What to know today

  • 40,000 is a big, round number.
  • Walmart is the king.
  • There’s gold in that 13F.
markets

What Comes Next

It’s been an exciting week.

It didn’t finish up there, but the Dow Jones Industrial Average entered previously unexplored territory on Thursday.

For the first time ever, the Dow crossed the 40,000 mark, floated by fresh rate-cut hope.

All the major indexes flirted with new highs before sagging into the closing bell, even as the biggest retailer in the world posted another quarter of expectations-beating financial and operating results.

Carl Quintinilla of CNBC shared a nice table on the social media platform formerly known as Twitter breaking down responsibility for the Dow’s rise from 30,000 in October 2022.

The Dow Jones Industrial Average crossed 40,000 for the first time on May 16, 2024.

That accounting is not up to date.

The outlier – the only component with a negative contribution to the Dow during the relevant time frame – announced a major acquisition on Thursday.

Johnson & Johnson $JNJ is buying privately held Proteologix for $850 million in cash. Proteologix's experimental eczema treatments are in various stages of development.

JNJ has been burdened by the uncertainty of thousands of lawsuits alleging its talc products contain asbestos and cause ovarian cancer.

The stock was up 1.02 percent on the deal news but is down more than 12 percent since reaching a 52-week high of $175.36 last July 28.

The S&P 500 reached a new all-time high on May 15, 2024.

One name that doesn’t appear up there is in the middle of its own “new highs” drama, though the vibes here are generally positive.

Nvidia $NVDA closed down 0.29 percent on Thursday but is within 3.22 percent of its all-time high of $974, reached during the trading day on March 8. 

The chipmaker will report its fiscal first-quarter financial and operating results next Wednesday, the last of “The Magnificent Seven” to do so this season.

That event seems like kind of a big deal, given recent price action at a general as well as a specific level. The S&P 500 did hit a new all-time high as recently as Wednesday.

As the saying goes and a whole lot of data supports, nothing is more bullish than new all-time highs.

We’ll see whether NVDA catalyzes the next leg higher next week or causes what will inevitably prove to be just a pause on the way up and to the right.

deep dive

A Full-Spectrum Retailer

Walmart is catering to everyone.

One of the articles in our What We’re Reading list on Thursday suggested right up in the headline that “strong Walmart earnings may already be priced in with shares near record” highs.

That wasn’t the case: Walmart $WMT surged in the pre-market, gapped higher at the open, and climbed 6.99 percent today.

That’s WMT’s best earnings-day reaction since August 16, 2018, when it rallied more than 9 percent.

And it peaked at $64.42 intraday, a new record high. It also crossed the $500 billion market capitalization threshold for the first time.

E-commerce sales were strong, up 22 percent for Walmart US, 19 percent for the international segment, and 18 percent for Sam’s Club. Results for Walmart’s ads business were solid as well.

Walmart $WMT had its best earnings day reaction since 2018 on May 16, 2024, rising nearly 7 percent after reporting expectations-beating results.

CEO Doug McMillon said during the company’s conference call that earnings were “stronger than we anticipated.” McMillion noted that consumer demand for value supported market-share gains, with notable growth in high-income shoppers. 

WMT reported adjusted earnings per share of $0.60 versus a consensus expectation of $0.53.

Revenue was up 5.8 percent to $161.5 million, beating the FactSet-compiled consensus of $159.6 billion. Same-store sales growth of 3.8 percent beat a forecast of 3.7 percent.

Management said it expects to be in the high end or to slightly exceed its previous full-year sales growth and adjusted EPS guidance of 3 percent to 4 percent and $2.23 to $2.37, respectively.

And so it goes for WMT, which, if it’s conceivable, seems to be getting even more ubiquitous.

deep dive |
May 17, 2024

A Full-Spectrum Retailer

GOLD

Burry Goes Long Gold

What’s the meaning of this?

We have another returning financial market folk hero/antihero this week.

From the Research Desk, we learn that Michael Burry of “The Big Short” fame is bullish on gold.

That’s according to the most recent Form 13F filing by his firm, Scion Capital Partners, with the US Securities and Exchange Commission.

This is the guy who made enough of a name with his bet against the US housing market in 2005 that Christian Bale played him in a movie.

Apparently, he dumped all of his Alphabet $GOOGL and all of his Amazon.com $AMZN to load up on the Sprott Physical Gold Trust $PHYS.

A $7.6 million purchase during the first quarter made PHYS Burry’s fifth-largest position as of March 31 at 7.37 percent of his portfolio.

JD.com $JD (9.53 percent) is Burry’s biggest position, followed by Alibaba Group $BABA (8.74 percent), HCA Healthcare $HCA (8.06 percent), and Citigroup $C (7.64 percent).

Burry’s reallocation is certainly compelling. But this is not a concentrated bet. And it’s not even much of a contrarian move.

Perhaps more probative is that Burry, in backing up his truck for the yellow metal, has just recently joined non-Western central banks in their longer-running portfolio adjustment efforts.  That’s what’s driven gold to new all-time highs this year, as Sultan Ameerali of Consolidated Rock Holding Company notes in a recent StockPick Interview.  “What you're seeing is a separation of the gold market from US fundamentals,” Ameerali explains. Net buying of the biggest ETF in the space, the SPDR Gold Trust $GLD, is declining, which, as Ameerali notes, indicates outflows of gold.  “Yet the price of gold keeps going up. And I think what that's telling you in the short run is that gold fundamentals are no longer being dictated by the United States or North America.   “What it's being dictated by is buying in Asian markets and buying in countries where they're trying to conduct trade without using the US dollar.”  China is diversifying its foreign reserves, in what multiple Beijing-watchers have characterized as a response to the Biden administration’s “weaponization” of the US dollar against Russia following the latter’s invasion of Ukraine.  In the last 18 months, China has accumulated more than 300 metric tons at a total purchase price of $561 billion.  So far in 2024, China has added 29 metric tons. The Middle Kingdom now holds more gold than it ever has, at 4.9 percent of its total foreign reserves.

Perhaps more probative is that Burry, in backing up his truck for the yellow metal, has just recently joined non-Western central banks in their longer-running portfolio adjustment efforts.

That’s what’s driven gold to new all-time highs this year, as Sultan Ameerali of Consolidated Rock Holding Company notes in a recent StockPick Interview.

“What you're seeing is a separation of the gold market from US fundamentals,” Ameerali explains. Net buying of the biggest ETF in the space, the SPDR Gold Trust $GLD, is declining, which, as Ameerali notes, indicates outflows of gold.

“Yet the price of gold keeps going up. And I think what that's telling you in the short run is that gold fundamentals are no longer being dictated by the United States or North America. 

“What it's being dictated by is buying in Asian markets and buying in countries where they're trying to conduct trade without using the US dollar.”

China is diversifying its foreign reserves, in what multiple Beijing-watchers have characterized as a response to the Biden administration’s “weaponization” of the US dollar against Russia following the latter’s invasion of Ukraine.

In the last 18 months, China has accumulated more than 300 metric tons at a total purchase price of $561 billion.

So far in 2024, China has added 29 metric tons. The Middle Kingdom now holds more gold than it ever has, at 4.9 percent of its total foreign reserves.

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