Things you need to know
- Apparently ‘beats are no longer enough’ , Now it’s about ‘terminal values’
- Stocks rose, but fell short of S&P 7000.
- Oil lower on an oversupply headline – not a waning demand headline.
- Bonds flat, Gold steady.
- Futures point lower.
- Try the Simple Pot Roast.
Ok – ok – let’s get it out of the way – Stocks mostly rallied yesterday as we waited for earnings after the bell…. – The Dow rose 307 pts, the S&P up 56, the Nasdaq gained 288 pts, the Russell added 11, the Transports bucked the trend and closed lower by 124 pts, the Equal Weight S&P added 2 pts while the Mag 7 added 493 pts.
CRM reported and they beat – EPS of $3.81 vs. the expected $2.78 and Revenues were up 12% at $11.2 billion. Subscription revenues up 13% while adjusted operating margins were 34.2% better than the 34.1% estimate. Free cash flow was up 39% at $5.32 billion. They raised their quarterly dividend to 44 cts, announced a $50 billion share buyback and the traders and algo’s still were not happy, so they sold the stocks – sending it down $5.75 or 3%. It is all about the ongoing concerns that AI is going to destroy it…..Abby Yoder – JPM US Equity Strategist telling us that
“This isn’t about what’s going to happen to software earnings in the next one to two years, this is about their terminal value in ascribing a certain valuation to that, which I think the market is just wrangling around right now.”
Terminal value? Sounds ominous doesn’t it? Terminal value is the market’s estimate of what a company is worth far beyond the next few years of earnings — essentially the value of the business “into perpetuity.” In high-growth sectors like software and AI, most of a stock’s valuation often comes from those long-term assumptions, not next year’s numbers. So, when she says it’s about the terminal value – she means the market is debating what these companies will look like a decade from now — their sustainable growth rate, margins, and competitive position. If investors start to believe long-term growth or profitability will be lower, the terminal value falls, and the stock can reprice sharply even if near-term earnings remain solid.
So, I guess the ‘terminal value’ for CRM is lower….a look at the chart makes that very clear….the stock is down 50% off the January high….breaking all support levels and trading back at prices not seen since March 2023 – and here is something else – if the stock does not hold the line at $180 (currently trading at $185 in the pre-mkt), the chart suggests the next stop could be $130…..Marky Benioff explaining it away as just an irrational, anxious market….that this ‘SaaSpocalypse’ shall pass too – because this is not the first time they have predicted the end of software.
Ok – maybe he is right – But this isn’t about whether Salesforce survives. It’s about whether the market still assigns it a premium long-duration growth multiple in an AI-driven world. When a stock gets cut in half after strong fundamentals, it tells you something important: the fight isn’t about earnings.
And then –
NVDA reported… and they beat. Across the board.
Revenue $68.1 billion vs. $66.2 expected — up 73% year-over-year. Data center revenue $62.3 billion vs. $60.6 billion. EPS $1.62 vs. $1.53. And first-quarter guidance? $78 billion — well ahead of the $72 billion estimate.
Jensen opens by saying, “Computing demand is growing exponentially.” He doubles down on the idea that reasoning models — the core of agentic AI — are driving relentless semiconductor demand.
The stock initially popped 4% after hours… and then cooled off. This morning it’s up less than 1% — nowhere near the 8% move the options market was pricing in.
Why? Because this isn’t about whether NVDA delivered. It did. This is about expectations. The market wants certainty. It wants guarantees that the AI capex boom won’t slow. That hyperscalers won’t blink. That margins won’t compress. That nothing breaks. And that’s laughable. We’re talking about a company growing revenue 70%+ at scale — and the complaint is that it wasn’t even better.
This is what happens when a stock becomes the proxy for an entire industrial revolution. The bar moves from “beat” to “prove it again — and make it bigger.” This morning – NVDA is trading up $1.23 or 0.6% at $196.80.
In any event – it’s over now…. everyone can breathe.
Look – some of the latest concerns around the whole AI trade is the research report put out by Citrini Research – that outlines a range of potential risks to a variety of industries – using hypotheticals set into the future. You can access that report here.
– I will say – it will cause you to re-think almost everything. But I remind you, not to light your hair on fire – Yes, AI disruption risk is here and while it presents risks, it also presents opportunities – some that we don’t even know yet. What we do know is that companies are reporting an ongoing and steady increase in ‘quantifiable benefits’ from AI adoption.
Eco data today includes – Initial Jobless Claims of 216k while Cont. Claims of 1.858 million. We will also get the Kansas City Fed Manufacturing Survey.
Tomorrow – is the January PPI report and it is expected to show a decline in price pressures – and that is bullish for America! PPI m/m of +0.3%, y/y of 2.6%. PPI Ex Food and Energy m/m of +0.3%, y/y of +3%. – Those results – if they happen – are lower than the December reads.
Oil is under pressure — down $1.10 to $64.37. Saudi Arabia is reportedly shipping significant volumes, while output from Iraq, Kuwait, and the UAE has also picked up. Add to that OPEC+ meeting this weekend, with rumors swirling that they could increase production again in April. That’s supply building — not tightening.
On top of it, U.S.–Iran negotiations are ongoing, which is keeping the Strait of Hormuz calm and supply flows uninterrupted. – Remember – the Strait is a narrow waterway that moves about 20% of the world’s oil. As long as that lane stays open, the market is pricing stability, not disruption. All of this points to lower prices — not higher. Unless, of course, the talks stall and Iran decides to flex muscle in the region. If tensions escalate and the Strait becomes a headline risk again, crude can reprice quickly.
For now, though, this is an oversupply story, not a waning demand story. Trendline support is down at $60.75.
Bonds ended flat – The 10 yr is at 4.05%, while the 30 yr is at 4.7%.
Gold is trading at $5,170 — up about $8 — and remains stuck in that broader $5,100 to $5,500 range. It does feel a bit tired up here, struggling to convincingly clear the $5,200 level. If tensions around Iran escalate or there are renewed fears about disruption in the Strait of Hormuz, gold will quickly find buyers as a geopolitical hedge. But if negotiations remain stable and the risk premium fades, then gold likely eases back and trades more on real rates and Fed expectations rather than headlines.
Bitcoin is raising its head a bit – trading at $68k, up $3k from yesterday, Ethereum is at $2,050 – up $130 and Solana is trading at $86 – up $4.
European markets are mostly higher…. Spain the only one in negative territory down 0.15%. France is up 0.9%, Germany up 0.4%, Euro Stoxx up 0.3%, Italy up 0.2% while The UK is up 0.1%. European markets are so far all outperforming the US markets.
US futures are under pressure again – the lack of excitement over NVDA being credited for the weakness. At 7 am – Dow futures are -25, S&P’s down 3, Nasdaq down 20 while the Russell is up 3.
The S&P closed at 6,946 — up 56 points — I don’t think NVDA’s results are enough to push us up and through 7,000 today. More likely, we churn a bit and potentially retest that trendline support around 6,825. We’ve tested it four or five times over the past month, so it’s clearly a battleground. The bulls have defended it every time, and unless we get an unexpected negative headline, you’d think they show up again. Tomorrow’s PPI is the next catalyst — expectations are for a softer read, which would support the bullish narrative. But if it surprises to the upside, you could see the bulls step back and then the question becomes whether the bears press it and start hitting lower bids. For me – I hope that happens, because I love buying stocks on sale.
Call me at 561-931-0190. Let’s talk about whether the risk in your portfolio actually matches your tolerance — because this works both ways. You may be taking too much risk… or not enough to reach your goals.
Take good care,
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Simple Pot Roast
This is one of those simple ‘one pan’ meals that takes little time to prepare and cooks beautifully in the oven.
For this you need: 1 -31/2 lb. boneless chuck-eye roast, vegetable oil, 1 large white onion- chopped, 2 large carrots chopped, 2 celery ribs chopped, 3 lg cloves of garlic- put thru the garlic press, sugar, chicken and beef broth, fresh thyme. You also need a pot that can go from the stove into the oven with a lid.
Begin by turning your oven on to 300 degrees. Make room in the center rack.
Pat the roast dry with paper towels and season generously with s&p.
Heat the pot with the oil until it shimmers. Brown the roast on all sides. – 10 mins. Now transfer to a plate and set aside.
Reduce the heat to medium – add the chopped onion, celery and carrots. Sauté for about 10 mins. Now add the garlic and 2 tsp of sugar- stir to mix…. Now add 1 c each of the chicken broth and the beef broth and the twig of thyme. Return the roast to the pot and any of the juice it produced. Now add enough water to come halfway up the sides of the roast.
Turn the heat up until it boils then cover the pot with tin foil and then put the lid on top to secure it – transfer to the oven. Turn the roast every 30 mins until fork tender – maybe 3 ½ – 4 hrs.
Now remove the roast and put it on a plate and cover with tin foil. Let the liquid in the pot cool for 5mins. Now skim the fat off the top and toss away the sprig of thyme. Bring to a boil to reduce by half.
Slice the meat, transfer to a warm serving platter and pour ½ c of juice over it. Serve immediately.
Buon Appetito.