (0.53)
At the time of publication, Guilfoyle was long WMT, NVDA, AMD, LMT, PLTR equity.
