What to know today

  • Nvidia will report earnings after the closing bell. 
  • Stocks reach another new all-time high.
  • Requiem for meme stock mania.
markets

Still More New Highs

This is becoming a trend.

The auguries ahead of what could very well be the most anticipated earnings announcement of the post-pandemic era are all good.

The S&P 500 closed Tuesday at another new all-time high, the 24th time the index has set a new high in 2024.

As Charlie Bilello of Creative Planning notes, over the last 12 years the S&P 500 has set 371 new highs, more than in any other 12-year period in its history.

The S&P 500 closed at a new all-time high on May 21, 2024, its 24th new all-time high this year.

While riding out their NVDA jones, investors, traders, and speculators digested some milquetoast fedspeak from Federal Reserve Governor Christopher Waller across two public appearances.

“In the absence of a significant weakening in the labor market,” Waller said in a speech at the Peterson Institute for International Economics, “I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy.”

Later, Waller told a CNBC audience that “if the data were to continue softening throughout the next three to five months, you can even think about doing it at the end of this year.”

Waller has been among the more hawkish policymakers, emphasizing in other recent public remarks the potential need to hold the Fed’s benchmark interest rate “higher for longer” to ensure inflation is trending toward the 2 percent long-term target.

He also said on Tuesday that the Fed isn’t “seeing anything right now that looks like staying here for three or four months is going to cause the economy to go off a cliff” and that further rate increases are “probably unnecessary.”

And that’s pretty good.

We’ll hear more from policymakers this afternoon at 2:00 p.m. ET with the release of the minutes from the April 30-May 1 Federal Open Market Committee meeting.

Expect a hawkish general tone, like Waller’s. Consider too that the most recent FOMC meeting occurred before the release of softer April jobs data and cooler April inflation data. 

deep dive

When Nvidia Talks

What we’re looking for is “color around demand.”

It’s about more than Nvidia $NVDA at this point. Artificial intelligence is the catalyst for just about everything now.

And, to investors, traders, and speculators as well as tech-savvy civilians maybe too, NVDA symbolizes AI.

A lot of companies in a lot of sectors are talking about the impact of AI on their respective bottom lines.

According to Bank of America Research, mentions of AI on earnings conference calls have increased by 186 percent since the first quarter of 2023.

That trend continues to develop, with companies operating in the energy, utility, and materials sectors citing the technology in their public commentary this earnings season.

The effect is apparent in share prices in those and other sectors.

So, NVDA’s 5:00 p.m. ET conference call has the potential to leave a lot of marks.

Data compiled by Goldman Sachs Investment Research show that mentions of artificial intelligence during first-quarter earnings conference calls were up for almost every sector.

NVDA made the fastest move from a trillion-dollar market cap to a two-trillion-dollar market cap of any publicly traded company ever.

It sure is meaningful when the super-small sample size includes iconic names like Microsoft $MSFT and Apple $AAPL.

That happened because NVDA has been beating expectations, raising guidance, and then beating raised guidance for more than a year.

The FactSet-compiled consensus forecast is for revenue of $24.59 billion and earnings per share of $5.80.

What people really want to see is $26 million, even $27 million, and they really want to hear what management has to say about demand for its AI chips and servers.

NVDA is up another 92.61 percent this year after rising 238.87 percent last year. It was up 2.48 percent on Monday and 0.64 percent on Tuesday.

It closed at $953.86, 2.11 percent shy of its all-time high of $974. That’s clearly not more than a day’s work for NVDA.

But, as Mish Schneider discusses in her Weekly Market Outlook, the question here is one of upside: How much higher can NVDA go?

Stick around for that post-close situation.

It could be explosive. 

deep dive |
May 22, 2024

When Nvidia Talks

TO MEME OR NOT TO MEME

Cathie Wood Wants To Make Something Clear

She’s not into meme stocks.

ARK Investment Management founder and chief investment officer Cathie Wood catches heat from critics in the financial community who question her approach to markets.

In a recent interview with Financial News, Wood distinguished what she does from the actions of, say, Roaring Kitty.

“Many people lump what we’re doing into the meme stock category,” Wood said. “But we wouldn’t own one of those stocks. Most meme stocks are very mature companies that have no technological edge.”

The two most prominent meme stocks, AMC Holdings $AMC and GameStop $GME, surged and sagged last week in a reboot of an episode that left a lot of bagholders back in 2021.

Many participants in that initial mania suffered serious financial losses, Wood notes.

Wood’s rating on both AMC and GME is “buyer beware.”

One stock mixed up in the meme-stock craze that isn’t really a meme stock, according to Wood, is Robinhood Markets $HOOD.

The online brokerage in fact benefits from that type of price action. And it surely qualifies as a “disruptor” by Wood’s definition.

Robinhood Markets $HOOD is up more than 60 percent in 2024 and has outperformed meme stocks AMC Entertainment Holdings $AMC and GameStop $GME.

Robinhood is enjoying a boost from the ever-increasing velocity of financial market trading, Wood notes, and is also a contender to be a dominant player in the digital wallet space.

HOOD was up 0.58 percent on Tuesday after introducing new interest rates for margin investing that establish the cheapest funding on the market for individual investors.

The move is designed to attract advanced traders, as HOOD continues to grab market share. It launched 24-hour trading in 2023 and will introduce futures trading later in 2024.

The brokerage’s new rates range from 5.7 percent to 6.75 percent, with lower rates for higher margin balances.

HOOD reported first-quarter earnings per share of $0.18 on revenue of $618 million, a company record. Both figures beat Wall Street estimates: Analysts expected $0.06 per share on revenue of $553 million.

HOOD reported a loss of $0.57 per share on revenue of $441 million for the first quarter of 2023.

Management’s efforts to expand its capabilities and attract new customers appear to be working.

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