September 20, 2024
What You Need to Know Today:
Nvidia drops another 9.5% on the day
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.
Saturday Night Quarterback says (on a Sunday), For the week ahead watch…
.Watch to see if we finally get that long-awaited, long-predicted, and never quite arriving rotation out of technology stocks (and especially those BIG tech stocks) and into smaller capitalization stocks, or consumer stocks or value stocks.
More good inflation news in June CPI
The all-items Consumer Price Index (CPI) declined 0.1% In June from May on a seasonally adjusted basis, the Bureau of Labor Statistics reported this morning. The month-to-month CPI inflation rate was unchanged in May.
Over the last 12 months, the all items index increased 3.0% before seasonal adjustment. Economists surveyed by Bloomberg had projected a 3.1% rate. The all-items index rose at a 3.3% annual rate in May. The core index rose at a 3.3% annual rate in June. That was the smallest 12-month increase in that index since April 2021.
Rockwell Automation: Pick #6 for the next phase in AI
Today I’m making Rockwell Automation my sixth pick in my Special Report 5 Next Big Things. This pick just about completes the picks for my first of those 5 Nect Big Things, the Next Phase in the AI boom.
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
I expect data showing a slowing economy to increasingly point to an interest rate cut by the Federal Reserve at its September 18 meeting. Right now, in the short-run, financial markets look likely to see a slowing economy as a positive and to rally on the increasingly likelihood of an interest rate cut at the September 18 meeting–and maybe even a second cut at the December 18 meeting. But I’m keeping an eye out for any shift in sentiment.
It’s getting to look a lot like September–for the Fed’s first interest rate cut
The U.S. economy added 206,000 jobs in June, the Bureau of Labor Statistics reported today, July 5. That was above the median forecast of 190,000 new jobs in a Bloomberg survey of economists. But even though the June number came in above expectations, the overall message in the data was that the labor market is slowing. The Bureau of Labor Statistics revised job growth in the prior two months down by 111,000. Average monthly job growth over the last three months slowed to the lowest rate since the start of 2021. And the unemployment rate rose to 4.1%
Special Report It’s a New World for Dividend Income Investors Pick #5 Visa
Bookkeeping. I added Visa as Pick #5 for my New World of Dividend Investors Special Report (You can find it in the Special Report section of this site along with all the content on this market and its trends for Dividend Income investors. But I’m reposting it as a stand alone pick so no one misses it.
Live Market Report (20 minute delay)
New York Community won’t be the last bank to get into trouble; adding Puts on next bank crisis
Nothing like a bank surprise to get Wall Street in a lather. On Wednesday, January 31, New York Community Bancorp (NYCB) announced that it would cut its dividend and add to reserves against losses in its commercial lending portfolio. The stock fell 38% on Wednesday to hit a 23-year low on Thursday. The bad news wasn’t limited to U.S. banks either.Tokyo-based Aozora plunged more than 20% after warning of US commercial-property losses Frankfurt’s Deutsche Bank more than quadrupled its provisions against U.S real estate losses. I don’t see any reason to think that this is a one-day phenomenon. Or that the damage is just a minor problem in a few portfolios. Billionaire investor Barry Sternlicht warned this week that the office market is headed for more than $1 trillion in losses. “This is a huge issue that the market has to reckon with,” Harold Bordwin, a principal at Keen-Summit Capital Partners in New York, which specializes in renegotiating distressed properties, told Bloomberg. “Banks’ balance sheets aren’t accounting for the fact that there’s lots of real estate on there that’s not going to pay off at maturity.” On Monday then, I’m adding Put Options on the SPDR S&P Regional Banking ETF (KRE).
Please Watch My New YouTube Video: Pick of the Week HAS
Today’s Quick Pick is Hasbro (HAS). This stock isn’t terribly exciting or groundbreaking. There’s no big new tech connected to this pick. Hasbro makes toys and traditional toys are considered a declining industry. The stock is indeed ,60% off of its 2019 high. This is not a growth stock, but it is a reliable, high yield, dividend stock. Cash flow from toy sales is consistent enough to keep the 5.5-6% coming Sales may be flat this year but licensing with brands like My Little Pony and Transformers keep the company’s toys top of mind with kids and in the media. Hasbro is one of three major toy brands that make up 40% of the traditional U.S. toy market and 30% of the global market. The industry may not be exciting, but the high dividend yield makes this worth a look. I’ll be adding this to my Jubak Picks Dividend Portfolio next week.
U.S. economy adds a whopping 353,000 jobs in January; forget about a March interest rate cut
I think you can kiss goodbye to the idea that the Federal Reserve will begin cutting interest rates with its march 20 meeting. Today, the Bureau of Labor Statistics reported that the U.S. economy added 353,000 jobs in January. The statisticians also revised upward the job totals for December and November. The unemployment rate held at 3.7%. Hourly wages accelerated from a month earlier, increasing by the most since March 2022. Economists surveyed by Bloomberg wee looking for the economy to add 185,000 jobs in January.
Please Watch My New YouTube Video: Microsoft Shows Priced-to-Perfection Risks
Today’s video is Microsoft Shows Priced to Perfection Risks. This quarter, the company reported Tuesday, Azure, its cloud services flagship, grew revenue by 30% last year. While a 30% growth rate would be a great for many companies, Wall Street and analysts were disappointed in this news from Microsoft. This is the “priced to perfection” problem. Although the company beat earnings estimates, beat revenue estimates, and showed 30% growth in a key part of the company, the stock went down. Maybe a $3 trillion market cap on Microsoft is a lot of weight to push up hill. We could see more of this during this earnings season as Amazon, Apple and Meta release their own reports. The “Magnificent Seven” that were responsible for most of the 24% gain in the S&P in 2023 are beginning to wobble. My hope was for more market leaders to emerge but that doesn’t seem to be happening. I don’t expect “wobble” to cause anything that terrible in the market, but a sideways move is likely as investors ponder their next move.
This economy is confusing–will tomorrow’s Jobs Report tell us how we’re doing?
A day before the January jobs report that everyone on Wall Street is awaiting with bated breath two other reports painted a conflicting picture of how the U.S. economy is doing. And just in case you’ve forgotten the strength and speed of economic growth is what will determine when the Federal Reserve first cuts interest rates and how many cuts investors will see in 2024.
Federal Reserve disappoints, comes close to taking a March cut in interest rates off the table
The Federal Reserve maintained its benchmark interest rate on Wednesday in a range of 5.25%-5.50%–as the financial markets expected. But the central bank pushed back more strongly than financial markets hoped on a March 20 schedule for the first cut in rates. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the Fed said in its policy statement.Fed chair Jerome Powell pushed back even moe strongly in his Wednesday press conference pushed back: A march cut is “probably not the most likely case or what we’d call the base case,” he said. “I don’t think it’s likely the Committee will reach a level of confidence by the time of the March meeting to identify March as the time to [cut rates].”
Microsoft beats on earnings, but stock is flat
It is perhaps too early to draw meaningful conclusions, but Microsoft’s failure to jump in after-hours trading on better than expected earnings sure seems like more evidence that this is a market priced to perfection.
Special Report: 10 Penny Stock Home Runs–Pick #1 LAZR, #2 PILBF, #3 GWH, #4 NLLSF, #5 LYSDY, #6 VWDRY, #7 LCCTF
Usually I start off one of these stock-picking Special Reports by building a paradigm that I can use to screen for the kind of stocks I’m looking for. For this Special Report: 10 Penny Stock Home Runs I’m going to reverse that process and begin with the 10 picks.My first pick is Luminar Technologies.
Please Watch My New YouTube video: Tesla’s headaches are causing real pain at GM and Ford
Today’s Trend of the Week video is Bad News from Tesla is even worse news for other electric vehicle companies. On January 24, after the close, Tesla announced a slight miss on their earnings report. Guidance was rather sparse but grim. Sales grew at about 38% in 2023, well below the 50% target that Tesla regularly touts. The 2024 guidance is even below that, (Wall Street estimates 24%). While this isn’t great for Tesla, it’s much worse for companies like Ford, GM and Volkswagen who are trying to figure out how much to spend and when to build market share for electric vehicles. The companies have been using estimates based on Tesla likely prices and profit margins in order to build their own projectors for their own profitability in electric vehicles. Those estimates, thanks to recent guidance from Tesla, appear to badly outdated, especially if Tesla is considering cutting prices again. Now companies like GM and Ford will have to decide how much pain, and for how long, they’re willing to take in order to get into this market.
Stocks rise and bond yields fall on Treasury surprise
Just days before the U.S. Treasury Department announces how much money it intends to borrow in the next quarter, the Treasury surprised traders by cutting its quarterly borrowing estimate to $760 billion. (Yeah, that would be a reduction from what had been expected.) The reduction fueled expectations on Wall Street that the Treasury would announce one last increase to its sales of long-term debt this week. That would be welcome relief after quarters when the size of Treasury auctions tested buyers’ appetites for government debt.
Hong Kong court orders China’s $300 billion in debt Evergrande property developer to liquidate
A Hong Kong court has ordered the liquidation of China Evergrande Group, the world’s most indebted property developer with more than $300 billion in liabilities. Thousands of unfinished but paid for apartments from the developer litter China.Of course, this being China, it’s unclear whether Chinese authorities will recognize the Hong Kong court’s ruling and allow international creditors to seize the company’s assets.
Please Read My New YouTube Video: Quick Pick ASML
Today’s Quick Pick is ASML Holding (ASML). ASML Holding is a chip equipment maker, specializing in high-end ultraviolet lithography. The stock released an impressive earnings report on Tuesday which sent the stock up 8.5% on that day. It’s up about 18% since I recommended the stock back in December. However, please remember, chip stocks and especially chip equipment stocks are cyclicals. They do well when demand is high, and then dip back down when demand is low. We’re currently in a big up cycle for chips with demand for new AI chips continuing to rise. ASML expects 2024 to maintain that upward swing and the stock is rising as expected. The thing I want to point out is how we know cyclical PEs to behave. The highest point for a cyclical PE tends to be down at the bottom, and as the stock goes up, the PE should go down. At the moment, the market is not at all focused on fundamentals and what we’re seeing is cyclical stocks trading like growth stocks. ASML is not a growth (forever) stock, but it’s currently trading at a PE of 39, the same as Microsoft, a definite growth stock (for comparison). There will be a top for ASML, it may not be 2024 but make sure you’re looking at fundamentals even if no one else in the market is.
Saturday Night Quarterback says, For the week ahead expect…
It’s a Federal Reserve meeting week, but I expect Apple’s (AAPL) earnings report for its December quarter to be the big event of the week. With the potential to move the tech sector and the market.
Visa beats but falls on guidance–that’s what “priced for perfection” means
After the close yesterday, Visa (V) reported earnings of $2.41 a share (after adjusting for one-time items) for the December 2023 quarter. (That the company’s fiscal first quarter.) Analysts had been looking for $2.34 a share in adjusted earnings. Revenue grew 8.8% to $8.63 billion, again beating analyst forecasts for $8.55 billion in revenue. Visa said payments volume grew 8%, and that its processed transactions rose 9% in the period. And yet the stock was down $4.70 a share, or 1.72%, to $267.91 at the close today, Friday, January 26. Why?
Special Report: My 10 Picks for how to invest in climate change NOW–3 first 3 picks, LAZR, PLBF and GWH
Here’s how I characterize developments in the global climate crisis in 2023: It was the year when hot air confronted cold cash. And as you might expect cold cash won.
Which gives me the framework for how to invest in the global climate crisis over the next 12 to 24 months. I’m going to use natural gas to develop my investing paradigm. And then I’m going to give you four sectors in which to concentrate your investments. And 10 specific picks for your money. I expect that I’ll be revisiting the topic of how to invest in the global climate crisis again before too long–because I think today’s paradigm will need substantial revision not all that far down the road.
In Part 1 today, I’m going to develop that paradigm. In Part 2 I’m going to tell you why I think nuclear energy, utility scale battery storage, wind and solar are the sectors that deserve your investment cash and attention (and why electric vehicles don’t make the cut now.) In Part 3, I’ll give you the ten stocks and ETFs I’d pick for these four sectors.
Please watch my new YouTube video: Too Far, Too Fast
Today’s video is Too Far, Too Fast. Yesterday, on January 24, the market hit Wall Street’s consensus 2024 target for the end of 2024. Yep, a bit early. The consensus target for the end of the year 2024 close is an average of 4867 and yesterday the S&P closed at 4868. The median target is 4950, and the high end forecast is around 5200–only 350 points from where we are. We’re still awaiting confirmation that the Fed will cut rates and when that happens (likely in June or July–not March), more money will come into the market. This mid-year injection of money is good, but how much of a reward is there in a market that may have already reached its target for 11 months from now? At this point, investors are chasing momentum in an attempt to make up for missing the mark in 2023. That leaves the market risky at the moment. There’s not a whole lot of reward in a market that moves sideways with very few big moves on the up side. We may very well finish the year flat from these levels.
U.S. GDP rose at a stronger than expected 3.3% rate in the fourth quarter
U.S. Gross Domestic Product (GDP) grew at an annual 3.3% rate in the fourth quarter, the Commerce Department announced today. That was down from the 4.9% annual growth rate in the third quarter, but substantially above the 2.0% rate expected by economists. For the full year, the US.economy expend at a 3.1% rate.
ASML–and chip stocks in general–soar on equipment-maker’s big growth numbers
Shares of ASML Holding (ASML) closed up 8.85% today after the company reported record orders for its chip-making equipment in the fourth quarter. ASML sales grew 12.5% year-over-year. And orders more than tripled from the third-quarter. I added shares of ASML Holding to my long-term 50 Stocks Portfolio on December 12, 2023. The position is up 17.6% since then as of the close on January 24.
Tesla misses on earnings but that’s not the worst news in today’s report
Today, after the market close, Tesla (TSLA) reported fourth-quarter earnings of 71 cents a share. The missed the consensus Wall Street forecast of 73 cents. Sales of $25.2 billion missed forecasts for $25.6 billion. But I’d argue that the earnings and sales misses weren’t the worst news in the report.
3M plunges as company delivers exactly the kind of bad earnings news investors fear
3M (MMM) fell 11.03% today, Tuesday, January 23, the most in nearly five years, after announcing projections for 2024 sales and earnings below Wall Street expectations. Now granted that 3M is a special case–the company is engaged in a huge restructuring effort that has met with a high degree of investor skepticism. In short, investors doubt that the company can pull it off without cutting its dividend. So the stock is especially sensitive to any news that suggest that the restructuring is failing. But the stock’s big drop today is also an indication of how worried this market, trading at record highs, is about the possibility that earnings growth for the fourth quarter, the subject of the current earnings season, won’t support prices at these levels.
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