What to know today

  • Nvidia does it again.
  • Target seeks direction.
  • What to do with $6 trillion.

The AI Boom Is Still On

What did you expect…

Nvidia $NVDA forecast fiscal second-quarter revenue of approximately $28 billion, more than satisfying analysts who expected guidance of $26.8 billion.

NVDA, down 0.46 percent during regular trading hours in a session marked by yet another overreaction to fedspeak, was surging in the post-market, up more than 5 percent and pushing toward $1,000 at last check.

Revenue for the three months ended April 30 was $26 billion, up 18 percent compared to the fourth quarter and 262 percent compared to the same period last year. Data center revenue was up 23 percent sequentially and 427 percent annually to $22.6 billion.

Earnings per share surged 21 percent quarter over quarter and 629 percent year over year to $5.98.

Founder and CEO Jensen Huang sounded one of his favorite themes in a statement announcing the results: “The next industrial revolution has begun.

“AI will bring significant productivity gains to nearly every industry,” Huang continued, “and help companies be more cost- and energy-efficient, while expanding revenue opportunities.”

Nvidia $NVDA was up more than 4 percent early in after-market trading on May 22, 2024, following its fiscal first-quarter earnings release.

Management also announced a 10-for-1 share split, which will happen on June 7, as well as a 150 percent increase in the quarterly cash dividend from $0.04 per share to $0.10 per share. It’ll be $0.01 per share on a post-split basis.

“Even in the face of huge expectations,” Ryan Detrick of Carson Group said, “the company once again stepped up and delivered.” Detrick noted the strength of the “always important” data center revenue and of management’s forecast.

“Bottom line, the bar was high, and Nvidia cleared it once again.”

And the artificial intelligence boom shall proceed apace.

It had been a quiet day through the lunch hour, the major indexes straddling their respective lines between positive and negative territory.

Even before the minutes from the April 30-May 1 Federal Open Market Committee dropped, sellers had taken control.

It’s hard to figure why that was so, but it was.

The S&P 500 was down 0.27 percent on May 22, 2024, sliding into the red following the release of the minutes from the April 30-May 1 FOMC meeting.

It’s like we discussed on Tuesday: Policymakers’ general tone was going to be hawkish, as indicated by the data that had most recently come in at the time.

The data that have come in since the meeting suggest more progress than did the information available when they got together three weeks ago.

Investors, traders, and speculators would do well to note both the difficulty and the futility of fixing an inflation assessment at a given moment.

Somebody out there surely faded the minutes release, anticipating an overreaction to stale commentary, and caught the last-hour bounce too.

Good for them.

Seems too like NVDA has provided impetus for some fresh all-time highs. 

deep dive

Target Has Its Own Problems Subhead

Retail is a competitive business.

Target $TGT gapped down at the open on Wednesday after management reported disappointing fiscal 2025 first-quarter results.

TGT missed analyst expectations and for sales and earnings, and guidance was gloomier than forecast as well.

The stock was down as much as 10.14 percent intraday before closing lower by 8.03 percent. It’s a particularly bad look for TGT following Walmart’s $WMT act.

What appears to be the lesser retailer reported adjusted earnings per share of $2.03, missing a FactSet-compiled consensus estimate of $2.06 and down from the $2.05 it posted a year ago.

Revenue was down 3.1 percent year over year to $24.5 billion. Same-store sales fell by 3.7 percent. Both figures were in line with the consensus forecast.

But it’s the fourth straight quarter TGT has reported declining same-store sales.

Management guided to flat to 2 percent growth for same-store sales for the second quarter. Analysts expected 1.5 percent.

Second-quarter EPS will be $1.95 to $2.35, the midpoint of $2.15 falling below a consensus estimate of $2.20.

Full-year sales growth will be flat to 2 percent, and adjusted EPS will be $8.60 to $9.60.

Target $TGT declined by 8.03 percent on May 22, 2024, after management reported disappointing fiscal first-quarter results.

The urge to extrapolate from TGT’s recent showing some meaning about the health of the US consumer is both strong and natural.

But the story here is probably more about competition – from Walmart as well as Costco $COST. Those two are killing it with value and groceries.

As for larger lessons, here’s Barry Ritholtz of The Big Picture and Ritholtz Wealth Management:

We all understand the economy is complicated and strength in consumer spending and wage growth are not evenly distributed. Especially at extremes, we disregard sentiment data at our peril. But when I look at specifics across the economy, I cannot help but notice that across each quartile of consumer spending, demand continues to overwhelm supply…

What follows is an inventory of spending categories from the mundane to the exotic as well as some good old-fashioned anecdotes and observations.

It adds up to a basic conclusion that consumers are generally bullish.

deep dive |
May 23, 2024

Target Has Its Own Problems Subhead

Fixed Income

How To Prep for a Cut

There are many ways to find a fair rate of return.

When we talk about stuff like “fuel” for more upside, what we refer to are things like the $6 trillion in cash held by investors right now, according to the Investment Company Institute.

Rising interest rates have meant that savers and other people with cash balances have been treated fairly well recently.

That’s about to change, though, if UBS is correct in its assessment of how the Federal Reserve will treat incoming inflation data from here.

Taking account of April Consumer Price Index data suggesting halfway decent progress on inflation, the bank expects 50 basis points of cuts to the Fed’s benchmark interest rate this year.

As of its most recent Summary of Economic Projections in March, Federal Reserve policymakers expected 75 basis points of rate cuts in 2024.

The world’s most important central bank is likely to start easing in September, UBS says.

Positioning for what UBS chief investment officer for the Americas Solita Marcelli anticipates will be a soft landing doesn’t necessarily mean backing up your truck for Big Tech stocks.

It could, however, mean rotating out of cash and money-market funds and into bonds and high-quality credit instruments.

That list includes agency mortgage-backed securities, investment-grade corporate bonds, AAA-rated commercial mortgage-backed securities, and 10-year Treasury Inflation-Protected Securities.

Marcelli, in a May 9 note, also observed that “a data-dependent Fed is not a hawkish Fed.”

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