All roads lead to NVDA

• Brace yourself…. It’s all about NVDA.

•  Remember all roads lead to Rome.

• Stocks struggle to hold onto S&P 5000.

• Brace yourself…it’s all about NVDA (or that’s what they want you to believe).

• Try the Linguine with Spinach/Ricotta Pesto.

*** I have the honor and pleasure of hosting the Slatestone Wealth’s 2024 Investment Outlook and Policy Webinar – A conversation with Liz Anne Sonders – Chief Investment Strategist at Charles Schwab & Co. on Tuesday February 27th at 3 pm EST.  Click here to grab your seat and seats are limited….I hope to see you there.

All Roads Lead to Rome…..This is a reference to the Roman Empire – when ‘all’ of the roads radiated out from the center of the city…..so no matter which one you chose – you ended up in Rome……So, let’s just say it up front – Today ’All’ roads lead to NVDA.

Now, NO matter what happens today – good or bad – it will all be because of NVDA – just like it was yesterday (more below)…..earnings are due out AFTER the bell, the stakes are high….as NVDA is at the center of the AI revolution…..the stocks is up 47% ytd, this on top of the 250% rise in 2023…..so you can imagine all of the speculation that has been building as a result of excitement…..CEO Jensen Huang never disappointing, but here is the issue – the stock is priced to perfection….there is no room for error (or no room for perceived error) – He almost can’t win here (but he can announce a stock split!) …. ….investors, traders and algo’s have created this ‘panic’…..They have taken this stock (and a few others) to valuations that beg for an explanation, the AI craze consuming the daily conversation…..so strap in, because no matter what happens today (like yesterday) they will tie it back to NVDA…and since the earnings are due out after the bell….the real action will come tomorrow…..

Stocks fell – I won’t say sold off because that suggests a bigger fall – and guess who was at the center of attention…. the Grand Marshall, per se……You guessed it- Anything Tech…..Think NVDA -4.3%, AMZN -1.4%, AAPL -0.4%, TSLA – 3%, SMCI – 2%, ARKK – 2.5%, CIBR – 1.7%, AI – 5.8% IGM – 1.24%, IBM – 2.2%, AMD – 4.7%, ASML – 2%  and the list goes on and on….and you can understand why….’RISK’.

At 4 pm- the Dow lost 65 pts or 0.2%, The S&P – 30 pts or 0.6%, the Nasdaq down 145 pts or 0.9%, the Russell – 28 pts or 1.4%, the Transports down 165 pts or 1% and the equal weight S&P down 20 pts or 0.3%. 

All of this as investors prepare themselves for ‘the NVDA event’ – I mean even taxi drivers are talking about it….(and that usually signals a top…- think the dot come bubble) And you can feel the pressure building……No matter what happens – it will NOT be enough….they want so much that they want even more….in my view – the path of least resistance is down…..just because of the move up into earnings has been dramatic….….the trader types will hit the sell button to lock in big profits and the big asset managers that own millions of shares – will peel off a piece and raise some cash…..Why?  because they can and they should as it takes on an even bigger position in the portfolio – raising the risk profile….So, again, be careful about assuming….why the sellers are selling…is it bad news or is it just risk management…and then what about the investors that are buying NVDA during this time….what are they doing?  Well, some are using any weakness to build their position, and some are just getting started in building a position….and some may even be covering a ‘short’ position that they created coming into the report….

Now if by chance Jensen does disappoint (or is perceived to disappoint)  – then expect bigger fallout…but remember – APPL reported earnings of $119 billion in 3 months, they offered upbeat guidance blah, blah, blah….but the trader types were unhappy – because they only earned $20 billion in  China instead of the expected $25 billion …..they took the stock down 3% that day and then another 3% over the next couple of days….only to rally back by 6% until last week….when the speculation began to build about what NVDA will do or say….….and that has affected anything tech…..and that was the story yesterday and will be the story today…..and then again tomorrow…..and maybe even next week…(depends on what Jensen says….)

Eco data yesterday saw the Philly FED Non-Manufacturing Survey plunge by 8.8 pts…. this on top of the 3.7 point fall last month….and that suggests (to some) weakness in the services sector which translates to weakness in the economy which translates to the need for JJ to cut rates…. They just can’t let go of the rate cut narrative……they are going to beat it to death…until they get their way…..but we will need more than the Philly FED to drive that conversation…..We will get more ‘services’ data tomorrow and that is expected to remain in expansionary territory…so again, conflicting data…. but we need to consider these data points with all of the other data points that will present themselves over the next couple of months……and remember – I am still in the ‘no rate cut camp’ – the data does not support it….but I am one lone voice in a sea of many…..

Bonds which have been under pressure of late – sending 2 and 10 yr. yields higher found buyers yesterday and that bond yields slightly lower…..but nothing to write home about…the 2 yr. is still yielding 4.58% while the 10 yr. is yielding 4.25%.....Rates well above where they were just 2 weeks ago….but below the level that is sure to create even more angst for investors and the markets….and with a deluge of supply coming to markets this year – the jury is still out on where bond yields will be next week, next month or next quarter.

Eco data today includes the January FOMC mins….and do you really expect to learn anything new?  Do you think the minds will change the narrative? They won’t but you can be sure that there are some that will try to find a word or a sentence that challenges the higher for longer conversation…. Again – I expect to learn nothing new from this release…. And mortgage apps? They took a hit….down 10.6% as mortgage rates rise……Current 30 yr. money is now trading at 7.25%, up from 6.8% a couple of weeks ago…..Tomorrow brings us S&P Manufacturing and Services PMI’s – both expected to be expansionary and Existing Home Sales which are expected to be up 4.9%.....Those would be data points that do NOT support the rate cut narrative but rather support the higher for longer narrative….Just sayin’.

Oil continues to toss around in the $75/$85 range….as the tensions in the RED Sea remain high and shipping costs surge as a result…. This morning it is down 50 cts at $76.55.

Gold also tosses around in the $2000/$2050 range as it too awaits more data on what the FED intends on doing…. Will the minds change that story?

This morning futures are DOWN!  Are you really surprised?  Dow down 65 pts, the S&P’s down 10, the Nasdaq down 80 and the Russell down 6.  It is the ongoing nervousness surrounding NVDA and the reaction of the algo’s….…..to which I will say – don’t get dragged down – unless you are so overweight NVDA and tech that you can’t help yourself….but then again – that also depends on who you are….and where you are in the life cycle….But in any event – hold on to your hats…the market has been looking for a reason to back off…we discussed this….I am hoping that this is the catalyst….a nice, swift 5% pullback would not be the worst thing to happen and is well within what is considered a normal trading pattern….….and it would give the long term ‘diversified’ investor a chance to go shopping….

All I’m saying is the market never moves in just one direction forever ––Valuations get stretched and then they, reprice…. the repricing (most times) depends on how stretched they were…. Other times, a repricing can happen because the story changes and as a long-term investor you have to be able to know the difference.  If you are a day trader or a more active trader then none of that makes a difference to you, you just want to buy ‘em and sell ‘em…. And that’s’ what makes a market…buyer and sellers….

Stocks in Europe are mixed…. Only the UK is in negative territory….and while there are some earnings due out…. there is no eco data to drive the tone….so markets there await the tech reaction here….

The S&P closed at 4975….down 30 pts….leaving it once again struggling to hold onto the new millennium…..(5000)…..Again – short term trendline support is at 4821….down 3% from where we are…..Intermediate term trendline support is at 4598 or 7.5% lower….again – STILL in the normal range…..a bit more uncomfortable, but still normal…and the long term trendline is at 4489 – or 9.8% from here…..or 10.7% off the all time high of 5026……So, just put that in your mailbox….because it is not a stretch to get there if something unforeseen happens….and while it will be more uncomfortable – it will shake the branches enough to cause investors to rethink valuations.  I do not think that’s where we are going…but I also would not be surprised if the algo’s overreact…which they always do….

Anywhere between 5000/5050 still feels a bit toppy to me – and so I expect more ‘backing and filling’ and maybe this is the start.  Call me to discuss.

I am away until Monday – February 26th….See you then.

Linguine in a spinach/ricotta pesto

This takes all of 15 mins to make and will become one of your family favorites.

You need:  1 lb. of Linguine, 1 large bag of fresh spinach, olive oil. Fresh grated Parmegiana cheese, pignoli nuts, and fresh ricotta cheese. s&p.

Start by bringing a pot of salted water to a rolling boil.

In a large sauté pan – heat up some olive oil and add the spinach.  Sauté until soft.

Add the pasta to the pot and cook for 8 mins.

Now in a food processor – add the cooked spinach, the ricotta, the nuts, the parnegiana, olive oil and s&p.  Blend well.

When the pasta is aldente- remove with tongs and put in the sauté pan.  Add the spinach pesto and a ladle of the pasta water (tears of the Gods).  Mix well. And serve.  Simple, Fast and Delicious.  Yum!