Weekly Market Update: Nvidia bolsters the markets and tech after anxiety anticipating earnings
The holiday shortened weak opened amid rising volatility in technology shares as investors anxiously anticipated earnings from Nvidia. A positive print from Walmart and a major M&A announcement in the US credit card industry was overshadowed by what appeared to be profit taking by investors ahead of the AI bellwethers quarterly update. Palo Alto Networks -25% drop after disappointing guidance added to the consternation while weighing heavily on the cyber security space. Once again though, Nvidia came to the rescue by post another breathtaking quarter and guiding well above market expectations. In the afterglow the SMH surged more than 6% and the S&P rose to new all-time highs.
US Treasury yields moved mid-week after a particularly sloppy US 20-year auction. Also, a parade of Fed speakers and the latest FOMC minutes underscored that most Fed officials are still reluctant to begin cutting rates now, and want to see more data for doing so. Natural gas prices bounced following earnings and 2024 production commentary from Chesapeake Energy. Crude oil prices also climbed on the week along with a basket of most other commodities.
Earnings season sallied on with Nvidia beating revenue consensus and rallying to an ATH, with other earnings’ reports being generally optimistic, although Westlake Chemicals had failed to beat consensus, and Intuit was just shy on EPS and revenue estimates. On the positives, Walmart broke revenue consensus with the CFO reporting ‘continued sales growth’ after holiday rush, and Builders FirstSource also beat estimates capped with strong 2024 guidance. Finally, DFS Capital One confirmed acquisition of Discover Financial, while Occidental Midstream explored 49% sale of Western Midstream.
MON 2/19
(CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: CUTS 5-YEAR LPR BY 25BPS [more-than-expected, the biggest move on record for the rate and 1st cut since Jun 2023]; Leaves 1-year LPR unchanged
(US) FBI Director Christopher Wray: China is increasingly inserting offensive weapons within our critical infrastructure poised to attack whenever Chine decides the time is right; We are laser focused on this as a real threat (update)
(US) Goldman Sachs analysts raise S&P500 end-2024 target again from 5,100 to 5,200
(US) Law enforcement in US and UK says they have seized cybergang Lockbit ransomware domains - press
(US) Mid Feb Manheim wholesale used vehicle Index at 202.1, -0.9% m/m, -13.8% y/y
(US) US Nuclear Regulatory Commission has formally issued a construction permit for a new type of nuclear test reactor [1st time in 50 years], named Hermes low-power molten salt-cooled (non-water) demonstration reactor
(US) US said to be considering sanctions on Chinese companies it believes are helping Russia fuel its war in Ukraine - CNBC [**Note: it would be the US's first direct penalties against China over its alleged military support for Russia]
(US) US said to be leaning toward providing Ukraine with longer-range version of the ATACMS missile – NBC
DFS Capital One confirms to acquire Discover Financial at EV ~$35.3B in all-stock transaction; Sees to be >15% accretive to adj non-GAAP EPS in 2027; See closing late 2024-early 2025
TUES 2/20
(EU) ECB Q4 Euro-Area Negotiated Wage Rate: 4.5% v 4.7% prior
(CN) China’s two main stock exchanges reportedly froze the accounts of a major quantitative hedge fund Ningbo Lingjun for three days after the money manager dumped CNY2.57B in stocks on Feb 19th – press
(CA) CANADA JAN CPI M/M: 0.0% V 0.4%E; Y/Y: 2.9% V 3.3%E (annual pace moved back within target range
(US) NY Fed takes $530.9B (v $532.1B prior) in RRP program at 5.30%; 90 participating and accepted counterparties
(US) White House's Kirby: To announce major sanctions against Russia on Friday following Navalny's death
TTN Research Alert: FT overnight shared the chatter noting bad property debt exceeds reserves at few of largest US banks, based on FDIC filings; US banks said to have the lowest reserves to absorb potential losses on CRE loans in more than 7 years
ENSU.NO First commercial delivery of the 150,000 unit contract for its world ´s first functional commercial-scale solid-state lithium microbattery is expected in Q2 2024; Expects to close larger technology contracts with partners and customers over the next month
Elon Musk: The first human patient implanted with a brain-chip from Neuralink appears to have fully recovered and is able to control a computer mouse using their thoughts
005930.KR Said to have created a team led by former Google developer in Silicon Valley to develop AI chips – press
CA.FR Reports FY23 adj Net €1.30B v €1.21B y/y, Recurring Op €2.26B v €2.38B y/y, Rev €94.14B v €90.81B y/y; Pricing negotiations with Pepsico are not resolved; Announce €700M buyback program
CHK Reports Q4 $1.31 v $0.42e; Cuts FY24 capex guidance; Given current market dynamics, plans to defer placing wells on production while reducing rig and completion activity
HD Reports Q4 $2.82 v $2.76e, Rev $34.8B v $34.6Be; Guides SSS below consensus; Raises Quarterly dividend 7.7% to $2.25 from $2.09 (indicated yield 2.48%)
HD CFO: Our market is on its way back to normal demand conditions, pressures we saw in 2023 are receding; Demand for home improvement dipped throughout the year as consumers spent more of their dollars on experiences – CNBC
PANW Reports Q2 $1.46 v $1.30e, Rev $1.98B v $1.97Be; Q3 guidance misses estimates
TOL Reports Q1 $2.25 v $1.78e, Rev $1.95B v $1.87Be; Seen a marked increase in demand coinciding with the start of the spring selling season
WES Reportedly Occidental exploring sale of 49% stake in Western Midstream Partners; Company valued ~$18.5B – press
WLK Reports Q4 $0.72 v $0.81e, Rev $2.83B v $2.85Be; Notes thus far in 2024, global macroeconomic conditions are largely unchanged from Q4 2023
WMT Reports Q4 $1.80 adj v $1.65e, Rev $173.4B v $170.6Be; Raises annual dividend 9% to $0.83/shr [post-split]; Reached $100B in annual eCommerce sales
WMT Grocery inflation +LSD in Q4 (but moderated ~150 bps versus Q3); up +high-teens on a two-year stack - earnings slides
WMT *CFO: AFTER HOLIDAY RUSH, SAW CONTINUED SALES STRENGTH; CUSTOMERS HAVE STILL SHOWN DISCRETION WITH PURCHASES. PUTTING FEWER ITEMS IN THEIR BASKETS, BUT SHOPPING MORE FREQUENTLY - PRE-RECORDED MEDIA CALL COMMENTS
WEDS 2/21
*(CN) CHINA SAID TO ENACT NET SALE BAN AT EACH MARKET'S OPEN AND CLOSE – PRESS
(JP) Japan Cabinet Office (Govt) Feb Monthly Report: Downgrades overall economic assessment; Sees gradual economic recovery despite some sluggishness (1st time since Nov 2023)
(JP) Nikkei 225 surpasses all-time closing high in intraday trading (38,915 on Dec 29th, 1989)
(KR) Bank of Korea (BoK) Gov Rhee: Decision to keep policy steady was unanimous; to maintain restrictive policy for sufficiently long period - post rate decision press conference
(RU) Reportedly seizing frozen Russian assets wins endorsement of legal experts – press
TTN Research Alert: According to unnamed US sources, Russia is working on a nuclear weapon that could target satellites from orbit despite the 1967 treaty bars signatories, although it would not be the first time a nuclear weapon was sent to space
(UK) Ministry of Defense: On Jan 30th, Trident nuclear missile misfired and crashed into ocean after anomaly discovered during test launch from submarine near US Florida's Port Canaveral – press
(US) Association of American Railroads weekly rail traffic report for week ending Feb 17th; 474.2K total units, +3.7% y/y (update)
(US) FOMC JAN MINUTES: Some officials saw risk inflation progress could stall; Judged policy rate likely at peak for the cycle
(US) NY Fed takes $574.9B (v $530.9B prior) in RRP program at 5.30%; 96 participating and accepted counterparties
(US) Some House Republicans have reportedly shifted from optimistically cautious to privately expecting US govt shutdown - Axios [**Note: House is on vacation until Feb 28th while Mar 1st is the first deadline to avert US govt shutdown]
(US) TREASURY $16B 20-YEAR BOND AUCTION DRAWS 4.595% V 4.780% PRIOR, BID-TO-COVER 2.39 V 2.58 PRIOR AND 2.56 OVER LAST 8 AUCTIONS
BAC CEO: Still see ability of US consumer to borrow; Commercial clients' line usage flattened out - investor conf
CWH Reports Q4 -$0.47 v -$0.54e, Rev $1.11B v $1.16Be
ENR.DE CEO: Demanding EU action like quotas or other measures to protect EU wind power sector from cheap Chinese competition, or it'll be decimated like the solar sector
GOOGL Releases smaller 'open' AI model for developers, Gemma; Individuals and businesses can build AI software based on its new family of 'open models' for free – press
HST Reports FFO Q4 $0.44 v $0.44e, Rev $1.32B v $1.30Be
HUN Reports Q4 -$0.21 v -$0.14e, Rev $1.40B v $1.32Be
NVDA Reports Q4 $5.16 v $4.54e, Rev $22.1B v $20.3Be; Guides Q1 Rev well ahead of ests; Says accelerated computing and generative AI have hit the 'tipping point'
NVDA CEO: Cannot keep up with demand in the short term as we ramp up; Demand far exceeds supply for next generation products; Expect supply constraints to continue throughout the year - earnings call
RCL Raises FY24 eps $8.80-10.10 v $9.75e; Demand and bookings have exceeded expectations; Expects to achieve all Trifecta goals in 2024
RIO.AU Reports FY23 underlying Net $11.8B v $13.3B y/y (vs $11.6Be), underlying EBITDA $23.9B v $26.3B y/y (vs $23.6Be), Rev $54.0B v $55.6B y/y (vs $53.8Be)
RIO.AU CFO: FY earnings decline was mostly price driven; China is robust - post earnings comments
SNPS Reports Q1 $3.56 v $3.43e, Rev $1.65B v $1.65Be
VAC Reports Q4 $1.88 v $1.80e, Rev $1.19B v $1.15Be
VRT Reports Q4 $0.60 v $0.54e, Rev $1.87B v $1.89Be; Guides Q1 weak; Notes strong and accelerating trends in the data center market, increasing demand for critical digital infrastructure to support AI deployment at scale
THURS 2/22
(CN) China Jan New Home Prices M/M: -0.4% v -0.5% prior (7th month of declines, but first deceleration in price declines in 10 months)
(EU) EURO ZONE JAN FINAL CPI Y/Y: 2.8% V 2.8%E; CPI CORE Y/Y: 3.3% V 3.3%E
(UK) FEB PRELIMINARY MANUFACTURING PMI: 47.1 V 47.5E (19th consecutive month of contraction); Notes February saw the highest degree of supply chain delays for over one and a half years, linked to Red Sea shipping disruptions
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 46.8 V 43.5E (14th month of contraction but highest since Mar 2023); New orders index has risen by more than seven points
(DE) GERMANY FEB PRELIMINARY MANUFACTURING PMI: 42.3 V 46.0E (20th month of contraction and below all estimates); Notes after a glimmer of hope in recent months, the German industry is feeling pretty bleak now
(US) JAN EXISTING HOME SALES: 4.0M V 3.97ME
(US) FEB S&P PRELIMINARY MANUFACTURING PMI: 51.5 V 50.7E (2nd month of expansion)
(US) Fed's Jefferson (voter): Likely to be appropriate to cut policy rate later this year: Jan data was disappointing and shows path down likely to be bumpy
(US) Fed's Harker (non-voter): We are close to cutting, just give us a couple meetings; Greatest risk would be cutting rates too soon; May be near point of cutting rates, unsure when it will happen
(US) NY Fed takes $553.2B (v $574.9B prior) in RRP program at 5.30%; 86 participating and accepted counterparties
(US) DOE CRUDE: +3.5M V +3.0ME; GASOLINE: -300K V -2.0ME; DISTILLATE: -4M V -1.5ME
(US) White House's Kirby: Iran providing Russia with a significant number of drones which Russia is using to attack Ukraine
BKNG Reports Q4 $32.00 v $29.72e, Rev $4.78B v $4.66Be; Declares initial dividend of $8.75/shr (annual yield of ~0.9%)
BLDR Reports Q4 $3.55 adj v $2.70e, Rev $4.15B v $4.01Be; Guides init FY24 strong
BN.FR Reports FY23 Recurring EPS €3.54 v €3.43 y/y, Recurring Op €3.48B v €3.38B y/y, Rev €27.6B v €27.7B y/y
HAS.UK Reports H1 Pretax £27.6M v £94.0M y/y, Op £60.1M v £97.0M y/y, Net fees £583.3M v £651.9M y/y; Again notes clear slowdown in most Perm markets in December, while its larger Temp & Contracting business again showed greater resilience
INTU Reports Q2 $2.63 v $2.29e, Rev $3.39B v $3.38Be; Guides Q3 EPS below estimates
IONQ Achieves first known commercial demonstration of ion-photon entanglement, a key technical milestone for networking quantum computers
LUNR Follow Up: Private lunar lander Odysseus has successfully reached the moon and is transmitting data despite weak signal - NASA confirmation to press [**Note: the first US spacecraft to land on the moon’s surface since Apollo 17 in 1972]
LYV Reports Q4 $1.37 v -$1.08e, Rev $5.88B v $4.72Be
NESN.CH Reports FY23 (CHF) Rev 93.0B v 94.4B y/y, Real Internal Growth (RIG) -0.3% v +0.1%e; Guides Organic Rev growth slowdown; Raises div to CHF3.00/shr
T Confirms network outage caused by software update and Not a cyber attack; Restores cell services after hours of outage nationwide - US press
UNH Reportedly suspects nation-state in cyberattack – press
FRI 2/23
(CN) China Securities Regulator (CSRC): To put more resources to identify fraud in listed firms; Will step up on-site inspection of IPO candidates; Vows to crack down market manipulation; Has no plan to review IPOs over past decade
(DE) GERMANY FEB IFO BUSINESS CLIMATE: 85.5 V 85.5
(EU) ECB’s Holzmann (Austria, ultrahawk): Better to cut later and faster than too early; Main risk to rate cuts is Red Sea tensions
(US) Tier1 week-to-Feb 22nd US Truckload Demand Indicator at 54.1 v 50.5 prior (2nd highest print in 80 weeks)
(US) TTN Reminder: According to the recent polls, former governor of South Carolina Nikki Haley is set to lose a primary in her home state on Feb 24th to former Pres Trump by 20-25ppts
(US) NY Fed takes $520.1B (v $553.2B prior) in RRP program at 5.30%; 79 participating and accepted counterparties
BAS.DE Reports final Q4 Adj EBIT €292M v €398Me, Rev €15.9B v €16.2Be; Further program for Ludwigshafen site announced, targeting annual cost savings of €1B by the end-2026
NBSE Board approved dissolution of company - filing