Rally Slows Amid Good Economic Data – May 24 Market Recap
Indices
- Dow 39,069, -934 or -2.33%.
- Nasdaq 16,920 (record high), +235 or +1.41%.
- S&P 5,304, +1 or +0.02%.
- MSCI EAFE 2358.87, -22.48 or -0.94%.
- USD10Y 4.467%, +4.7bp or +1.06%.
- WTI Crude $77.80 bbl, -$2.20 or -2.75%.
Rally Slows Amid Good Economic Data
The story of the week should have been the incredible results from chipmaker extraordinaire Nvidia (NVDA) which reported earnings 9.5% higher than Street estimates, revenues 5.64% higher than estimates, guided current quarter revenues higher, and announced a 10-1 stock split. Year-over-year their numbers are just flabbergasting; revenues are up +262%, earnings are up +629%, and net income is up +628%.
While the Nasdaq, Technology, and Communication Services sectors all rallied, the broader market was fairly quiet as the markets decided that good economic news is bad news in terms of interest rate cuts. Multiple Fed officials spoke hawkishly throughout the week. On Wednesday, the minutes from the Fed’s May meeting were released which revealed a pessimistic view of 2024 rate cuts. On Thursday, Initial Jobless Claims fell for the second consecutive week and both May Flash Services and Manufacturing PMIs came in much stronger than expected. Thus, despite the great quarter by NVDA, the pessimistic Fed narrative along with the strong economic data dampened enthusiasm in the broader markets.
The Fed Futures are now signaling a zero probability of interest rate cuts at the Fed June 12 meeting, only a 10% chance of a cut at the July 31 meeting, and a 45% chance of a cut at the September 18 meeting. The probability of September cut is interesting as the Federal Reserve would prefer to appear as apolitical as possible and an interest rate cut at the meeting in front of a Presidential Election would undoubtedly raise cries of partisanship from the opposition party.
This Week: May 27 – May 31
Earnings slow to a trickle this week with Salesforce (CRM) and several retailers making up the laggards of the first quarter reporting season. All eyes will be on the Personal Consumption Expenditure (PCE) report on Friday to determine whether the ongoing fight against inflation is making further progress or continues to stagnate and thus threaten 2024 rate cuts.
Economic Calendar
- Monday – Markets Closed in Observance of Memorial Day.
- Tuesday – May Consumer Confidence.
- Wednesday – Fed Beige Book. Earnings: Salesforce (CRM).
- Thursday – Initial Jobless Claims, First Revision Q1 GDP. Earnings: Dollar General (DGEN), Kohl’s (KSS), Best Buy (BBY).
- Friday – April Personal Consumption Expenditure. Earnings: Dell (DELL), Costco Wholesale (COST), Nordstrom (JWN).
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Last Week‘s Daily Trading Recap…
Monday – Dow -196 to 39,806, Nasdaq +108 to 16,794 (record high), S&P +4 to 5,308, USD10Y +1.7bp to 4.437%.
- Seven of eleven S&P sectors traded down today, led lower by Financials, Consumer Discretionary, and Consumer Staples.
- Earnings: Palo Alto Networks (PANW) beat earnings and revenue expectations but did not guide its current quarter higher; PANW is down -8.16% post close. Zoom Video Communications (ZM) also beat their revenue and earnings expectations but guided current quarter earnings lower; ZM is down -1.23% in after-hours trading.
Tuesday – Dow +66 to 39,872, Nasdaq +37 to 16,832 (record high), S&P +13 to 5,321, USD10Y -2.3bp to 4.414%.
- Seven of eleven S&P sectors traded higher today, led by Utilities, Consumer Staples, and Financials.
- Earnings: Lowe’s (LOW) beat their earnings and revenue estimates. Macy’s (M) beat their earnings estimates on inline revenues and guided 2024 earnings estimates higher.
Wednesday – Dow -201 to 39,671, Nasdaq -31 to 16,801, S&P -14 to 5,307, USD10Y +2.0bp to 4.434%.
- Eight of eleven S&P sectors traded down today, led lower by Energy, Utilities, and Materials.
- The May FOMC Minutes showed participants still concerned over the lack of progress in the fight to reduce inflation to 2%.
- Earnings: Target (TGT) missed their earnings estimates, reported inline revenues, maintained their full year guidance and traded down -8.03%. TJ Maxx Stores (TJX) beat their earnings estimates on inline revenues and traded up +3.5%. Williams-Sonoma (WSM) crushed their earnings estimates while missing on revenues; WSM traded down -10.96%. Nvidia (NVDA) blew out their estimates once again, guided their current quarter revenues higher, announced a 10-1 stock split, and traded up +6.07% post close.
Thursday – Dow -605 to 39,065, Nasdaq -65 to 16,736, S&P -39 to 5,267, USD10Y +4.1bp to 4.475%.
- Ten of eleven S&P sectors traded down today, led lower by Real Estate, Utilities, and Consumer Discretionary.
- Jobless fell to 215,000 vs 220,000 forecast and vs. last week’s slightly revised higher print of 223,000 (originally 222,000).
- Both May Flash S&P Manufacturing and Flash Services PMI posted stronger than expected numbers and along with the lower-than-expected jobless claims number reignited fears that the Fed may not cut interest rates this year. Manufacturing PMI was 52.4 vs 50 expected and vs 51.1 last month and the Services PMI was 54.8 vs 51.6 expected and vs 51.3 last month.
- Earnings: Ross Stores (ROST) beat their earnings expectations and reported slightly better revenue results as well; ROST traded up +7.72% post close.
Friday – Dow +4 to 39,069, Nasdaq +184 to 16,920 (record high), S&P +36 to 5,304, USD10Y -0.8bp to 4.467%.
- Ten of the eleven S&P sectors traded higher today, led by Communication Services, Technology, and Utilities.
- April Durable Goods Orders exceeded expectations at +0.7% vs –0.5% land vs last month’s +0.8%.
If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.
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