There was a whiff of panic to the big moves by the People’s Bank today.China’s central bank cut a key short-term interest rate and announced plans to reduce the reserve ratio, the amount of money banks must hold in reserve, to the lowest level since at least 2018. This marked the first time reductions to both measures were revealed on the same day since at least 2015. And that wasn’t all.
The Standard & Poor’s 500 Index had a banner first half of 2024 with the index climbing more than 17% as of June 30. But two-thirds of that gain is attributable to just six stocks: Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Amazon.com (AMZN), Meta Platforms (META), and Apple (AAPL.).Track the performance of equal-weighted version of the S&P 500–rather than the commonly tracked index where the contribution of any stock to the index is weighted by market cap–and the index was up just 3.9% in the first half of 2024. For the second half of 2024 and looking ahead to 2024, I’m not so much worried about the fundamentals of this extraordinary rally as I am by a failure of market imagination Everybody owns the same 6 stocks. Hey, I get the excitement around these stocks and the boom in Artificial Intelligence. I share it. Which is why I own shares of Nvidia, Amazon, and Alphabet in my online portfolios. But there are 494 other stocks in the S&P 500. And 2000 stocks in the small-cap Russell 2000.(Up 9% in the first half of 2024.)After a rally that has recorded 30 new record highs for the S&P 500 just the first half of n 2024, some of that other 494–or 2000–are actually better stock buys, and likely to out perform the 6 stocks everybody owns from their current record high prices. But which ones? That’s what my Special Report: “10 New Stock Ideas for an Old Rally” is all about.
It’s not just that stocks soared Thursday, September 19 with the Standard & Poor’s 500 climbing 1.7% to set its 39th record in 2024. It’s what stocks topped the leader board in the advance and what stocks lagged.
Microsoft (MSFT) raised its quarterly dividend by 10% and unveiled a new $60 billion stock-buyback program, matching the size of a repurchase plan three years ago. Shares were up as much as 2.4% today, September 17, before closing ahead 0.87%.
China’s copper imports in August dropped by 12.3% from the previous year, preliminary official Chinese customs data showed on Tuesday, September 10. It’s yet another sign that the slowdown in Chinese economy is rippling out into the global economy.
In a report today, September 11, analysts at UBS reported the potential suspension by Chinese electric vehicle battery maker Contemporary Amperex Technology (CATL) of production at its massive lepidolite lithium mine in eastern China. The suspension would amount to an 8%, or roughly 5,000-6,000 metric tons, reduction of China’s monthly lithium carbonate equivalent production. And lithium stocks, depressed by low prices as a result of oversupply in the lithium market, were off to he races today.
There’s a good possibility of an AI “nothing-burger” from Apple (AAPL) on Monday, September 9, when the company rolls out its latest iPhones. Which are supposed to mark Apple’s advent as a serious smartphone AI player. All indications are, however, that Apple’s AI features on the iPhone will be distinctly underwhelming. And that’s a potential problem for the stock-up 15.08% for 2024 and ahead 13.67% for the last three months as of the close on September 6.
Yesterday the DOJ sent subpoenas to Nvidia Corp. and other companies seeking evidence that the chipmaker violated antitrust laws. The DOJ, which had previously delivered questionnaires to companies, is now sending legally binding subpoenas that require recipients to provide information. That takes the government a step closer to launching a formal complaint.
I was hoping that Nvidia (NVDA) would take a bigger dip on its “disappointing” earnings news last week. But a 7% or so drop looks like the best we’ll get. And I certainly want to own these shares before the revenue from the new Blackwell chips kicks in during 2025. I already own these shares in my long-term 50 Stocks Portfolio. Today I’m adding them to my 12-18 month Jubak Picks Portfolio. The bad news out of Nvidia last week in its August 28 earnings report?
A report Saturday said one of Nvidia’s next generation chips will be delayed by a just-discovered design flaw. Tech news site The Information, citing a couple of industry sources, said volume shipments of the Blackwell B200 chip would be delayed some three months.
I’ve started to call this The McDonald’s Economy–where the long-term effects of high inflation on prices damps consumer purchasing, but where the recent drop in inflation has limited companies’ “cover” for price increases. The result is that companies are seeing lower sales volumes at the same time as consumers push back ore strongly against price increases. McDonald’s isn’t the only company caught in this vise. Customer traffic at U.S. fast-food restaurants fell 2% in the first half of the year compared to the same period a year ago, according to Circana, a market research company. Circana expects high inflation and rising consumer debt will also dent traffic in the second half of 2024.
I expect technology sector weakness to continue with earnings worries still unanswered. What could put an end to selling in tech stocks? The NASDAQ 100 is down almost 4% in the last week. Certainly earnings news that showed earnings growth at the companies in this sector robust enough to justify paying a premium for these shares would be a big help Unfortunately, the coming week isn’t going to bring enough earnings good news among tech shares to make this case. Among big tech stocks only Tesla (TSLA) and Alphabet (GOOG) are scheduled to report.
