Things you need to know
- Stocks churn ahead of the eco data
- NVDA Pre-announces (never good) stock drop more than 6%
- After the bell – more warnings of a slowdown ahead
- Treasury yields up, Oil up, Gold Up
- Try the Lobster/Corn Chowder
Stocks whipped around on Monday…..beginning the day in the early hours in negative territory, only to turn up at the opening and trade higher in the moments after the opening bell – as it appeared as if Friday’s NFP report was not gonna get in the way of what investors wanted to do…..….notching the high for the day at 10 am….when the S&P traded up to 4,186 and the Nasdaq traded up to 12,855 – and from there it was all downhill…..
NVDA – the premier semi-conductor company came out and ‘pre-announced’ – which usually means it NOT good…. – so, the dilemma in the C-Suite was this:
– ‘Do we wait until August 24th to tell everyone the bad news or do we head it off at the pass – give them ‘selected’ results, tell them now, let them clobber us, let them throw a temper tantrum and then it will be over or do we say nothing and let it ride….?’
Well by now you know or at least you can imagine how that turned out…..they decided to pre-announce, they took the beating, they saw 8% (or $15.12) of their value wiped out by 11:30 as they tried to manage the bleed…..Preliminary 2nd qtr. revenues are ‘projected’ to be $6.7 billion vs. the expected $8.1 billion – down 19% q/q but up 3% y/y. The shortfall being driven by weaker gaming revenues…. that are expected to be down 44% q/q and down 33% y/y…data center revenues, though, were up 1% q/q and 61% y/y…. 2nd qtr. results are also expected to include about $1.32 billion worth of charge offs…
CEO Jensen Huang had this to say – “We expect the macroeconomic conditions affecting sell-throughs to continue – so we took actions with our gaming partners to adjust channel prices and inventory” (so you ask – what is Sell-Through? It is the ratio of the quantity of goods sold by a retail outlet vs. the quantity distributed to it wholesale). I guess THAT number was no good….in fact it declined significantly as the quarter progressed……I just wish they told me that before I bought stock last week….Hey! slow down – no one says anything when Pauly ‘P’ somehow finds out and puts on a big trade ahead of the news ‘risking all he’s got’……..but that’s another story!
In any event – the NVDA news weighed on the Nasdaq and the broader mkt – partly because everyone owns it….it’s a fan favorite across the mutual fund industry, the ETF industry and the Index industry….so it is what it is…..by the end of the day – the stock was off by 6% or $12….. The Dow was up 30 pts, the S&P down 5, the Nasdaq only off by 14 pts, the Russell up 20 and the Transports gained 52.
All of the 11 S&P sectors remained in calm territory as investors digest what’s next…. Industrials, Tech, Financials, Consumer Staples and the growth trade all just a bit lower by about 0.3% while Utilities, Consumer Discretionary, Communications, Energy, Healthcare, Basic Materials, Real Estate and the value trade all ended the day higher – up between 0.2% – 0.7%.
Treasuries – rose in price – sending yields down but leaving them inverted…. with the 2’s yielding 3.20% -the 5’s yielding at 2.90% and 10’s at 2.75%…this morning – yields are on the rise as prices fall.
There was lots of conversation about the ‘Inflation Reduction Bill’ now known as the ‘Schumer/Manchin TAX and Spend Stagflation Bill’ – as more analysis took place – even Bernie Sanders expressed disappointment – saying that the CBO along with a range of other economic organizations that have studied the bill agree that it does nothing to bring down inflation…all this while Joey tells us how great this bill is because
“When you sit down at your kitchen table to pay your bills – you’ll be able to pay a whole lot more bills because you will be paying less in medical bills…”
Is he kidding? No, tell me – the truth – he’s kidding right? When did Joey become a comedian?
Oil traded up by $1.50 or 1.6% to end the day at $90.76/barrel. Recall, they have been blaming the weakness in oil on demand destruction due to the recession…. (That doesn’t exist), Yesterday it was all about the strong economy (no recession here) and how it should cause demand to increase, not decrease…and so we saw oil trade up. In addition – we learned that China – the world’s top importer bought 8.79 million barrels/day of crude in July – which is up from a four year low in June. In terms of US production – oil producers CUT the number of oil rigs by the most since last September….and that is not gonna help supply at all…. our friends at GS re-iterating the case for higher oil prices in the months ahead. Keep your eyes on $88.97…. that is the 200 dma support trendline while $100.80 is resistance.
Yesterday saw gold rally by $14.30/oz to end the day once again on the north side of $1800……and this morning it is up another $2.60 trading at $1,807/oz…. piercing resistance at $1,806/oz. This is the 3rd time that gold challenges the trendline – and so, I’m betting succeeds. Last week – I pointed out the longer-term technical trend suggesting that gold is poised to go higher – I still believe that. If it holds this trendline – then what was resistance becomes support allowing it to challenge the converging intermediate/long term trendlines at $1,865 where I suspect, it will find resistance but once it pierces that – then it’s off to the races. I have NEM and GOLD on the list of names I think will pop.
In addition to the inflation concerns – the fact that China has extended their military exercises over Taiwan indefinitely showcasing their new set of weapons trying to intimidate the island will keep the pressure on the politics and will serve as a reason for investors to flock to gold as a store value. $1,811 which is last weeks high is the target right now.
After the bell last night we heard from 5 more companies (lesser known) but all warned of difficulties ahead…Take 2, AllBirds, Smile Direct, 3D Systems, CarGuru – comments like – ‘not recession proof’, extended difficulty in the 2nd half of ‘22’ and ‘challenges for consumers – especially for discretionary spending in the months ahead’….were just some of the comments…and this morning we learn that SNAP is joining a host of other names announcing coming layoffs in the weeks ahead….all this pointing to caution ahead, confirming what the other 430 S&P companies reported as well.
Economic data today includes NFIB Small Business Optimism – and that came in at 89.9 – up slightly from last month’s 89.5. Tomorrow brings us Mortgage Apps, Real Avg Hourly Earnings y/y and the all-important CPI read. Optimism is building that we will see a decline suggesting that inflation has peaked…. This month – it is expected to show slight declines in all the metrics except Ex food and energy y/y and that is expected to be up by 6.1%…. So, investors and the markets await. If the CPI does in fact decline – then expect all kinds of excitement from the administration and the FED that their policies are working to tame inflation…. giving them the right for 2 more years of democratic rule.
Expect the next 2 ½ months to get even more heated (if that’s possible) in terms of politics…. Last night’s raid on Mar-a-Lago only adding a new dimension to what was already a dirty fight and while none of this will price stocks – it is surely offer some very real excitement in the weeks ahead.
US Futures are weaker this morning…. Dow futures down 4 pts, the S&P’s -8, the Nasdaq -65 and the Russell is -1. None of this really suggests anything – other than churn. Look – until the FED pivots (and changes) their stance – my sense is that these rallies are not sustainable.
European markets are all lower – down about 0.5% – 0.9% across the board.
The S&P closed at 4,140 – down 5 pts. We remain in the 4115 / 4335 trading range…. smack in the middle of both trendlines…. Earnings are winding down and the markets await the coming economic data coupled with speeches from FED Presidents, Neely Khaskkari, Chucky Evans tomorrow and Mary Daly on Thursday.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Lobster/Corn Chowder
This is not a complicated recipe at all… came to me from a friend years ago but is a summer favorite…
For this you need: 1 pound freshly cooked lobster meat, cut into bite-size pieces, 8 cups yellow corn kernels, 3 cups low-salt chicken broth, 8 bacon slices, chopped, 2 cups chopped onions, 3/4 cup peeled finely diced carrots, 2/3 cup finely diced celery, 1/4 teaspoon cayenne pepper, 3 cups bottled clam juice, 1 1/2 cups whipping cream, 6 tablespoons sour cream, 2 tablespoons (1/4 stick) butter, 3 tablespoons chopped fresh chives
Puree 4 cups corn with 1 1/4 cups broth in processor until almost smooth. Place in a pot on med hi heat, bring to a boil and then turn off. Set aside until later.
Sauté bacon in large pot over medium heat until crisp, about 5 minutes. Transfer bacon to paper towels. Add onions to pot; sauté until light golden, about 5 minutes. Add remaining 4 cups corn: sauté 5 minutes. Add carrots, celery, and cayenne; sauté until vegetables soften slightly, about 15 minutes. Add clam juice and 1 3/4 cups broth: simmer 10 minutes. Stir in corn puree and whipping cream; simmer 10 minutes. Season with salt and pepper. Remove soup from heat; stir in sour cream.
Melt butter in medium nonstick skillet over medium heat. Add lobster meat and sauté just until heated through, about 2 minutes. Ladle soup into bowls. Garnish each serving with lobster pieces, bacon, and chives and serve.
Buon Appetito.
