What to know today

  • JPM is looking for a leader.
  • NVDA is a question of upside.
  • The turning of a bear.
markets

After Jaime Dimon

Wall Street is looking forward, a little uneasily.

The major indexes were mostly positive on Monday, all but the Dow Jones Industrial Average closing in the green.

The Dow gave up the 40,000 level, brought lower mostly by JPMorgan Chase & Co. $JPM, which was down 4.46 percent, and Cisco Systems $CSCO, which shed 2.24 percent.

JPM and CSCO combined for about a 63-point intraday drag on the Dow.

Travelers $TRAV (down 1.86 percent), Home Depot $HD (1.82 percent), and McDonald’s $MCD (1.64 percent) also made notable subtractions.

JPM’s big move appears to be at least in part a reaction to Jaime Dimon’s comments about succession planning at the biggest of the big banks during an investor day Q-and-A session.

The Dow Jones Industrial Average was down 0.49 percent on May 20, 2024, and fell back below the 40,000 level.

The other part is that he said JPM won’t be buying back many shares with the price where it is. But that’s a short-term thing.

Calling back to his once-pat answer, Dimon said the forecast is “not five years anymore” for his anticipated tenure. That’s the long-term thing.

Dimon has been CEO of JPM since 2006, into and through both the Global Financial Crisis and the Great Recession as well as the COVID-19 pandemic panic and recovery.

He learned from people who held top slots at major financial corporations during the 1987 crash, the 1997 Asian crisis, and the dot-com implosion.

He’s seen a lot. Investors, traders, and speculators are trying to put a price on Dimon’s deep institutional memory and his experience of market history.

JPMorgan Chase & Co. $JPM was down 4.50 percent on May 20, 2024, as CEO Jaime Dimon hinted his tenure may be coming to an end.

It’s a big question for the company and for the stock. 

“We’re on the way, we’re moving people around,” Dimon said. He also said, “It’s up to the board – it’s not up to me.

“I have the energy that I’ve always had. That’s important. I think when I can’t put the jersey on and give it my fullest, I should leave, basically.”

JPM also boosted its guidance for full-year net interest income from $90 billion to $91 billion, citing fewer-than-expected rate cuts by the Federal Reserve.

Price action yesterday and today is mostly about Wednesday, when we’ll see the minutes from the most recent Federal Open Market Committee meeting and we’ll hear from Nvidia $NVDA about its fiscal 2025 first quarter.

deep dive

Just Beat It

That seems to be Nvidia’s refrain.

As Mish Schneider says at the top of her Weekly Market Outlook, “How can we do this without talking about Nvidia $NVDA with the big earnings on Wednesday?”

The interesting thing about NVDA to Mish right now is that people like Stanley Druckenmiller are selling the stock and saying, essentially, “Thank you very much.”

The question Mish has is that at these levels, up at around $950, how much higher can it go?

What Druckenmiller is saying is, “I'll take my money off the table.”

Analysts, of course, are boosting their 12-month price targets – but we’re talking about $1,000, $1,050.

Mish notes that NVDA’s all-time high is $974, “so we're not that far away as we're getting closer to earnings.”

These analysts note that from a price-to-earnings perspective, as we discussed on Monday, NVDA is not even overvalued.

Nvidia $NVDA will report fiscal 2025 first-quarter earnings after the close on May 22, 2024.

In fact, based on forecast earnings growth, the stock might even be cheap on a price-to-earnings basis.

Another way to look at it is from a technical perspective: NVDA is showing a bearish divergence based on momentum.

So decisions like Druckenmiller’s make a certain amount of sense: lock in some profits.

If you’re thinking about establishing a new position, consider what analysts see as upside from here: $1,000, $1,050.

That looks to Mish like limited upside with potential downside signaled by that momentum divergence.

NVDA’s recent pattern is to beat expectations, raise guidance, and then beat raised guidance.

That’s a heavy tempo to keep. And we’ll see soon enough whether it continues.

deep dive |
May 21, 2024

Just Beat It

S&P 500

Mr. Wilson Has Set the Price

A Morgan Stanley bear makes a bullish adjustment.

All the major financial media outlets covered this one: Morgan Stanley $MS strategist Mike Wilson has raised his target for the S&P 500 by 20 percent and now expects to see the index at 5,400 by June 2025.

Wilson had seen it sinking to 4,500 by December. The strategist issued a bearish outlook ahead of a 24 percent-plus rally for the S&P in 2023.

It’s good when people change their minds, especially when the catalyst is a combination of solid facts and evidence-based conclusions.

Wilson wrote to clients on Sunday that he expects to see “robust” earnings-per-share growth of 8 percent in 2024 and 13 percent in 2025 as well as margin expansion both years.

Wilson also anticipates a “sunny macro environment” over the relevant time frame in the US.

With less than 10 percent of the index left to report, S&P 500 components have posted average earnings growth of 7.1 percent versus a consensus expectation for 3.8 percent growth.

And nearly 80 percent that have reported have beaten expectations.

Morgan Stanley strategist Mike Wilson raised his 12-month target for the S&P 500 by 20 percent to 5,400.

Wilson favors “large caps over small caps and a barbell of quality growth and quality cyclicals.” He upgraded industrials to “overweight,” noting that a recent pullback has created an attractive entry point.

He noted that an increasing number of companies among industrials subgroups including capital goods, commercial and professional services, and transports have revised earnings estimates upwards during the soon-to-conclude reporting season.

The strategist highlighted his preference for growth stories and aerospace and defense stocks.

He is not exactly bullish on the S&P 500, with his revised forecast implying 1.73 percent upside from its Monday close to next June.

On Friday, Deutsche Bank $DB strategist Binky Chadha, who had been working with a range of 5,100 to 5,500, firmed up his forecast for the S&P 500 to reach the high end by year’s end.

Chadha said earnings growth has “plenty of legs.”

JPMorgan Chase & Co. $JPM strategist Dubravko Lakos-Bujas reiterated his forecast for a slide of more than 20 percent for the S&P 500 by year’s end on Sunday.

Softening economic data suggest companies will be hard-pressed to sustain their earnings growth in the third and fourth quarters, and the “hurdle rate” is “optimistic.”

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