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Chip maker
Intel
offered positive news on its foundry business Wednesday as it continues to build out new facilities to expand the custom chip-making service. Investors sold the stock anyway.
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Tesla Stock’s Winning Streak Ended. Wall Street Says Ford, GM, AI Made It All Happen.
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It is the notion that the Federal Reserve could deliver a hawkish jolt to markets even if it refrains from raising rates when its two-day policy meeting ends on Wednesday.
There are concerns that such an outcome could spark a turnaround in U.S. stocks, especially if an uncomfortably strong reading on May inflation — due this coming Tuesday just as the Fed’s policy meeting is slated to begin — pushes the central bank toward something even more extreme, like delivering a rate increase on Wednesday despite intimating that it plans to abstain.
The May consumer-price index is forecast to rise 4.0% for the year, down from a rise of 4.9%, while the core index, excluding food and energy prices, is seen easing to a rise of 5.3% from 5.5%.
On the other hand, signs that the economy has weakened and inflation has continued to fade would help the Fed to justify skipping a rate increase in June — as several senior officials have suggested it will — while signaling that a potential hike at its following meeting in July could be the final increase for the cycle.
“Softening U.S. data should support calls that a June skip could eventually turn into a July pause. Next week, most of the data is expected to remain weak or little changed: retail sales could be flat m/m, the Fed regional surveys should remain in negative territory, and consumer sentiment will waver,” said Craig Erlam, senior market analyst at OANDA, in emailed commentary.
See: The Fed’s crystal ball on inflation appears off the mark again. Here’s comes another fix.
Wednesday’s meeting comes at a critical time for the market. U.S. stocks have powered ahead for more than six months, with the S&P 500
SPX,
having risen more than 20% off its Oct. 12 closing low, according to FactSet. Just this past week, the index exited bear-market territory for the first time in a year.
The index is up 12% so far in 2023, reversing some of its 19.4% decline from 2022, its biggest calendar-year drop since 2008, according to Dow Jones Market Data.
So far this year, highflying tech stocks have helped to paper over weakness in other areas of the market. This has started to change over the past two weeks, as small-cap and value-stocks have lurched suddenly higher, but there are fears that the Fed could hurt the most interest-rate sensitive technology names if Chairman Jerome Powell hints at rates rising higher than investors presently anticipate.
The so-called “Megacap eight” stocks — a group that includes both classes of Alphabet Inc. stock
GOOG,
GOOGL,
Microsoft Corp.
MSFT,
Tesla Inc.
TSLA,
Microsoft Corp.
MSFT,
Netflix Inc.
NFLX,
Nvidia Corp.
NVDA,
Meta Platforms Inc.
META,
— have driven nearly all of the S&P 500’s gains this year, according to Ed Yardeni, president of Yardeni Research, who included his analysis in a note to clients.
But since the beginning of June, the Russell 2000
RUT,
a gauge of small-cap stocks in the U.S., has risen more than 6.6%, according to FactSet data. The Russell 1000 Value Index
RLV,
has also gained nearly 3.7% in that time. During this period, both have outperformed the tech-heavy Nasdaq Composite
COMP,
although the Nasdaq remains the market leader, having risen 26.7% since Jan. 1.
Concerns about the Fed’s plans intensified this week after the Bank of Canada delivered a surprise interest-rate hike, ending a four-month pause. The BOC’s decision followed a similar move by the Reserve Bank of Australia, and partly as a result, U.S. Treasury yields rose and tech-heavy stocks tumbled, with the Nasdaq logging its biggest drop since April 25, according to FactSet.
While small-caps held up amid the chaos, the reaction stoked fears that something similar might be in store for markets when the Fed delivers its latest decision on interest rates Wednesday.
Stocks could be in for more turbulence if the Fed signals it plans to follow the BOC and RBA with a hawkish surprise of its own. And it wouldn’t necessarily need to hike rates to pull this off, market strategists said.
Emerging signs of complacency in the market could complicate its reaction. That the Cboe Volatility Index has fallen back below 15
VIX,
for the first time since before the arrival of COVID-19 is one such sign that investors aren’t worried enough about a potential selloff, said Miller Tabak + Co.’s Chief Market Strategist Matt Maley.
Another analyst likened the potential fallout from a hawkish Fed to the bad old days of 2022.
“If the Fed signals that rates will be going up again, the market playbook could read more like 2022 than what we have seen so far in 2023,” said Will Rhind, the founder and CEO of GraniteShares, during a phone interview with MarketWatch.
Perhaps the biggest wild card is Tuesday’s inflation report. If the numbers come in hot, Powell and his peers could face pressure to hike rates without priming the market first.
For this reason, Rhind believes investors are underestimating the likelihood of a hike next week, even as Fed funds futures currently see a roughly 70% probability that the central bank will stand pat, according to the CME’s FedWatch tool.
And Rhind isn’t the only one. Leslie Falconio, chief investment officer at UBS Global Wealth Management, says the Tuesday inflation report could be a make-or-break moment for markets, summing up fears expressed elsewhere on Wall Street in a recent note to clients.
“We believe another rate increase is on the table, and that the CPI release on 13 June, a day before the Fed decision, will be decisive. In our view, another hike won’t have a material impact on the pace of economic growth,” Falconio said.
Assuming the Fed does forego a hike in June, there are a few key tells that investors should watch for to determine whether a “hawkish pause” is under way.
Perhaps the most important will be how the Fed handles changes to its closely watched “dot plot.” A modestly higher median dot would send an unmistakable signal to the market that the Fed will continue with its campaign of tightening monetary policy, perhaps to the detriment of the market, said Patrick Saner, head of macro strategy at the Swiss Re Institute.
“If the Fed skips but wanted to avoid the impression of the hiking cycle being done, it would need to include a revision of the dot plot. They could justify that with a more resilient GDP forecast and a higher inflation outlook. So I think it is the dots and then the statement that will be in focus,” Saner said during a phone interview with MarketWatch.
Beyond that, whatever the Fed does or says will likely be viewed through the lens of economic data that is due out next week. In addition to the Tuesday inflation report, a report on May retail sales is due out Thursday, and a on consumer sentiment from the University of Michigan will land on Friday. All these data points could influence investors’ impressions of the state of the U.S. economy, and their expectations for how the Fed will behave as a result.
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Photo by Ethan Miller/Getty Images
Real estate investment trusts have had a tough couple of years, but opportunities abound—if you know where to look.
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Artificial intelligence may destroy humanity, but not before creating enormous wealth. Such is the paradox that now confronts investors after
Nvidia
recent earnings report inadvertently created a large-scale ethics experiment on Wall Street.
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/amazon-misses-rally-8a6e2511
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Chip stocks experienced a significant surge Thursday in the wake of Nvidia Corp.’s upbeat commentary on AI-fueled demand — with one notable exception.
Shares of Intel Corp.
INTC,
were down more than 5% in afternoon trading Thursday, leading Dow Jones Industrial Average
DJIA,
laggards by a wide margin, on a day when Nvidia Corp.’s
NVDA,
stock was up 26% and the PHLX Semiconductor Index
SOX,
was ahead 6%.
Read: Chip index heads for highest close in 13 months as Nvidia momentum lifts semiconductor stocks
Nvidia delivered a stratospheric beat on its quarterly revenue outlook Wednesday afternoon, with executives discussing how spending on artificial intelligence is already starting to drive sizable financial benefits for the company. That discussion has Wall Street thinking that many other chip makers will also be able to capitalize on the same wave of interest in the hot technology — shares of Monolithic Power Systems Inc.
MPWR,
Advanced Micro Devices Inc.
AMD,
and Taiwan Semiconductor Manufacturing Co.
2330,
TSM,
all joined Nvidia in gaining by double-digit percentages in Thursday’s session.
Intel, though, was a key outlier. Nvidia’s commentary seemed to make investors more worried that Intel is behind the curve on what some see as a massive technological revolution.
Nvidia CFO on record-breaking forecast: ‘The inflection point of AI is here’
Intel’s revenue and profits from central processing units look “even more at risk” after Nvidia’s report, while Intel doesn’t have “any real” competitive position in graphics processing units or generative-AI compute, wrote Mizuho’s Jordan Klein, a desk-based analyst associated with the company’s sales team and not its research arm.
Nvidia’s earnings call “will reinforce the negative view that [Intel] and all their CPU share is a major loser and share donor to GPU, ASICs and lower power ARM design chips on the way,” Klein added.
While Nvidia GPUs typically would run alongside CPUs from either Intel or AMD, Nvidia has been making inroads in CPUs. Chief Financial Officer Colette Kress said on Nvidia’s call that the company has seen “growing momentum for Grace with both CPU-only and CPU-GPU opportunities across AI and cloud and supercomputing applications.”
Read: ‘Ride the Nvidia wave.’ Wall Street says the ‘undeniably pricey’ stock can keep roaring.
Nvidia is perceived to be ahead of the pack in AI-related computing technology, but AMD is at least in a better position than Intel, with more of a one-stop shop across CPUs and GPUs. That’s likely why AMD’s stock is riding on Nvidia’s coattails Thursday, up more than 10% in afternoon action.
AMD is “the only other real GPU supplier,” Klein wrote, though the company “could lose CPU spend in process and [has] a far way to go to catch [Nvidia].”
In his view, it “will take some time for more advanced and higher performance GPU and software platform to ramp and really drive upside potential” at AMD. “But seeing how fast and much [Nvidia] benefited, few will want to wait and see how long that takes for AMD.”
A more clear beneficiary, he noted, is Taiwan Semiconductor, whose stock was up more than 12% Thursday. You “cannot get any of these GPUs, inference, etc. without their fabs,” according to Klein.
As for Intel, Klein likes that the company is approaching a second-quarter bottom and positioned to capitalize on a personal-computer refresh, but he said its stock “feels totally stuck at best and could get shorted.”
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U.S. stocks closed mostly higher Thursday, as technology companies fueled gains amid investor enthusiasm surrounding artificial intelligence. The S&P 500
SPX,
finished 0.9% higher, while the tech-heavy Nasdaq Composite
COMP,
climbed 1.7% and the Dow Jones Industrial Average
DJIA,
slipped 0.1%, according to preliminary data from FactSet. Chip maker Nvidia Corp.
NVDA,
was the top-performing stock in the S&P 500, surging as the index’s tech sector closed with sharp gains of more than 4%, preliminary FactSet data show. Communication services was the second strongest sector in the S&P 500 on Thursday, rising a modest 0.4%. Nvidia shares have skyrocketed as investors anticipate the company will benefit from generative AI.
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NVIDIA Corp. engages in the design and manufacture of computer graphics processors, chipsets, and related multimedia software. It operates through the following segments: Graphics Processing Unit (GPU), Tegra Processor, and All Other. The GPU segment consists of product brands, including GeForce for gamers, Quadro for designers, Tesla and DGX for AI data scientists and big data researchers, and GRID for cloud-based visual computing users. The Tegra Processor segment integrates an entire computer onto a single chip and incorporates GPUs and multi-core CPUs to drive supercomputing for autonomous robots, drones, and cars, as well as for consoles and mobile gaming and entertainment devices. The All Other segment refers to the stock-based compensation expense, corporate infrastructure and support costs, acquisition-related costs, legal settlement costs, and other non-recurring charges. The company was founded by Jen Hsun Huang, Chris A. Malachowsky, and Curtis R. Priem in April 1993 and is headquartered in Santa Clara, CA.
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NVIDIA Corp. engages in the design and manufacture of computer graphics processors, chipsets, and related multimedia software. It operates through the following segments: Graphics Processing Unit (GPU), Tegra Processor, and All Other. The GPU segment consists of product brands, including GeForce for gamers, Quadro for designers, Tesla and DGX for AI data scientists and big data researchers, and GRID for cloud-based visual computing users. The Tegra Processor segment integrates an entire computer onto a single chip and incorporates GPUs and multi-core CPUs to drive supercomputing for autonomous robots, drones, and cars, as well as for consoles and mobile gaming and entertainment devices. The All Other segment refers to the stock-based compensation expense, corporate infrastructure and support costs, acquisition-related costs, legal settlement costs, and other non-recurring charges. The company was founded by Jen Hsun Huang, Chris A. Malachowsky, and Curtis R. Priem in April 1993 and is headquartered in Santa Clara, CA.
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Nvidia Corp. headed toward market-capitalization gains of nearly $200 billion in after-hours trading Wednesday, which could put the chip maker within sight of becoming only the seventh U.S. company to top a valuation of $1 trillion.
Nvidia shares
NVDA,
jumped 25% in the extended session Wednesday, after executives predicted that revenue would exceed the company’s record by more than 30% in the current quarter. The audacious forecast arrived as tech companies look to jump on advances in artificial intelligence that are largely powered by Nvidia’s computing gear.
Nvidia ended Wednesday’s session with a market cap — the total value of all shares in existence — of roughly $754.3 billion, according to FactSet. A 25% increase would add nearly $189 billion to that total, putting the company within striking distance of $1 trillion. Only six U.S. companies have ever attained a $1 trillion market cap: Apple Inc.
AAPL,
and Microsoft Corp.
MSFT,
are currently worth more than $2 trillion apiece; Google parent Alphabet Inc.
GOOGL,
and Amazon.com Inc.
AMZN,
have valuation of more than $1 trillion; and Facebook parent Meta Platforms Inc.
META,
and Tesla Inc.
TSLA,
have both touched the $1 trillion plateau previously.
Nvidia’s market cap was ahead of both Meta and Tesla as of Wednesday’s close, with both worth less than $650 billion, showing the potential fleeting nature of such a valuation. Nvidia’s record market cap is $834.4 billion, established on Nov. 29. 2021, according to Dow Jones Market Data.
If Nvidia’s gains hold through Thursday’s trading session, the company could challenge for the largest one-day market-cap gain in history. The biggest currently on record was Amazon’s $191.2 billion increase on Feb. 4, 2022, according to Dow Jones Market Data, followed closely by a $190.9 billion gain by Apple on Nov. 10, 2022. Nvidia also stands to gain more than rival Advanced Micro Devices Inc.
AMD,
is worth in total — AMD ended Wednesday’s session with a market cap of $174.4 billion.
Nvidia is closing in on the rare $1 trillion plateau because of huge gains in its stock this year, as hopes and hype about generative AI have flooded the tech sector. After OpenAI debuted its ChatGPT AI offering, and investor Microsoft quickly integrated the chatbot into many of its services, expectations for the technology have exploded.
Despite the hype, most companies have avoided providing hard figures for revenue gains expected from AI. Nvidia’s fiscal second-quarter forecast — which calls for roughly $11 billion in sales, nearly 33% higher than Nvidia’s previous quarterly record of $8.28 billion — could be seen as the first sign of a wave of fresh spending coursing through the tech sector.
Other companies have indicated that they will be forced to spend to develop their technology before reaping large financial rewards from it. Microsoft, for example, disclosed to investors last month that capital expenditures are increasing as it builds AI capabilities into its Azure cloud-computing platform — spending that is largely going toward Nvidia.
Full earnings coverage: Nvidia stock soars toward all-time high as AI push leads executives to predict record revenue
That is a rather typical path for large jumps in tech spending: Companies that make the necessary hardware see gains before the companies that use that gear can develop offerings that take advantage of it. Other gear makers joined Nvidia in the sharp move higher in after-hours trading Wednesday, including AMD, which gained more than 10%; chip maker Marvell Technology Inc.
MRVL,
which increased more than 5%; and networking specialist Arista Networks Inc.
ANET,
which added about 5%.
Alphabet and Microsoft stocks both increased around 2% in after-hours trading, and software companies that have made AI a core part of their offerings also saw gains. Palantir Technologies Inc.
PLTR,
and C3.ai Inc.
AI,
shares both increased more than 8%, for example.
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Nvidia Corp. executives predicted record revenue well beyond anything the company has experienced Wednesday, pushing shares toward all-time highs, as margins improve with AI-driven data-center sales.
Nvidia
NVDA,
guided for second-quarter revenue of $11 billion, plus or minus 2%; the chip maker has never before reported quarterly revenue higher than $8.29 billion, which it hit in the fiscal first quarter a year ago. Analysts on average were expecting $7.17 billion, according to FactSet, a gain from the $6.7 billion in sales Nvidia put up in the fiscal second quarter last year.
On the conference call with analysts, Huang said the simple way to think about it is that the world has “a trillion dollars of data center installed and it used to be 100% CPU,” or central processing units, as opposed to Nvidia’s graphics processors that data centers and AI models have embraced in recent years. And while the world’s data-center budget is strapped, at the same time larger and larger AI models require more and more computing power, he said.
“The easiest way to think about that is over the next four or five, 10 years, most of that trillion dollars, and compensating adjusting for all the growth in data center still, it will be largely generative AI,” Huang said.
“What happened is, when generative AI came along, it triggered a killer app for this computing platform that’s been in preparation for some time,” he added.
The company forecast adjusted gross margins of 70% for the second quarter, after reporting 66.8% for the first quarter, not only as higher data-center margins counter the deficit in gaming, but as Nvidia Chief Financial Officer Colette Kress said on the call: ” We believe the channel inventory correction is behind us.”
Shares soared more than 25% in after-hours trading, following a 0.5% decline in the regular session to $305.38. Nvidia’s record closing price is $333.76 and the all-time intraday high is $346.47, according to FactSet data. After-hours “prices” topped both of those marks, reaching more than 14% beyond all-time highs for the regular session, as shares registered as high as $395, according to FactSet. The last time Nvidia shares rallied as much in a single session was Nov. 11, 2016, when shares surged 29.8% after the company reported that profit more than doubled.
Meanwhile, shares of rival Advanced Micro Devices Inc.
AMD,
rallied 6% after hours.
Nvidia did not provide full-year guidance, but Chief Executive Jensen Huang has been effusive in his predictions that increased focus on AI from Big Tech partners such as Microsoft Corp.
MSFT,
and Alphabet Inc.
GOOGL,
GOOG,
will lead to revenue gains in the near future. Speaking to the media at Nvidia’s developers conference in March, he said that generative AI has only accounted for a “tiny, tiny, tiny” single-digit percentage of revenue over the past 12 months, but predicted that in the next year, revenue from generative AI will grow to be “quite large — exactly how large, it’s hard to say.”
Nvidia reported fiscal first-quarter earnings of $2.04 billion, or 82 cents a share, on sales of $7.19 billion, a decline from $8.29 billion a year ago but well ahead of expectations. After adjusting for stock compensation and other effects, the chip maker reported earnings of $1.09 a share, a decline from $1.36 a share a year ago. Analysts on average were expecting adjusted earnings of 92 cents a share on sales of $6.53 billion, according to FactSet.
Gaming sales for the first quarter fell 38% to $2.24 billion, while data-center sales at Nvidia rose 14% to a record $4.28 billion, “led by growing demand for generative AI and large language models using GPUs based on our Nvidia Hopper and Ampere architectures.”
“The revenue growth reflects strong demand from large consumer internet companies and cloud service providers,” the company said in a statement. “Enterprise demand for GPU platforms was strong, although general purpose networking solutions declined both sequentially and from a year ago.”
Analysts had expected gaming sales of $1.97 billion — nearly half of last year’s $3.62 billion — and data-center sales of $3.9 billion, a 4% increase from a year ago. Auto chip sales soared 114% to $296 million from a year ago.
Nvidia’s profit and sales have declined in recent quarters as the company deals with oversupply in the market, a result of pandemic-era shortages flipping to a glut after demand for personal computers and gaming gear waned. Analysts expect that trend to end with this report, however, as demand for gear that can power artificial intelligence kicks into higher gear amid a bevy of promises from tech companies about the power of generative AI.
Nvidia’s stock has soared toward all-time highs amid the hype for generative AI, which was launched after the successful debut of OpenAI’s ChatGPT service. Shares have more than doubled so far this year, growing 109% as the S&P 500 index
SPX,
has increased 8%.
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The market capitalization of Apple Inc. has surpassed that of the entire Russell 2000 for two weeks, the longest stretch on record, according to Bloomberg data.
Apple’s market capitalization, which measures how much the company is worth based on the value of all its outstanding stock, surpassed that of the Russell 2000
RUT,
on April 27 and has held higher through Monday. The only other time that occurred was Sept. 1, 2020, when Apple’s valuation passed that of the small-cap index for only a day.
Apple’s premium over this group of small-cap stocks continued to widen over the past two weeks as the consumer-technology giant reported earnings that surpassed Wall Street analysts’ expectations.
With a market capitalization of roughly $2.7 trillion, Apple is now worth roughly $100 billion more than the combined value of all 2,000 stocks in the Russell 2000, according to Bloomberg data shared with MarketWatch.
To be sure, the gap narrowed somewhat on Monday as Apple shares declined by 0.4% to $171.80, while the Russell 2000 gained 1.3% to trade at 1,763.
A team of stock-market analysts from Bespoke Investment Group illustrated the trend in a chart shared on Twitter Monday.
U.S. equity benchmarks have powered higher in 2023, but some say the strength in popular indexs like the S&P 500 and Nasdaq Composite has masked weakness in other corners of the market.
Both the S&P 500, which has risen more than 7% year-to-date, and the Nasdaq Composite, which has risen nearly 18%, owe the bulk of their gains to a handful of megacap technology stocks including Apple, Microsoft Corp.
MSFT,
Alphabet Inc.
GOOG,
and Nvidia Corp.
NVDA,
The top 10 stocks in the S&P 500 hold a 29% weight in the index, and have been responsible for around 70% of its year-to-date performance gains, according to a MarketWatch report from last week.
See: The S&P 500 is top-heavy with tech. Here’s what that says about future stock-market returns.
The Russell 2000, meanwhile, is essentially unchanged since the start of 2023. Apple, by comparison, has risen more than 32% since Jan. 1, according to FactSet data. The relative weakness in small-caps has inspired discussion about whether this might be a buying opportunity, as market strategists told Barron’s.
See: Small-Cap Stocks Have Been Crushed. 3 With Big Potential.
Small-caps have struggled against a plethora of headwinds since the start of 2023. Shrinking corporate earnings, a string of regional-bank failures and signs of a looming recession have taken a heavy toll. Facing so much uncertainty, equity investors have sought safety in shares of megacap technology names this year following a punishing selloff in 2022.
“It is pretty incredible that one company could overtake an entire universe of small-cap stocks in terms of size,” said Callie Cox, U.S. equity strategist at eToro, during a phone interview with MarketWatch. “To me, it really speaks to how beaten down small-caps are.”
When Apple reported earnings for the quarter ended in March last week, the company’s management revealed a surprise growth in its iPhone business, which helped to overcoming a shortfall in Mac revenue. The company also promised investors billions more in dividends and stock repurchases, which helped to boost the stock price. Apple’s shares traded higher in response.
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U.S. stocks have shrugged off a number of threats since the start of the year, powering through the worst U.S. bank failures since the 2008 financial crisis, while resisting the pull of rising short-term Treasury yields.
This helped all three main U.S. equity benchmarks finish the first quarter in the green on Friday, but that doesn’t change the fact that the S&P 500 index, the main U.S. equity benchmark, has barely budged since last summer.
“The market has handled a lot of gut punches recently and it’s still standing in this range,” said JJ Kinahan, CEO of IG North America, owner of brokerage firm Tastytrade. “I think that’s a sign that the market is very healthy.”
The S&P 500 index
SPX,
traded at 4,110.41 on Sept. 12, 2022, according to FactSet data, just before aggressive Federal Reserve commentary on interest rates and worrisome inflation data triggered a sharp selloff. By comparison, the index finished Friday’s session at 4,109.31.
Some equity analysts expect it to take months, or perhaps even longer, for U.S. stocks to break out of this range. Where they might go next also is anyone’s guess.
Investors likely won’t know until some of the uncertainty that has been plaguing the market over the past year clears up.
At the top of the market’s wish list is more information about how the Fed’s interest rate hikes are impacting the economy. This will be crucial in determining whether the central bank might need to keep raising interest rates in 2024, several analysts told MarketWatch.
The S&P 500 has vacillated in a roughly 600-point range since September, but at the same time, the number of outsize swings from day-to-day has become even more pronounced, making it more difficult to ascertain the health of the market, analysts said.
The S&P 500 rose or fell by 1% or more in 29 trading sessions in the first quarter, including Friday, when the S&P 500 closed 1.4% higher on the last session of the month and quarter, according to Dow Jones Market Data.
That’s nearly double the quarterly average of just 14.9 days going back to 1928, according to Dow Jones Market Data. The S&P 500 was created in 1957, and performance data taken from before then is based on a historical reconstruction of the index’s performance.
Stocks also look almost placid in comparison with other assets. For example, Treasurys saw an explosion of volatility in the wake of the collapse of Silicon Valley Bank in March. The 2-year Treasury yield
TMUBMUSD02Y,
logged its largest monthly decline in 15 years in March as a result.
“You can’t find any clues about where we’re going by watching the S&P 500,” said John Kosar, chief market strategist at Asbury Research, in a phone interview with MarketWatch. “Ten years ago, you could look at the movement of the S&P 500 and a simple indicator like volume and get a back-of-the-envelope idea of how healthy the market is. But you can’t do that anymore because of all this intraday volatility.”
The S&P 500’s 7% advance in the first quarter of this year has helped to mask weakness underneath the surface. Specifically, only 33% of S&P 500 companies’ shares have managed to outperform the index since the start of the quarter, well below the long-term average, according to figures provided to MarketWatch by analysts at UBS Group UBS.
If it weren’t for a flight-to-safety rally in large capitalization technology names like Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
and Nvidia Corp.
NVDA,
the S&P 500 and Nasdaq would likely be in much worse shape.
Advancing megacap tech stocks have helped the Invesco QQQ
QQQ,
Trust exchange-traded fund, which tracks the Nasdaq 100, enter a fresh bull market in the past week, as the closely watched market gauge closed more than 20% above its 52-week closing low from late December, according to FactSet data. That’s helped to offset weakness in cyclical sectors like financials and real estate.
Tech behemoths have also benefited from the hype around artificial intelligence platforms like OpenAI’s ChatGPT.
Confusion about the Fed’s quantitative tightening efforts to reduce the size of its balance sheet also helped muddle the outlook for markets.
For example, the size of the Fed’s balance sheet has increased again in recent weeks as banks have tapped the central bank’s emergency lending programs in the wake of the failure of two regional banks, undoing some of the central bank’s efforts to shrink its balance sheet by allowing some of its Treasury and mortgage-backed bond holdings to mature without reinvesting the proceeds.
Some analysts said this is akin to sending the market mixed signals.
“It seems to be both tightening and loosening right now,” said Andrew Adams, an analyst with Saut Strategy, in a recent note to clients.
U.S. stocks have remained rangebound for long stretches in the past.
Beginning in late 2014, the S&P 500 traded in a tight range for roughly two years. Between Jan. 1, 2015 and Nov. 9, 2016, the day after former President Donald Trump defeated Hillary Clinton to become president of the U.S., the S&P 500 gained less than 100 points, according to FactSet data.
At the time, equity analysts blamed signs of softening economic activity in China and weakness in the U.S. energy industry for the market’s lackluster performance.
But after once it became clear that Trump would win the White House, stocks embarked on a steady ascent as investors bet that the Republican economic agenda, which included corporate tax cuts and deregulation, would likely bolster corporate profits.
It wasn’t until the fourth quarter of 2018 that stocks turned volatile once again as the S&P 500 wiped out its gains from earlier in the year, before ultimately finishing 2018 with a 6.2% drop for the year, according to FactSet.
As investors brace for a flood of first-quarter corporate earnings in the coming weeks, Kinahan said he expects stocks could remain range bound for at least a few more months.
“There’s going to be a very cautious outlook still, which should keep us in this range,” he said.
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M&R Capital Management Inc. lowered its stake in NVIDIA Co. (NASDAQ:NVDA – Get Rating) by 18.5% in the 4th quarter, according to its most recent disclosure with the SEC. The fund owned 1,105 shares of the computer hardware maker’s stock after selling 250 shares during the quarter. M&R Capital Management Inc.’s holdings in NVIDIA were worth $161,000 at the end of the most recent quarter.
Several other hedge funds and other institutional investors have also recently bought and sold shares of the stock. Vanguard Group Inc. lifted its position in NVIDIA by 1.2% in the third quarter. Vanguard Group Inc. now owns 203,747,246 shares of the computer hardware maker’s stock valued at $24,732,878,000 after purchasing an additional 2,326,387 shares during the last quarter. State Street Corp lifted its position in NVIDIA by 0.9% in the third quarter. State Street Corp now owns 98,751,264 shares of the computer hardware maker’s stock valued at $11,987,416,000 after purchasing an additional 908,481 shares during the last quarter. Price T Rowe Associates Inc. MD lifted its position in NVIDIA by 7.2% in the second quarter. Price T Rowe Associates Inc. MD now owns 56,929,819 shares of the computer hardware maker’s stock valued at $8,629,991,000 after purchasing an additional 3,813,087 shares during the last quarter. Legal & General Group Plc lifted its position in NVIDIA by 4.4% in the second quarter. Legal & General Group Plc now owns 18,243,948 shares of the computer hardware maker’s stock valued at $2,765,602,000 after purchasing an additional 764,184 shares during the last quarter. Finally, UBS Asset Management Americas Inc. lifted its position in NVIDIA by 3.3% in the second quarter. UBS Asset Management Americas Inc. now owns 14,612,261 shares of the computer hardware maker’s stock valued at $2,215,073,000 after purchasing an additional 467,060 shares during the last quarter. Institutional investors own 61.80% of the company’s stock.
In other news, Director John Dabiri sold 293 shares of the company’s stock in a transaction on Monday, December 19th. The stock was sold at an average price of $165.80, for a total transaction of $48,579.40. Following the transaction, the director now directly owns 2,417 shares of the company’s stock, valued at $400,738.60. The sale was disclosed in a filing with the SEC, which is available at the SEC website. In other NVIDIA news, Director John Dabiri sold 293 shares of the stock in a transaction dated Monday, December 19th. The stock was sold at an average price of $165.80, for a total value of $48,579.40. Following the transaction, the director now owns 2,417 shares of the company’s stock, valued at $400,738.60. The transaction was disclosed in a filing with the SEC, which can be accessed through this hyperlink. Also, Director Mark L. Perry sold 20,000 shares of the stock in a transaction dated Monday, February 27th. The shares were sold at an average price of $236.37, for a total value of $4,727,400.00. Following the completion of the transaction, the director now directly owns 140,000 shares in the company, valued at approximately $33,091,800. The disclosure for this sale can be found here. Insiders have sold a total of 293,066 shares of company stock valued at $51,229,679 over the last ninety days. 4.04% of the stock is currently owned by corporate insiders.
Shares of NASDAQ:NVDA opened at $257.25 on Friday. The company has a market cap of $635.41 billion, a P/E ratio of 147.84, a PEG ratio of 4.53 and a beta of 1.76. The company has a debt-to-equity ratio of 0.44, a current ratio of 3.52 and a quick ratio of 2.73. NVIDIA Co. has a 1 year low of $108.13 and a 1 year high of $289.46. The stock’s fifty day moving average price is $210.84 and its 200-day moving average price is $167.00.
NVIDIA (NASDAQ:NVDA – Get Rating) last announced its quarterly earnings results on Wednesday, February 22nd. The computer hardware maker reported $0.88 earnings per share (EPS) for the quarter, beating analysts’ consensus estimates of $0.81 by $0.07. The firm had revenue of $6.05 billion for the quarter, compared to the consensus estimate of $6.02 billion. NVIDIA had a return on equity of 26.61% and a net margin of 16.19%. The company’s quarterly revenue was down 20.8% on a year-over-year basis. During the same period in the prior year, the company posted $1.14 earnings per share. Sell-side analysts expect that NVIDIA Co. will post 3.21 earnings per share for the current year.
The firm also recently declared a quarterly dividend, which will be paid on Wednesday, March 29th. Stockholders of record on Wednesday, March 8th will be issued a dividend of $0.04 per share. This represents a $0.16 dividend on an annualized basis and a dividend yield of 0.06%. The ex-dividend date is Tuesday, March 7th. NVIDIA’s payout ratio is currently 9.20%.
Several equities analysts have recently issued reports on NVDA shares. StockNews.com started coverage on NVIDIA in a research note on Thursday. They set a “hold” rating on the stock. Raymond James reissued a “strong-buy” rating and set a $290.00 target price on shares of NVIDIA in a research note on Thursday, March 2nd. Cowen boosted their target price on NVIDIA from $200.00 to $220.00 in a research note on Monday, December 12th. Jefferies Financial Group boosted their target price on NVIDIA from $275.00 to $300.00 and gave the company a “buy” rating in a research note on Thursday, February 23rd. Finally, BMO Capital Markets boosted their target price on NVIDIA from $210.00 to $240.00 and gave the company an “outperform” rating in a research note on Tuesday, February 21st. Two equities research analysts have rated the stock with a sell rating, eight have given a hold rating, twenty-six have assigned a buy rating and one has issued a strong buy rating to the company. According to data from MarketBeat.com, the company has an average rating of “Moderate Buy” and an average target price of $245.32.
NVIDIA Corp. engages in the design and manufacture of computer graphics processors, chipsets, and related multimedia software. It operates through the following segments: Graphics Processing Unit (GPU), Tegra Processor, and All Other. The GPU segment consists of product brands, including GeForce for gamers, Quadro for designers, Tesla and DGX for AI data scientists and big data researchers, and GRID for cloud-based visual computing users.
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U.S. stocks ended lower Friday as worries about banking-sector stability reemerged following a bankruptcy filing by SVB Financial Group and the release of data showing banks borrowed $165 billion from the Federal Reserve over the past week.
For the week, the Dow fell 0.1%, the S&P 500 gained 1.4% and the Nasdaq climbed 4.4%, according to Dow Jones Market Data. The Dow booked back-to-back weekly losses while the Nasdaq saw its biggest weekly percentage gain since January.
U.S. stocks fell Friday as worries about the banking sector persisted.
“The markets are up and down all this week, and they’re moving typically in big amounts, because there really isn’t any consensus on how the strains in the banking system will play” into the economy, said Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, in a phone interview Friday. Investors are trying to get a sense for how quickly the economy may be slowing and whether the problems in the banking sector will lead to an “accelerated slowing,” he said.
Concerns about the banking sector’s ability to withstand deposit flight reemerged Friday morning after SVB Financial Group
SIVB,
announced it had filed for Chapter 11 bankruptcy protection. SVB is the holding company of Silicon Valley Bank , which was put into FDIC receivership last Friday.
On Thursday, First Republic Bank announced that it would receive $30 billion of uninsured deposits from a group of large U.S. banks. JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. were among the 11 banks that agreed to provide the deposits.
Meanwhile, Federal Reserve data released Thursday afternoon in New York showed banks borrowed a combined $165 billion from the central bank. Most of the borrowing occurred via the Fed’s discount window. But a small amount was also tapped through the Fed’s new Bank Term Funding Program that allows bonds trading at a discount to be used as collateral, at par value. The fact that borrowing through the discount window has soared to a record high was adding to the market’s concerns about the banking sector, analysts said.
See: Banks have borrowed $165 billion from the Fed in past week after SVB failure
First Republic Bank
FRC,
shares plunged 32.8% Friday, while Credit Suisse Group
CS,
which earlier this week got a lifeline from the Swiss National Bank, closed 6.9% lower, according to FactSet data.
At least four major banks have put restrictions on trades that involve troubled Swiss lender Credit Suisse Group or its securities, Reuters reported Friday, citing people with direct knowledge of the matter.
“I think there are still a lot of questions right now,” said Mark Luschini, chief investment strategist at Janney, during a phone interview with MarketWatch. “Investors can’t seem to hold their enthusiasm for equities for longer than a 24-hour news cycle.”
It’s not hard to understand why investors are still so anxious about the banking sector given the surge in borrowing from the Fed, said Matt Maley, chief market strategist at Miller Tabak + Co.
“Given that banks borrowed over $150bn at the Fed’s discount window on Wednesday, which compares to $4.4bn the week before, one can understand why investors are worried that the situation might be a bit more dire than the authorities are admitting to right now,” Maley said in emailed commentary.
In economic news, the Conference Board said Friday that the U.S. leading economic index fell 0.3% in February, marking the 11th straight monthly decline. U.S. industrial production was flat in February, data released Friday by the Fed show.
Meanwhile, the University of Michigan’s latest reading on consumer sentiment showed consumers were more downbeat in March than at ay time in the last four months.
While stocks fell Friday, they finished the week mostly higher. The Dow Jones Industrial Average slipped 0.1% for the week, while the S&P 500 booked a 1.4% weekly gain and the technology-heavy Nasdaq Composite saw a weekly rise of 4.4%, according to Dow Jones Market Data.
—Steve Goldstein contributed to this report.
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Silicon Valley could use a reboot. The biggest players aren’t growing, and more than a few are seeing sharp revenue declines. Regulators seem opposed to every proposed merger, while legislators push for new rules to crack down on the internet giants. The Justice Department just can’t stop filing antitrust suits against Google. The initial public offering market is closed. Venture-capital investments are plunging, along with valuations of prepublic companies. Maybe they should try turning the whole thing on and off.
The only strategy that seems to be working is to lay people off. Tech CEOs suddenly are channeling Marie Kondo, tidying up and keeping only the people and projects that “spark joy,” or at least support decent operating margins. Layoffs.fyi reports that tech companies have laid off more than 122,000 people already this year.
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Nvidia
should be insulated from any slowdown in the broader economy by increased spending on artificial intelligence, say analysts at Oppenheimer, who lifted their price target for the semiconductor company.
The heightened interest around artificial-intelligence should set investors’ minds at ease ahead of
Nvidia
‘s earnings next week, say the analysts, with the semiconductor maker’s commentary on data-center spending in focus.
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