Things you need to know.

–        Stocks rose as we awaited the NVDA results – Investors remained on edge.

–        The market action revealing what we all knew – Jensen Huang was NOT going to disappoint.

–        NVDA absolutely BLOWS THE ROOF OFF THE HOUSE AND PREPARES TO BLOW IT OFF AGAIN IN 3 MONTHS

–        Anything Tech related surges (which is almost everything!)

–        Treasury prices rise sending yields lower, Dollar down, Gold up.

–        Oil down as they reinforce the weak manufacturing narrative.

–        Try the Champagne Chicken Cutlets

Stocks rose! Treasury yields fell, gold rose, the dollar fell, and oil fell – all as the world awaited the NVDA results…. The Dow was up 184 pts or 0.6%, the S&P up 48 pts or 1.1%, the Nasdaq up 215 pts or 1.6%, the Russell gained 20 pts or 1%, while the Transports surged by 175 pts or 1.1%.

Anything Tech related (which is every sector) led the way all day as the world awaited the NVDA report (see below) but we saw strength across the board – the XLK +1.8%, Semi’s – SOXX + 2.01%, Disruptive Tech – ARKK +2.5%, Cyber Security – CIBR + 1.3%, Communications – XLC +1.6%, Robotics and Automation – BOTZ +2.10%, AI +4.03%, the Growth Trade – SPYG +1.2%

And the magnificent 7 that had given back double over the past 3 weeks – found plenty of buyers…AAPL +2.2%, MSFT +1.4%, AMZN +1%, GOOG +2.7%, META +2.3%, NVDA +3% (during the day and then +8% post the results), & TSLA + 1.5%

But like I said – everything (except energy -see below) saw gains…. Industrial – XLI +1%, Financials – XLF +1%, Real Estate – XLRE + 1.5%, Consumer Discretionary – XLY +0.8%, Staples – XLP +0.6%, Utilities – XLU +0.4% and Healthcare – XLV +0.3%.

Energy (across the board) as noted was the loser – XLE -0.25% as they continued to slam oil over the usual arguments – nothing new…. Coal and Natural Gas names are also under pressure – BTU -1.9%, CRK -3.4% ARCH -1%. – But other than energy – if you are in the game – you had an UP day….and that’s always good.

On the economic front we had:

Mortgage Apps – FELL by 4.2%, Manufacturing PMI fell to 47 – 2 pts below the expected 49 and deeper into contractionary territory…. Services PMI that fell too…coming in at 51 – 1 pt below the expectation…and while still in expansionary territory – it is about to slam into contractionary territory…. (Defined by sub-50).  All while New Home Sales rose by 4.4%….but remember what I told you yesterday…..Home builders can ‘doll it up’ – they can upgrade your kitchen, your baths etc.… they can offer you a better rate (because they own the financing company) – they control the whole process from breaking ground to delivering the finished home…to offering the financing to get it done…..Unlike a bank that is tightening standards – home builders WANT to give you the money (so they can sell the house) and so they do…..which is why Existing Home Sales are plunging and New Home Sales are rising…..and the homebuilders – XHB rose by 2% yesterday on the back of this news….

And the algo’s which have been in sell mode for a couple of weeks suddenly decided that we had gotten into a slightly ‘oversold’ position on the indexes – all of them had pierced their short term trendlines in only 2 weeks, Treasury yields – that ‘spiked to 16 yr. highs cited as the ONE reason that caused the move …– Now look, we needed to see a pullback – it was necessary but it was swift…….So the big brokers and wholesalers had to change the narrative….they floated the idea of a rate pause (again), it’s like what they do when they want oil to go lower – they pull out the ‘weak China’ story….and so the algo’s  ‘think’ that the FED is about to PAUSE and that JJ is about to announce that PAUSE on Friday at Jackson Hole….to which I say – “Really’?  What has really changed?  Nothing…. Inflation today feels even worse than it did one year ago…. Why?  Because we are exhausted….and remember – prices are still rising by 4% on top of the increases we have seen since April 2021 – as the CPI rocketed higher peaking at +9.4%….  So, there is NO relief (yet)….and the consumer is growing weary…. Yes, the eco data is mixed, but the fact is – It’s getting ‘hot’ in the kitchen….

Then – the clocked ticked and you could hear a pin drop….and as my friend Dan Ives – Sr. Equity Analyst at Wedbush put it…. “The entire tech sector and overall market was waiting for NVDA with this being the purest and best barometer for AI demand and the results/guidance were a ‘drop the mic’ moment that will have a ripple impact for the tech space for the rest of the year.” 

NVDA CRUSHES IT……absolutely crushes it….EPS of $2.70 vs. the expected $2.07 – that is a 30% beat on the estimate – and even better than the whisper number of $2.20/sh… Revenue jumped by 101% to $13.5 bil -22% greater than the prior estimate of $11 bil – profits soared ninefold to $6.2 bil…. What did I tell you?  I said that the company would guide the analysts to a number that would leave them plenty of room to ‘crush it’ and that is what happened….now,  the stock closed at $471.12 up 14 pts or 3.3% and then when the news hit at 4:25 pm – BAMMMMMMM – straight up and thru that BIG ROUND NUMBER – $500 – trading as high as $515/sh up an additional 8.25%….and as usual analysts on the street are now raising targets with some going as high as $1100/sh.

And after Jensen Huang gave us the ‘old news’ (I say old because it already happened) he told us about the ‘new news’ (forward guidance) that he expects revenue to climb even more next qtr. – saying.  

“Sales in the 3 months ending in October will be about $16 bil” – which means they will be $18 bil!!! In the end – Jensen gave us his “CEO of the Year” presentation and reminded us that investors continue to salivate over anything AI – which means that they salivate over anything that NVDA touches…… And that is what the market also told you all day…it told you that no one believed that Jensen Huang was going disappoint…and like I said yesterday – The C suite has had plenty of time to prepare street analysts and strategists – they have had plenty of time to speak to Goldy (wink, wink) and ‘suggest’ that business was ‘OK’!  They left enough room in the estimate to make sure that they beat it by a wide margin (was 30% wide enough?) …. this way, it looks even better…. In the end, it is what it is, and AI will continue to be the driver for NVDA…. Period, Full Stop! 

Investors also took the competitors up as well – AMD rose 3.5% during the day and another 2.9% after the bell – AMD is rumored to be releasing a competitive chip in the late fall….AMD is +66% ytd, AVGO +2.4% during the day and this morning it is trading up 2% in the pre-mkt …it is up 56% ytd, , INTC +3% during the day and up another 0.2% this morning…it is up 22% ytd and ASML +1.4% during the day and up 1.3% in the pre-mkt….

Now we did see treasuries rise in price – sending yields just a bit lower – falling yields on the long end suggest lower borrowing costs – well, yields are gonna have to fall a lot more before we get ‘lower borrowing costs’ – mortgages are at 7.5%, Auto loans at 9%, Used Car loans at 14%, Revolving Credit Card loans at +30% – but the decline in yields speaks directly to the JJ is gonna PAUSE argument – because the whole reason they spiked higher is because JJ and the FED are expected to stay hawkish and then keep rates higher for longer – but that narrative changed (yesterday) – it’s a head fake…..……..the 2 yr. ended the day yielding 4.966% – down from 5.10%, , the 10 yr. lost 14 bps to end the day yielding 4.19% – which is down from 4.335% only 3 days ago….the shorter duration bills – 3 & 6 months are still yielding 5.41% and 5.51% and that makes sense – because rates are not going DOWN anytime soon.

The dollar index fell 20 cts to end the day at 103.36 – leaving it still above the trendline support at 103.11 but the decline in the dollar coupled with the decline in treasury yields did help gold rally nicely…. up $22 to end the day at $1948/oz and this morning – it is holding steady….

Oil – fell again yesterday…. the reason?  A build UP in gasoline inventories of 1.5 mil barrels vs the expected 880k drop which suggests – lower demand YET a larger than expected DROP in US crude stockpiles of 6.1 mil barrels rather than the drop of 2.8 mil barrels – which suggests higher demand – so one data point cancelled out the other – so you ask – then what?  Well, think hard….it was the ‘weak’ manufacturing data that is now coming from China, the Eurozone, and the US….  (I do not subscribe to that narrative – but I am only one lone wolf).  The recent sell off (driven by the weak China narrative) has taken oil down 7% from 2 weeks ago but it remains above all 3 trendlines.  And don’t forget – the charts did produce a Golden Cross on the 14^th…. that is when the short term trendline pierces the long term trendline on the upside – which usually means ‘higher prices ahead’…. And don’t forget – the Saudi’s and the Russian’s can always tweak supply by cutting more production…. Which they will do if oil trends back towards $70.

And US futures are mixed this morning…. Dow down 70 (negative BA news – stock down 2% pre-mkt), the S&P up 18, the Nasdaq + 155 (more NVDA and AI excitement) and the Russell down 3. 

Asian markets ended higher…. Some central bank news (South Korea kept rates unchanged at 3.5%) while a bounce off of the recent weakness gave stocks a lift.  European trading is also off to a good start – mkts across the zone all up between 0.25% – 0.5%.  A pullback in European bond yields helping to support the move and the excitement about NVDA earnings making tech investors there very happy. 

The S&P ended the day at 4436 up 48 pts……. We are in the final trading days of August and today begins the Jackson Hole Boondoggle…. And like I said – yesterday they tried to spin the JJ will sound more dovish vs. hawkish narrative – and we are about to find out when he speaks tomorrow.  Again – just 7 days ago – the FOMC mins revealed that the majority of the committee is worried about the risk of rising inflation becoming more entrenched and that confirmed JJ’s hawkish tone…. So, does anyone really expect him to flip that narrative on its head tomorrow?  Unlikely – but he will most likely do the same – remain hawkish while leaving the door open to reconsider….and that is NOT new….  He has been playing on both sides of the fence for months now….…. He has always said that he is data dependent and for now that means hawkish, BUT it could become dovish if the data suggests so– and right now – the data is not suggesting that – although you will find some that would dispute that.  Thus, the confusion….My gut says a 6% terminal rate before this ends.

We remain in 4290/4450 trading range (intermediate support and short-term resistance).

Again – get comfortable with being uncomfortable and focus on the long game.

Reach out to discuss – always happy to engage.

**P.S. Guess who got killed yesterday in a plane crash? Yevgeny Prigozhin – remember him? Vlad strikes again!

Take good care.

Chief Market Strategist
kpolcari@slatestone.com

“The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kace Capital Advisors.

Chicken Breasts in Champagne Cream

Apparently, it is a time to celebrate….so break out the champagne……This is a classic dish, easy to prepare, presents beautifully on the plate on a bed of sautéed spinach will leave your guests wondering – How you did it. 

Start with skinless pounded chicken breasts – dredge in seasoned flour – (S&P). After you have dusted all the breasts – set aside.

On medium heat melt 3/4 stick of butter and a splash of olive oil in a large sauté pan. When almost sizzling – yet not burning…. add the breasts and sauté for about 4 / 5 mins. At this point – turn the breasts over – add about 1 1/2 cups of champagne and sauté for about 10 mins more.

Next add 3/4 cup of heavy cream (or lite cream if you must), chopped Italian parsley and a bit of rosemary powder and continue cooking until it thickens up.

While this is cooking – sauté some fresh spinach in garlic and oil and then make a bed on each plate.  When the chicken is done – transfer the breasts to individual plates and top with the champagne cream sauce.

A nice mixed green salad garnished with cherry tomatoes; red onion & cucumber dressed with a champagne vinaigrette finishes off this meal.  Choose a lighter bodied red or even a chilled white to complete the presentation.

Buon Appetito