I think.the market to continue to come to terms with the likelihood that the Federal Reserve will begin to cut interest rates later than expected in 2024 and will make fewer cuts than expected.
This probably isn’t a part of the credit market you watch–even if you watch the credit market. But 8.6% of commercial real estate loans bundled into collateralized loan obligations (CLOs) were classed as distressed in January, according to a report by analytics firm CRED iQ, Bloomberg reported Friday. That’s a 480% increase in distressed loans in CLOs since February 2023. The culprit, again, is real estate loans that have gone bad.
Going into Wednesday earnings, Nvidia was the third largest short on the U.S market with about $18.3 billion in shares borrowed and then sold short, according to S3 Partners. Those short sellers wound up with $3 billion in paper loses after the stock soared Thursday on a big earnings and revenue beat.
Yesterday, Thursday, February 22, Nvidia (NVDA) gained 16.40% at the close after beating Wall Street expectations on earnings and revenue after the market close on Wednesday. And then raising guidance for the rest of 2024. But what most interested me on Thursday were what tech stocks Nvidia carried higher with it–and which stocks it didn’t.
Economics is supposed to be the gloomy science. So where’s the gloom? Stock markets are supposed to climb a Wall of Worry. So where’s the worry? In its latest survey (February 16-21) of economists (72 of them), Bloomberg found them positively giddy–for economists.
Today’s video is Doldrums from now through April.. Doldrums are, “a state or period of inactivity, stagnation, or depression” or, in nautical terms, the places where tradewinds converged and ships were left stagnant on the ocean until a storm or the wind picked up to get the vessel back in motion. The recent stock plunge of 26% from Palo Alto Networks (PANW) certainly doesn’t feel like a market that is stagnant or waiting for a change in the winds, but I think that’s what we’ll see going forward. After Nvidia’s report, there aren’t any big earnings reports expected until April and we’ll likely be moving sideways until the Fed sets the market sailing with a rate cut. The odds of the Fed not doing anything at the March meeting according to the CME Fedwatch are up to 90%. That rate cut expectation has now moved solidly to June or July with the CME Fedwatch polling at 75% for June and 90% for June or July. Until those rate cuts happen, and with little to no market-moving earnings reports expected in the months between, the stock market will be drifting in the doldrums while we wait for the wind to pick up.
Well, optimistic analysts just weren’t optimistic enough about Nvidia’s (NVDA) fourth quarter 2023 earnings. The company reported adjusted earnings of $5.16 per share on revenue of $22.1 billion. Analysts were expecting earnings of $4.60 a share and revenue of $20.4 billion.
After yesterday’s earnings report–the company beat Wall Street estimates for the quarter–and radically lower guidance for next quarter and the rest of 2024–total billings for next quarter will grow by just 2% to 4% and revenue for all of 2024 will grow by just 15% to 16% from 2023–shares of Palo Alto Networks (PANW) took a big hit right between the eyes. The stock fell 28.44% at the close and lost $104.12 a share to $261.97. What do I recommend? I’d say “buy” with a couple of caveats. Why buy?
t should be a familiar story in this priced-to-perfection market: Company beats big in current quarter but lowers guidance and stock takes a dive. Latest victim? Palo Alto Networks (PANW). The stock is down 14.09% at 4:30 New York time today. And with Nvidia scheduled to report tomorrow after the close, you can bet the market will be on edge tomorrow.
Lynas, one of the largest producers of rare earth minerals outside of China (and one of only two non-Chinese processors of rare earth minerals) is my sixth Penny stock pick for my Special Report.
I expect the market reaction to Nvidia’s (NVDA) earnings report, to be released after the close on Wednesday, February 21, to tell investors a lot about the short-term direction of this stock market. We’re likely to learn more, however, from the reaction to an Nvidia beat rather than from an earnings miss.
