Before the Open (Feb 20-23)

Good morning. Happy Friday.

The Asian/Pacific markets were mixed and little changed. China did well; Indonesia and Singapore were weak. Europe, Africa and the Middle East lean to the upside. Poland, France, Switzerland, Hungary and Italy are up; Norway and Austria are down. Futures in the States point to a positive open for the cash market.

————— VIDEO: Long Term Bitcoin Stocks —————

The dollar is down. Oil and copper are down. Gold is up; silver is down. Bonds are up slighty.

Stories/News from Seeking Alpha…

High on AI

How do you make billions in a day? Ask Jensen Huang. The Nvidia (NVDA) CEO saw his net wealth swell by $10B to $69.2B on Thursday after a dizzying post-earnings rally that turned the heads of nearly everyone on Wall Street. Investors were also celebrating in style as Nvidia shares soared 16.4% during the session to a new record high of $785.38, and they even managed to breach the $800 level in premarket trading this morning as the AI darling nears the $2T valuation milestone.

Snapshot: The latest rally resulted in the biggest single-session increase for a U.S. company in history, with Nvidia adding $277B in market value. Putting it in perspective, the increase alone was larger than some of the biggest blue-chip firms, like Coca-Cola (KO). The powerful advance also fueled the 14th record close for the S&P 500 (SP500) in 2024, and with Nvidia skyrocketing nearly 60% this year, it now accounts for more than a quarter of the benchmark S&P’s increase YTD. It’s also helped put the stock on the radar of broad-market investors and owners of index funds, not just Nvidia’s direct shareholders.

Why is it worth so much? Just like any revolution, the companies that stand to make the most money are the ones providing the tools to achieve the transformation, not necessarily the ones that do it. Nvidia (NVDA) is providing the most advanced GPUs needed to power generative AI platforms and the large language models being developed by Big Tech, and holds an estimated 80% share of that market amid demand that has been off the charts. Remember that each of these chips is worth tens of thousands of dollars, and Silicon Valley cannot eat them up fast enough, with plenty of cash to do so.

SA commentary: “Of course, there will come a time when Nvidia’s AI demand will slow down, and growth will become lower than expected, leading to worsening profits and a lower stock price,” Investing Group Leader Victor Dergunov writes in Nvidia Q4: It’s Good To Be The King. “However, that time is not here yet, and when it will arrive, only time will tell. Nonetheless, Nvidia is priced for perfection and needs to continue delivering solid results to keep its share price moving higher.” (72 comments)

Back on the moon

It’s the first commercial U.S. company to pull off a lunar landing, and the first American spacecraft to reach the moon’s surface since Apollo 17 in 1972. Intuitive Machines’ (LUNR) uncrewed spacecraft, called Odysseus, achieved the feat late Thursday, sending shares skyrocketing 37% in AH trading. “On the eighth day of a quarter-million-mile voyage, Intuitive Machines aced the landing of a lifetime,” said NASA Administrator Bill Nelson, calling it “a triumph for humanity.” Investing Group Leader Dilantha De Silva previously posed some questions surrounding the stock, flagging the need for more data to analyze how the mission’s success will translate into financial gains. (3 comments)

Dive into anything

Set to be listed under the ticker symbol “RDDT,” Reddit has filed for an initial public offering on the New York Stock Exchange. The social media platform disclosed that it generated $804M in revenue in 2023, up around 21% from a year ago, while its net loss narrowed to $90.8M, from $158.6M in 2022. Content on Reddit, which had over 73M daily active users as of Dec. 31, has become particularly important for training artificial intelligence models. “We believe there is an emerging opportunity in data licensing,” noted the company, which just inked a content licensing deal with Google (GOOG, GOOGL). Reddit also projected its total addressable market globally from advertising, excluding China and Russia, to be $1.4T by 2027. (32 comments)

Fresh sanctions

As the war in Ukraine enters a third year, Russia has been hit with fresh sanctions from the EU and U.K., with the U.S. expected to follow today. The more than 500 measures, which will target Moscow’s military-industrial complex and foreign companies helping provide other goods, also come in response to the recent death of opposition leader Alexei Navalny. In addition to imposing the new penalties, the U.S. warned of more sanctions on Iran for its support of Russia. Recall that the Biden administration’s request for $60B in additional funding for Ukraine is yet to be cleared by the Republican-controlled House of Representatives. (14 comments)

Today’s Economic Calendar
1:00 PM Baker Hughes Rig Count

What else is happening…

What happened as AT&T (T), Verizon, T-Mobile (TMUS) outage hit U.S.?

Fed’s Cook wants more confidence in inflation path before rate cuts.

Capital One (COF) deal for Discover (DFS) has $1.4B termination fee.

Goldman: Obesity drugs to expand U.S. GDP by 1% in coming years.

Block (SQ) stock surges after strong annual earnings guidance.

Booking Holdings (BKNG) trades lower as Middle East conflict weighs.

Carvana (CVNA) shares rally as used car retailer nears profitability.

Foundry push: Taiwan Semi (TSM) to remain ahead of Intel (INTC).

UnitedHealth (UNH) subsidiary Change Healthcare hit by cyberattack.

FDA warns against use of smartwatches to measure blood glucose.


Good morning. Happy Thursday.

The Asian/Pacific markets posted solid gains. Japan, China, Hong Kong, South Korea, India, Taiwan, New Zealand and Malaysia all did well. Europe, Africa and the Middle East are mostly doing well. Denmark, Poland, France, Germany, Russia, South Africa, Spain, the Netherlands, Italy, Israel and Austria are up; the UAE and Portugal are down. Futures in the States point to a gap up open for the cash market.

————— VIDEO: Long Term Bitcoin Stocks —————

The dollar is down. Oil and copper are down. Gold and silver are up. Bonds are down.

Stories/News from Seeking Alpha…

The rising sun

It took over 34 years, but trading floors across Tokyo today erupted in cheers and applause at the end of the market session. The Nikkei 225 (NKY:IND), Japan’s main stock index, closed at a new all-time high above 39,000, following a record run last seen during the country’s late-1980s asset bubble. In fact, the Nikkei has been the world’s best-performing major index in 2024, surging 17.5% only two months into the year and trouncing the impressive near 5% advance of the S&P 500.

Why so hot? There are several factors at play, with many seeing a new era for the Japanese market. A falling yen and the fading promise of China have lured foreign investors (like Berkshire’s Warren Buffett) and boosted earnings of heavyweight exporters. Additional bright spots have been the corporate governance changes that have sent stock buybacks soaring, while excessive cash balance sheets have declined, as well as strategic crossholdings between conglomerates. It also comes amid optimism that Japan has finally escaped from the doldrums of deflation, and big industry that has been pumping in investment from semiconductors to artificial intelligence.

“Japan is re-emerging from its multi-decade long hibernation with multiple government initiatives that have held back share valuations starting to reverse course, for both Japanese shares and the yen,” SA analyst Dan Stringer wrote back in December, when determining the “Best Idea for 2024.” He recommended the iShares MSCI Japan ETF (EWJ), highlighting that it traded at a 15x multiple, compared to the over 26x earnings multiple of the S&P 500 (SP500). However, the “biggest risk is that the government bodies start to lose confidence in the policy pivots” for reasons that include “wage inflation not taking hold like it is currently anticipated.”

Thought bubble: The record stock gains are taking place at a time when Japan is mired in a recession. Germany last week even ousted the country as the world’s No. 3 economy (per nominal GDP in dollar terms) due to a weak yen and an aging population that is not being easily replaced. “Thankfully the economy is not necessarily the stock market,” adds Stringer, referencing a common divergence that factors in monetary policy, stock ownership and cash flows, and forward-looking sentiment.

AI boost

Nvidia (NVDA) surged 9.1% to $735.94/share AH on Wednesday as the chip giant once again surpassed expectations with its Q4 results, with AI accounting for around 40% of its data center revenue last year. During Nvidia’s earnings call, executives detailed an exhaustive list of companies and industries embracing its generative AI, providing a never-ending deluge of demand. “Accelerated computing and generative AI have hit the tipping point,” said CEO Jensen Huang. “Demand is surging worldwide across companies and nations… Auto, health, robotics, financial services… multibillion-dollar industries are embracing our generative AI.” (57 comments)

Cutting too soon

Most Federal Reserve policymakers highlighted the risk of moving too quickly to ease policy, according to minutes from the FOMC’s Jan. 30-31 meeting, with a minority feeling that keeping policy too restrictive could tip the economy into recession. There was no discussion on when rates might get cut, but policymakers noted the importance of monitoring data to see whether inflation continues to move toward the Fed’s 2% goal. Perhaps more importantly, members agreed that the federal funds rate is “likely at its peak for this tightening cycle,” and the FOMC also discussed the process of reducing the size of the central bank’s balance sheet. (39 comments)

Economies of scale

The oil and gas industry is set for more consolidation. Chord Energy (CHRD) and Enerplus (ERF) have agreed to an $11B cash-and-stock merger, creating a Williston Basin-focused E&P company. The combined firm’s Q4 production is expected to be 287K boe/day, and oil would comprise about 56% of its output. Recall that Devon Energy (DVN) had reportedly offered to buy Enerplus, but the latest news sent shares of the latter soaring 9.6% AH on Wednesday, while Chord rose 2.4%. Wall Street Breakfast also recently discussed the reasons behind the growing M&A activity, assessing the rampant consolidation in the Permian Basin. (10 comments)

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
9:45 PMI Composite Flash
10:00 Existing Home Sales
10:00 Fed’s Jefferson Speech
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
3:15 PM Fed’s Harker Speech
4:30 PM Fed Balance Sheet
5:00 PM Fed’s Kashkari Speech
5:00 PM Fed’s Cook Speech
7:35 PM Fed’s Waller Speech

What else is happening…

Boeing ousts 737 Max leader, names new quality control head.

iSports: Apple (AAPL) launches free new app for the iPhone.

UAW reaches deal with Ford (F), averting strike at Kentucky plant.

Rivian (RIVN) slides after posting another loss, announcing job cuts.

Lucid (LCID) falls as Q4 sales drop, production outlook disappoints.

Reddit (REDDIT) inks first AI content licensing contract with Google.

Royal Caribbean Cruises (RCL) raises annual adjusted profit guidance.

Demand concerns: Sunrun (RUN) shares tumble after earnings miss.

Super Micro Computer (SMCI) launches proposed $1.5B note offering.

Intel (INTC) unveils Microsoft partnership, new foundry system for AI.


Good morning. Happy Wednesday.

The Asian/Pacific markets were split. China, Hong Kong, Thailand and the Philippines did well; India, Taiwan, Australia and Singapore were weak. Europe, Africa and the Middle East lean down. Spain, Italy and the Czech Republic are up; the UK, Denmark, Russia and Greece are down. Futures in the States point to a moderage down open for the cash market.

————— VIDEO: Long Term Bitcoin Stocks —————

The dollar is unchanged. Oil is down; copper is up. Gold and silver are nearly unchanged. Bonds are up.

Stories/News from Seeking Alpha…

The AI trade

Get ready for the big show. The most talked about stock in the financial world is set to report earnings after the closing bell on Wednesday, with big bets taking place before the closely-watched results, outlook and accompanying commentary. Nvidia’s (NVDA) impressive returns have not only been limited to the stock, but have been a big force behind the AI frenzy that has helped power the broader market and Magnificent 7 in 2023 and beyond.

By the numbers: Nvidia’s consensus EPS estimate for Q4 comes in at $4.63 (+426% Y/Y), with a revenue forecast of $20.5B (+236% Y/Y), up from $6.1B in the prior year. That’s a staggering difference, with the AI darling now making nearly as much revenue per quarter as it used to do on an annual basis. Nvidia’s stock has reflected these major gains, quadrupling over the past year and up 40% YTD to about $700 per share. It’s also led Nvidia to recently become the third largest U.S. company, as well as topping Tesla (TSLA) to become the most popularly traded stock on Wall Street.

If there is any guide to how shares will trade after earnings, keep an eye on forward guidance. If more exponential growth is in store for Nvidia, the stock may continue to rocket, but if there are signs to the contrary, the reaction might be more muted or even go in the other direction. Going into earnings, Nvidia (NVDA) suffered the largest daily loss of market cap in its history, but with a market cap of about $1.7T, even a 4% move can allow those numbers to make headlines. Another item to watch on the earnings conference call will be comments made about trade restrictions, with the U.S. putting sanctions in place on GPUs like the H100, or rising competition from other companies. Check out some commentary from SA analysts below:

Buy: “Nvidia’s ability to deliver on promises and exceed expectations, coupled with an unprecedented competitive advantage, means this stock can likely continue rallying despite high valuation risk,” SA analyst Christopher Robb writes in Poking Holes In The Nvidia Bear Case: Q4 Pre-Earnings Report. “The mechanism for the Internet crash around the turn of the millennium was valuations getting ahead of earnings. However, the young AI revolution essentially saw the opposite problem for its most fortuitous beneficiaries like Nvidia, so far. Earnings have gotten ahead of valuations in this stock market darling’s case.” (132 comments)

Sell: “Nvidia’s lead times for GPU orders have decreased from 8-11 months to just 3-4 months, indicating a potential future sequential growth peak,” Investing Group Leader Paulo Santos notes in Nvidia: UBS Note Should Raise Alarms. “Having ascended to the 3rd largest market cap in the US markets based on discounting ceaseless growth into the future, caution is certainly warranted as there’s clear risk this ceaseless (sequential) growth will cease in the near future.” (268 comments)

Hold: “Nvidia can be hedged with protective puts quite cheaply now in relation to its stock price,” SA analyst A.J. Button explains in Nvidia: Buy Protection Before Earnings. “Although Nvidia has fantastic growth and a wide moat, that doesn’t mean the stock is worth, say, $10 trillion. Any series of future cash flows is finite, which means asset prices are finite as well. The question, of course, is where the upper limit of fair value actually resides.” (83 comments)

Walmart recap

Walmart (WMT) climbed 3.2% to a record high on Tuesday after topping estimates with Q4 results amid e-commerce sales that jumped an impressive 23%. CEO Doug McMillon pointed to slowing deflation trends during the quarter, with inflation stickier than expected, meaning more shoppers led to increased revenues, not prices. Meanwhile, Walmart declared an annual dividend of $0.83/share on a post-stock split basis, or $2.49/share on a pre-split basis, a 9% increase from last year. The retail giant also confirmed that it would acquire TV maker Vizio (VZIO) for $11.50/share in cash, or around $2.3B. (38 comments)

Dow shakeup

Effective Feb. 26, Amazon (AMZN) will be added to the Dow Jones Industrial Average (DJI), replacing Walgreens Boots Alliance (WBA). The change reflects the evolving nature of the economy and was prompted by Walmart’s (WMT) 3-for-1 stock split, which will reduce its weight in the index. Elsewhere, Uber (UBER) will be added to the Dow Jones Transportation Average (DJT), replacing JetBlue (JBLU), to increase exposure within the index to the ride-sharing industry. The shakeup sent Amazon and Uber up around 1% each in AH on Tuesday, while Walgreens fell 3% and JetBlue slipped marginally. (52 comments)

Robot deliveries

Embarking on a new international drive, Uber (UBER) is inking some new partnerships to begin delivering food using autonomous robots in parts of Tokyo. Cartken’s Model C robots, which use AI and computer vision technologies to navigate sidewalks, will be used in the venture, with Mitsubishi Electric supervising the operations. Uber Eats and Cartken first partnered to launch autonomous delivery services in parts of Miami, Florida in 2022, which then expanded to Fairfax, Virginia. Uber Eats also has similar partnerships in the U.S. with robotics firms Motional, Nuro and Serve Robotics. (1 comment)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:00 Fed’s Bostic Speech
10:00 Atlanta Fed’s Business Inflation Expectations
11:30 Results of $28B, 2-Year FRN Auction
1:00 PM Fed’s Bowman Speech
1:00 PM Results of $16B, 20-Year Bond Auction
2:00 PM FOMC Minutes

What else is happening…

U.S. House sets up task force to explore legislation to manage AI.

Palo Alto Networks (PANW) plunges after cutting billings and guidance.

Bezos offloads more Amazon (AMZN) shares to cap off stock sale plan.

Occidental (OXY) explores potential sale of Western Midstream (WES).

Home Depot (HD) falls after U.S. comparable sales growth disappoints.

Ford (F) cuts prices on Mustang Mach-E in a bid to boost sales.

SolarEdge (SEDG) sales guidance comes in far below estimates.

Report: PE interest in Sanofi’s (SNY) $20B consumer health unit.

Realty Income (O) posts mixed earnings; guidance comes in slightly soft.

Chinese banks approve $17B of loans for ‘white list’ real estate projects.


Good morning. Happy Tuesday. Hope you had a good weekend.

The Asian/Pacific markets mostly did well. China, Hong Kong, Taiwan, Malaysia, Indonesia, Singapore, and the Philippines were up; South Korea and Thailand closed down. Europe, Africa and the Middle East are currently split. Poland, Turkey, Spain and Israel are up; Russia, South Africa, Norway and the Netherlands are down. Futures in the States point to a moderage down open for the cash market.

————— VIDEO: Playing Bitcoin Stocks —————

The dollar is down. Oil and copper are down. Gold is up; silver is down. Bonds are up.

Stories/News from Seeking Alpha…

New payment giant

Investors had some time off from the stock market on Presidents’ Day, but that couldn’t stop some mega deals from turning it into Merger Monday. Capital One (COF) agreed to acquire Discover Financial Services (DFS) in a stock-based transaction valued at $35.3B, creating a new financial giant that will better compete with the likes of Visa (V) and Mastercard (MA). Besides payment networks, the two companies will also form the largest U.S. credit card issuer by loan volume, as well as the sixth-largest U.S. bank by assets, which is sure to attract extra attention from regulators.

Reaction: In typical M&A fashion, shares of Discover (DFS) are up 13.6% to $125.53 in premarket trade, while Capital One (COF) is down 4.3% to $131.31 on the news. Many are hoping the deal will translate into lucrative interest charges as credit card debt and delinquency rates continue to climb in the aftermath of the pandemic. Upon completion of the transaction, Capital One stockholders will own around 60% of the combined firm, with Discover investors owning the rest.

Note that the agreement comes after Discover hit some turbulence in August 2023 when its then-CEO, Roger Hochschild, left the company. At the time, analysts suspected his exit was related to increased regulatory and risk oversight concerns. The company disclosed in its Q2 results a $365M charge related to a misclassification issue, which caused DFS to provide refunds to its merchants and merchant acquirers. In December, Discover said Michael Rhodes, formerly with TD Bank, would become its CEO as of March 6.

More details: Capital One anticipates the mega deal to generate $2.7B in pretax synergies and add more than 15% to its adjusted EPS in 2027. It’s also expected to deliver a return on invested capital of 16% in 2027 with an internal rate of return of more than 20%. A conference call discussing the tie-up will take place this morning at 8:00 AM ET. (79 comments)

To the rescue

China is stepping up efforts to rescue its financial markets, with the PBOC announcing the biggest-ever cut in the benchmark mortgage rate. The five-year loan prime rate was reduced by 25 bps to 3.95%, which ING economists said was “likely aimed at supporting the recovery of the property market,” but could further pressure Chinese bank margins. Beijing has been struggling to revive its economy and restore investor confidence amid a 30-year low in the country’s foreign direct investment. The Lunar New Year turned out to be a bright spot, with consumer spending topping pre-pandemic levels, although some analysts are doubtful that this trend will continue. (3 comments)

Abandon ship

A cargo vessel’s crew was forced to abandon ship over the weekend following Houthi missile attacks, marking the first such evacuation since the group’s strikes began in the Red Sea. “Two anti-ship ballistic missiles were launched from Iranian-backed Houthi-controlled areas of Yemen toward MV Rubymar, a Belize-flagged, U.K.-owned bulk carrier,” said the U.S. Central Command, adding that the evacuated crew was transported to a nearby port. A Houthi spokesperson said the group also targeted a U.S. drone and two American ships. As the waterway accounts for about 12% of global maritime trade, the West has been ramping up its defense in the Red Sea, with naval operations and retaliatory airstrikes. (21 comments)

Jet competition

Airbus (OTCPK:EADSF) isn’t too worried about China’s first homegrown airliner, which some say could eventually threaten the Western aerospace duopoly between the European firm and Boeing (BA). Comac’s C919 is “not going to rock the boat,” Christian Scherer, CEO of Airbus’ commercial aircraft business, said on the sidelines of the Singapore Airshow, adding that it “looks a bit like an Airbus narrowbody.” The C919 – similar to Boeing’s 737 and the Airbus 320 – made its international air show debut in Singapore, where Tibet Airlines finalized an order for 40 jets. Scherer’s comments come amid continued safety concerns at Boeing, while the aviation industry grapples with supply-chain constraints.

Today’s Economic Calendar
10:00 E-commerce Retail Sales
10:00 Leading Indicators

What else is happening…

Morgan Stanley: Weight loss drugs reduce grocery bills by up to 9%.

Top lithium producer cuts 2030 demand outlook on slower EV adoption.

JetBlue (JBLU) appoints Icahn Enterprises’ (IEP) Lynn, Miller to board.

Nintendo (OTCPK:NTDOY) Switch might be delayed until next year.

GlobalFoundries (GFS) to get $1.5B for latest U.S. chip manufacturing.

Bayer (OTCPK:BAYZF) to slash dividend by 95% to reduce debt.

Trump SPAC (DWAC) schedules special stockholder meeting.

Early Super Bowl data suggests record numbers for sportsbooks. (JD) mulls offer for Currys in potential bidding war with Elliott.

J.P. Morgan: U.S. companies’ earnings saw 5% Y/Y growth during Q4.


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