Algo-fueled market surge hits new highs, earnings season heats up – What’s next for investors

• The Columbus Holiday sent stocks higher.

• NVDA closes at an ALL time high.

• Lots of interesting stuff to discuss.

• Earnings representing 5 different sectors to hit the tape in mind.

• Oil down as Israel rules out hitting Iranian energy assets – but there are other targets.

• Gold up, Central banks singing its praises.

• Try the Shrimp Cardinale.

Yesterday was a holiday, bond markets were closed, yet stocks raced higher again – as the programmers must have only programmed the algo’s to buy….hitting yet another ‘all time high’ as the markets await the earnings season – that kicks into full swing this morning -  that is expected to re-enforce the idea that JJ managed to navigate a soft landing and that it’s all good.  Volumes were low, (Columbus holiday) and that contributed to exaggerated move up…. But I’m not complaining!

At the end of the day- the Dow added another 200 pts or 0.5%, the S&P 45 pts or 0.8%, the Nasdaq +160 pts or 0.9%, the Russell up 15 pts or 0.6%, the Transports up 110 pts or 0.7% while the Equal Weighted S&P added 50 pts or 0.7%. 

It is kind of a light week in terms of eco data…. There is none today, tomorrow brings import/export prices (not a market mover) – I mean when was the last time you asked me – ‘Should I buy stocks because of the Import/Export numbers? Really?  

Wednesday we’ll get Retail Sales (now that could be  a market mover) and they are expected to be UP  - suggesting that we just can’t stop spending (and that suggests the economy is just fine, but if they come in even stronger than the estimates that could mean the FED needs to stop cutting – just sayin) …Top line up 0.2%, Ex autos and gas +0.3%. We will also get the Philly Fed Business outlook – again not a market mover, but it too is expected to be slightly higher. 

Thursday brings us the usual suspects – Initial Jobless Claims and Continuing Claims (nothing dramatic expected) and it also bring us Industrial Production, Capacity Utilization, Manufacturing Production and Business inventories (all expected to be slightly lower).

Then on Friday we’ll get Housing Starts and Building Permits AND those are also expected to be lower - 0.7% and - 0.3% respectively.

So – what will investors, traders and algo’s focus on?  Earnings and they start with a range of reports this morning at about 7 am. Look for results tomorrow from JNJ (large pharma and a Dow & S&P name), BAC (Diversified Banks – S&P) , UNH (Managed Care – also a Dow and S&P), PNC (Bank – S&P), SCHW (Wealth Management – S&P), PGR (P&C Insurance – S&P), GS (Institutional Brokerage – Dow and S&P), STT (Institutional Trust, Fiduciary and Custody – S&P)  & C (Diversified Banks – S&P).  I noted which index they participate in so that you can understand how they affect the performance of that index – NOTE there are no Nasdaq, Russell or Transport names in that group.  S&P participation is in both the S&P and the Equal Weight S&P).

Remember – the expectations – while they might beat the estimates –they may most likely NOT beat the y/y comparisons….AND that is not a surprise…. Analysts have made that very clear.  Strategists are predicting the ‘weakest results’ y/y, while positive guidance is expected to be up by 16%.  Recall what happened on Friday – they all beat the EPS number, 3 out of 4 beat the Revenue number, but none beat the y/y comparisons…And that is ok – we knew that – and what did the market do?  Rallied. Why?  Because the guidance was ROBUST – Capisce?

Remember- earnings are history – investors look to the future to make investment decisions – You want to know what the C-suite says about the economy and how it affects their business and what they think their ‘employment demands’ might be, and what they expect out of their customers – do they see demand rising or falling and then what are they predicting for revenue growth and earnings growth.

In the end – the risk is about not being invested; the trick is to be invested in a well-diversified, balanced portfolio which is why you need to talk to your advisor.

OK – but we can’t let the morning go without noting that NVDA shares raced to a record high $138.07 on ‘fierce demand of the Blackwell AI chip’ - this after they calmed the nerves and concerns about this product delay (that they announced last qtr.) while affirming the long-term growth prospects…. The stock is up 16% this month, taking it up 178% this year. Ok – did you get that?   This morning the stock is quoted down $2 or 1.4% at $136.30/$136.35. 

Note that you’ll hear people talking about the ‘Hyperscalers’ and how they are responding to anything NVDA…Hyperscalers are not a sector per se, rather they are names that operate data centers and scalable cloud computing services. Think AMZN, MSFT, IBM, ORCL, CSCO & BABA.

And another sector you really have to consider – on the back of the NVDA play – are infrastructure names…like CRH +33% ytd, MLM +11% ytd & VMC +10% ytd. (who is going to supply and build all those ‘data centers’).

And then think about Utilities and Nuclear reactors – (who is going to supply all that electricity)  URNM- Sprott Uranium Miners ETF would be a good way to get some exposure to the whole group….It is an underperformer this year – down 1% ytd….but now that GOOG announced the purchase of nuclear reactor – you can see where this is going.

Bond mkt was closed…. this morning 2 yrs are at 3.95% and the 10 yr is at 4.06%. (Remember – I do expect the 10 yr to challenge trendline resistance at 4.16% and that just might cause stocks to settle down).

Oil traded down 5% to end the day at $71.85 and this morning it is down another 4.6% at $70.42…this as Israel is not expected to hit Iranian energy assets (but are willing to take out military and nuclear assets suggesting that while they will listen to what the US says, they are not bound by what the US says)  while the world continues to try and negotiate any kind of ceasefire between these two. Even China chimed in calling on both countries to ‘avoid the vicious circle of conflict’.  In addition – OPEC also lowered their outlook for global demand in 2025…The latest move takes oil back down thru all 3 trendlines putting it in the $65/$71.80 trading range.

Expect downward pressure on the energy stocks…bot XOM and CVX quote down $4 as well as the Energy ETF -XLE. You can also expect downward pressure on Oil and Gas Exploration names XOP is the ETF but names like CNX quoted down $2, TPL quoted down $5, APA quoted down $1, and FANG quoted down $6.

Gold continues to hang out in the upper 2600’s up $5 this morning at $2670/oz.  Comments overnight from central banks in Mexico, Mongolia and the Czech Republic all telling the markets that they prefer even larger gold holdings amid ‘a confluence of growing geo-political tensions and lower interest rates’ and that suggests that there is a floor under gold.  My sense is that if these countries are saying it out loud – then there are others that are remaining silent but agree.

Trendline support is down at $2581while the chart line suggests we won’t hit resistance until $2750ish.  So, knock yourself out!

The VIX fell yesterday – 3.8%.... on all the stock excitement….…. completely ignoring the weekend exchange of fire in the mid-east and the potential rise in tensions should Israel make a move.  Now it could be that we have almost become numb to the rising tensions – any move may create short term pressure and chaos, yet not negatively price stocks in the long term. The VIX at 19.76 remains above what was trendline resistance – is now trendline support at 18.22.

This morning futures are churning…. Dow futures +25, S&P’s -4, the Nasdaq down 34 while the Russell is down 2.   I would just be careful about chasing just anything up here. Look at the names or sectors that are underperforming vs. the market for opportunity…. If you are establishing a new position – go easy….and if you already own it, celebrate, if you want to add more – be patient and if you want to take money off the table then hit the SELL button.

European markets are mixed as well as earnings season kicks off.

The S&P closed at 5859 – up 45 pts…. Futures are confused, but earnings will surely set the tone…. Get ready – it’s never boring…Give me a call to discuss helping you make that plan that will serve you well.  561-931-0190.

Shrimp cardinale

This is a simple dish to make and is so rich and delicious.

For this you need:  2 lbs. of large, cleaned shrimp – (cut in half lengthwise), butter, 1 lb. of linguine, ¼ c of Brandy, 1 c of heavy cream, marinara sauce and s&p to taste.

Turn on the oven – Bake 350 degrees. Bring a pot of salted water to a rolling boil.

Melt a stick of butter in a large bowl – now toss the shrimp – season with s&p. Lay the shrimp out on a baking dish and bake in the oven for 5 – 7 mins… remove and place in a large sauté pan.  

Put the linguine in the boiling water and cook for 8 mins or so. 

While the linguine is cooking add in the brandy to the sauté pan and allow it to burn off a bit – next add the heavy cream and about 3 or 4 cups of the tomato sauce. Reduce the heat to simmer and allow the sauce to thicken.

When the pasta is done – strain (always keeping a mugful of the water) and add directly to the sauté pan and mix well. You can always add back some of the pasta water if it needs it. Serve in warmed bowls.