What to know today

  • The Dow sags as Nvidia surges.
  • This’ll please at least some of the crowd.
  • Analysts are all-in with these chips.
markets

Stop Making Sense

People, what are we doing here?

So, Nvidia $NVDA crushed it, again, and the stock surged nearly 12 percent intraday to a new all-time high.

But then investors, traders, and speculators heard that initial jobless claims are at a nine-month low.

And, shortly thereafter, they saw the fastest expansion of business activity in two years in the S&P Global flash PMI survey data for May

It was enough for them to push their forecast for a Federal Reserve rate cut from November to December.

And that sent the Nasdaq Composite and the S&P 500 down 0.39 percent and 0.74 percent, respectively, and the Dow Jones Industrial Average into a 600-point tailspin. 

Both the Nasdaq and the S&P hit new highs early in the trading day. But it was the Dow’s worst day of the year from the opening bell. 

That’s the story from 35,000 feet.

What made the Dow’s day different was Boeing $BA, No. 15 among the 30 components in a price-weighted index.

BA shed nearly 8 percent on Thursday after management revised downward its guidance for full-year cash flow.

The flash S&P Global US Composite PMI Output Index surged to a two-year high of 54.4 in May.

As for all this business activity, the flash S&P Global US Composite PMI Output Index surged to 54.4 in May versus a consensus forecast of 51.1.

That’s the highest reading since April 2022 for the index, which tracks both the manufacturing and the services sectors. The final reading last month was 51.3.

The flash services print was 54.8, up from 51.3 in April to its highest level in a year, while manufacturing came in at 50.9, up from 50.0 last month.

Sure, S&P Global Market Intelligence chief business economist Chris Williamson said companies are still wary of “the economic outlook amid uncertainty over the future path of inflation and interest rates.”

And, yes, he said “managers “continue to cite worries over geopolitical instabilities and the presidential election.”

But he also said this: “Business confidence has lifted higher to signal brighter prospects for the year ahead.”

And that’s probably the best reflection on this particular set of incoming data.

deep dive

Everybody Hates Live Nation

Well, maybe not “everybody”...

Live Nation Entertainment $LYV was among the biggest losers Thursday, falling nearly 8 percent and wiping out its year-to-date gain.

The US Department of Justice announced a lawsuit against the Ticketmaster parent alleging multiple violations of federal antitrust statutes.

A lot of people are happy about that, though maybe not investors. And even they might be so troubled beyond Thursday’s price action.

In an April 25 StockPick Interview, Baskin Wealth Management CIO Barry Schwartz highlighted LYV as “one stock we're super excited about has pulled back dramatically.”

“The concert business has been unbelievable” in the aftermath of COVID-19 lockdowns, Schwartz said, noting as well that the DoJ antitrust suit has been dragging on LYV “for a couple of years.”

Schwartz notes that the DoJ approved Live Nation’s merger with Ticketmaster in 2010. Opponents of the deal argued then that a combined company would be a colossus capable of dominating the entertainment industry.

“Backtracking on that merger,” Schwartz said, “seems a little bit political in a year where there’s an election.”

Live Nation Enertainment $LYV was down 7.81 percent on May 23, 2024, after the US Department of Justice announced an antitrust lawsuit against the company.

LYV noted in response to the DoJ’s announcement that a 1.4 percent profit “is not monopoly power.”

Feels like we’re about to get a lesson in music industry accounting – but it won’t happen for years, if it even gets to trial. Complex civil litigation is hard and long.

And this case is particularly fraught with emotion.

For Schwartz, it’s all upside: “The bottom line for us is even if there's the slightest chance that Live Nation is broken up back into its two original companies, we think it's still worth as much as it would be together.”

LYV was trading around $88 at the time of the StockPick Interview with Schwartz, when the antitrust suit was just a threat. It closed at $93.48 on Thursday.

“We think it's a value up to $120 a share. And the concert business has never been better.”

(Can confirm: I have multiple Live Nation-promoted events on my calendar over the balance of 2024.)

deep dive |
May 24, 2024

Everybody Hates Live Nation

THE MAGNIFICENT SEVEN

The Chip King Is Here

And its potential is impressive.

“Stronger than expected” economic data got in the way of what should have been an NVDA-led rally on Thursday.

My guess was wrong. I’ll take no comfort in the fact that people are people and people are crazy.

I will chalk it up to yet another adventure in short-term price action on the long-term march up and to the right.

As for The Chip King, analysts were pleased with what they saw in its fiscal first-quarter financial and operating results. 

Of the 57 who cover it, 53 rate it a “buy” and four rate it a “hold.”

And multiple analysts raised their 12-month price targets for the stock in the aftermath of management’s report on the three months ended April 28.

Nvidia $NVDA was up 9.32 percent on May 23, 2024, the day after it reported another quarter of expectations-beating results and management raised guidance again.

Bernstein Research analyst Stacy Rasgon, noting “the narrative is clearly nowhere near its end, or likely nowhere near its peak,” raised his target to $1,300.

Jefferies sees NVDA at $1,350 in 12 months, with the new Blackwell AI chip set driving profit growth in the second half of the year.

Goldman Sachs suggested demand will continue to exceed supply into 2025, supporting a $1,200 target. 

JPMorgan boosted its target from $850 to $1,150 on favorable supply-demand dynamics. Barclays ($1,200) and Citi ($1,260) also updated their targets.

Wedbush Securities bucked the trend, maintaining its “buy” rating as well as its $1,000 12-month price target.

Wedbush sees strong demand as well as further upside from data center operations.

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