Things you need to know.
– NVDA – that’s it for today
– Bond, Gold, Dollar and VIX all steady….
– FOMC mins due out at 2 pm – don’t hold your breath.
– Oil gets slapped as some suggest demand is waning! (Can you believe that?)
– NTGR is the latest ‘idea’.
– Try the Sicilian Swordfish.
Dow added 66 pts, the S&P gained 14 pts, the Nasdaq tacked on 38 pts while the Russell lost 4 pts, the Transports gave up 267 pts and the Equal Weight S&P lost 5 pts. Bonds held steady, Gold continues to trade at $2450, the VIX remains in the low 12’s – suggesting NO fear, The Bloomberg Commodity Index is trading at levels that suggest higher inflation is coming all while OIL got whacked on the idea that the global economy is slowing thus demand for oil MUST be collapsing….(which is contra to what the estimates are). More below.
Ok – Brace yourself – the bar is high…. traders around the world are glued to their computers…. Algo’s are chomping at the bit to react…. Futures this morning are negative……you can feel the PRESSURE!
It’s Wednesday, May 22nd…..and in 10 hours – Jensen Huang will take the stage and deliver the results for NVDA..…..Make sure you’re ready to hear what he has to say…..because what he says will create all kinds of activity for the broader market….The risk here is that he says something that somehow disappoints, that doesn’t meet the ‘expectations’ that the street has created for itself….BEYOND what published expectations are and have been…..these are known as the ‘whisper numbers’ and they are an unofficial estimate of a company’s earnings per share (EPS) made by professional traders.
Some argue that the ‘Whisper Numbers’ are often more accurate than the official consensus estimates because they are the analysts’ true expectations vs. the estimates that are guided to by companies and the kicker here is that ‘Whisper numbers’ are usually reserved for the brokerage’s favored clients! It’s a ‘you pat my back, I’ll pat your’s benefit’ for the best clients. But as they whisper the number around the street – it gets louder and louder and suddenly it’s not a whisper anymore…Capisce?
It reminds me of that famous song – “I Heard It Through the Grapevine” – originally released by Gladys Knight and the Pips in 1966, before Marvin Gaye took ownership of it in 1968. I will give you both versions.
(Gladys)
(Gaye)
Now you can feel the ‘tension….yesterday they closed it up another $6 to end the day at $953.86 leaving it up 92% ytd and up 24% in the last month…this morning in the early morning pre-mkt trading – some traders are choosing to hit the SELL button to lock in some profits – just in case…At 5:30 am – NVDA is down $5 at $948 – giving up most of yesterday’s gains. Again, the consensus estimate for EPS are $5.64/sh (414% increase y/y), Revenues of $24.5 billion, (up 265%) the whisper number is $26 billion (up 300%)….My sense is that anything less than $26 billion will be viewed by traders and algos’ as a disappointment – which is the first issue….the second issue is – Will Jensen tell us that clients are choosing to wait for the next gen NVDA chip -the Blackwell – which was developed to accelerate AI. There is this current rumor that AMZN has chosen to wait for the new chip – which is what I think is causing some of the pressure this morning…. As of 5:30 am – AMZN has NOT confirmed or denied this rumor. Now just to prepare you – the Blackwell chip is due out in late 2024 – it is the successor chip to the Hopper and Lovelace microarchitectures. It has 208 billion transistors and is an upgrade from the current H100 chip – which is currently the most advanced chip in the industry.
Now if he somehow disappoints (defined as missing the whisper number)– then watch as they crush the stock in the after-hours session and then how they crush the market (tomorrow) when investors get a chance to react to the details….because so much of this rally has been built upon the NVDA chip and the expected future demand. Now, if he does not disappoint – (like I believe) then watch as the stock surges thru $1k and the Nasdaq kisses (and hopefully pierces) 17k to set yet another record for the markets…Let me be clear – I think $24.5 billion is a win and I think $26 billion is a BIGGER win – so I am not expecting a disappointment at all, but that does not mean that the street has the same view….And this is when the market is at its best….buyers and sellers battling it out….Remember – there are other parts to this story – data center growth, operating leverage, forward guidance and of course something about the role that China is NOT playing in this story – recall the US gov’t has banned NVDA from selling advanced chips to China since 2023. Get ready…. The clock is ticking.
Ok – away from this – Yesterday we heard from FED Governor Chrissy Waller, and he said that we need to see a continuation of softening in the data over the next 3 – 5 months – allowing the FED to cut rates at the end of 2024…. – Which is funny, because – Where exactly is he seeing ‘softening’ in the economy? In any event – it is what it is….they are keeping that narrative alive to try and prevent an honest pullback ahead of the election…..Again I will say – Unless we see a real decline in the economic data points – I am not sure how anyone (other than Janet) can expect JJ to cut rates……cutting rates will stimulate demand – and that is exactly what JJ is trying to slow….and don’t forget – money from the Inflation Reduction Act is due to hit the economy later this year and into next….and that too will only add to demand….so if you ask me – I am not sure how any of them think that inflation is ‘cooling’ or heading back to 2% – but they can always HOPE – even though HOPE is not a strategy.
Oil fell by 1.4% yesterday to end the day at $78.22…this after Chrissy Waller reminded us that rates will stay higher for longer – and higher borrowing cost are SURE to slow economic growth – which it has FAILED to do so far…costs have been higher for more than 16 months now yet the economy continues to hum along….job market remains strong, eco data remains strong all while the consumer spends more money on the basics because inflation remains strong….In addition the API reports that US crude oil and gasoline inventories rose last week – as supply outweighs demand – we will hear from the EIA later today…….This just as we head into the kickoff of the summer driving season which begins in 48 hours…
Now Eddy Morse at Hartree Partners told Bloomberg that ‘the macroeconomic outlook is deteriorating around the world.’ and the assumption is that if that is true then demand for oil should decline……Oh boy….I wonder what he is looking at….The UK has come out of its recession, the Eurozone is not in recession, both the BoE and the ECB are on the verge of cutting rates (supposedly) and the narrative in the US is for multiple rate cuts – not because we are suffering a decline, but because some people think 5.25% rates are usurious – so they want to cut BEFORE we go off the edge….China is buying oil like there is no tomorrow and OPEC+ expects demand to grow while maintaining production cuts thru year end… This morning oil is trading at $78.29.
Gold is trading at $2450; the Dollar index (DXY) is trading at 104.78 and the VIX is trading at 12.12… (Historic lows) …
Yesterday saw Utilities in the lead…up 0.9%, taking this boring, not sexy, sector up 15% ytd….we also saw gains in Tech + 0.2%, Financials – + 0.6%, Consumer Discretionary + 0.6%, Consumer Staples + 0.6%, and Healthcare + 0.2%…Sectors that ended lower included Industrials – 0.3%, Communications – 0.1%, Energy – 0.5% and Real Estate – 0.1%. Basic Materials – ended the day flat.
Down the scale – Homebuilders -0.1%, Airlines – 1.8%, Disruptive Tech – 0.9%, Semi’s – 0.3%, Oil and Gas Exploration – 0.7% and Aerospace and Defense + 0.1%…. The Contra trades were all lower while the Growth and Values trades were both higher….
This morning – US futures are down…Dow down 50 pts, S&P’s down 5, Nasdaq +10 and the Russell down 3. Eco data includes Mortgage apps – up 1.9%, Existing Home Sales of +0.8%. and at 2 pm – we will get the FOMC mins from last month….and I do not expect to hear anything new…. Do you?
The S&P closed at 5321 up 13 pts -this as it just churns awaiting today’s KEY report…..I suspect that it remains tight all day – as the speculation builds…but I also expect that we will see it move late in the afternoon – as the bets line up…..a push lower suggesting one thing, while a push higher into the bell will suggest something else.
This is not the time to fall asleep…. Grab your coffee….and take a seat. Call you advisor to help you sort this out….
Now recall – every once in a while I will toss you a new name to consider if you love to trade some ‘mad money’….Names that we have discussed – include GRPN which is up 23% from when we first discussed it – although it been a wild 23% for sure….and HEAR which is up 47% since I first mentioned it in March . So today I am going to toss NTGR (Netgear) into the mix….
This is a $12 stock. They own 35% of the market (networking/communications) – they have no debt; they have $290 mil in cash (and growing) and a mkt cap of $366 mil. There is an upgrade coming to Wi-Fi 7 in the back half of the year and that will drive demand and the replacement cycle for their products. In addition – the connected ‘home’ has lots of tailwinds for this name. A look at the chart reveals that it has been locked into the $10/$16 range….and it might cause some caution as it attempts to fill the gap created on May 3rd… this is not for the faint of heart, nor is it a specific for recommendation for everyone….….I am just pointing out a potential opportunity that I find interesting….Go at your own pace….
Take good care, 
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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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, which may not necessarily align with our firm’s standpoint.
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Kenny Polcari is the Chief Market Strategist for SlateStone Wealth. Neither Kenny nor the partners of SlateStone Wealth are compensated in any manner by the issuers of any securities mentioned in the publication.
Sicilian Swordfish
a great dish from this Island that sits just off the toe of Italy.
Raisins, green olives, capers, pignoli nuts (pine nuts), tomatoes, garlic, onion, s&p, olive oil and swordfish. This dish is easy to make – it will tease your senses – and tickle your pallet – only takes about 15 or 20 mins to prepare and 20 mins to cook…. enough time to set the table, pour the wine, light the candles, put on the music and dim the lights….
Preheat oven to 400 degrees (f).
Season the swordfish with s&p.
Next soak the raisins in warm water for about 1/2 hr… drain and set aside.
Heat the olive oil in a sauté pan on med high heat…. sauté the diced onion and crushed garlic until soft. Do Not Burn. Maybe like 5 / 8 min’s…. add raisins, diced tomatoes, chopped olives (no pits!), and capers – like 1 tblspn. (If you like capers feel free to add a bit more – but not too much as the taste will overpower the dish). Reduce heat to simmer and cover…stirring occasionally…. for about 15 min’s or so…
Place the swordfish in a baking dish (You could also grill the swordfish quickly and then place it in the baking dish). Cover the fish with the raisin/olive/caper/tomato mixture – bake for 15 min’s or until the steaks are firm….
Present the fish on a warmed plate with steamed green beans and a large mixed green salad with red onions, cucumbers, grape tomatoes, maybe some fresh mozzarella…. dress with s&p, oregano, a splash of fresh lemon juice, balsamic vinegar and olive oil.
Buon Appetito
