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Tech sold off. Say it ain’t so.
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Durable Goods much stronger than expected.
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Bonds steady, Oil surges and gold advances.
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Countdown to NVDA begins.
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Marky Z admits pressure to censor ‘some’ content.
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Try the Steak Florentine.
Oh boy…what happened? The Nasdaq fell? NVDA fell? META fell, AMZN fell, AMD fell, WHAT is going on? All this as the Dow kissed and MADE a new high (23rd time this year) as we wait (patiently) for Jensen Huang (JH) to take the stage tomorrow at 4:10 pm….
(Correction – yesterday I made a mistake - I said NVDA earnings were due on Thursday, August 28th – it is Wednesday, August 28th, please excuse the mistake).
The Bloomberg Magnificent 7 Index slid by 1.2% (BM7T Index) is a Total Return equal weighted index of the Magnificent 7 (GOOG, AAPL, AMZN, NVDA, TSLA, META & MSFT). It has become a widely watched index by the ‘paparazzi’ and is up 39% ytd…. In any event – it fell yesterday and that caused all kinds of concerns for the ‘hot button’ traders/algo’s that are getting itchy to react to NVDA’s earnings.
Many wondering if yesterday’s action was just a tease to see who will bail and who will not. I think its comical…. Yesterday, I pointed out that the options market is pricing in a 10% move lower if JH disappoints while a 10% move up will happen if he doesn’t disappoint…. but here is the question – who decides if he disappoints? What I think may not be what you think… And there it is…. Buyers and Sellers!
If the traders & algo’s do not like what they hear – they will run for the door and the buyers will see that and then back off – letting the sellers fight each other to get OUT the door….sending the stock lower…yet if they like what they hear – then the buyers will scramble and the sellers will watch them fight to get IN the door sending the stock higher…. So, make a decision – is NVDA in danger or not? I’m in the ‘NOT’ camp – just so you know…. You do you….
Remember – much of your decision is who you are as an investor. If you are a day trader then you are ready to hit the sell button and lock in some of those recent 40% profits since the August 6th rally began and if you are an investor then you are loving the 182% gain this year and if it backs off by 10%, you’re good, you are not panicking…. Now if you are just starting to invest and you own the name up here, then taking advantage of a 10% selloff would make sense…(always looking to improve your cost), while at the same time making sure you don’t take yourself out of balance, or if you do, do it knowing that you did. Again, this speaks to the ‘plan’ – make sure you have one!
By the closing bell – the Dow added 65 pts, the S&P lost 18, the Nasdaq gave up 152, the Russell ended flat (a win), the Transports lost 54 pts and the Equal Weighted S&P gave up 4 pts.
Durable goods which were expected to be up 5% surged by even more…coming in at +9.9%. Now, a strong durable goods report typically indicates that businesses and consumers are buying machinery, appliances, vehicles (all Durable Goods) at a higher rate…..and that suggest business confidence, consumer confidence, economic growth, and possibly job creation….BUT if demand is too high – then it could also be a root problem for inflation…. Demand outstrips supply – Econ 101, Capisce?
Next up – two FED heads made some comments….San Fran’s Mary Daly – you remember her, don’t you…(The one who missed the Silicon Vally Bank Failure) – well, she came out to say that she believes that it is time to cut, while Richmond’s Tommy Barkin – still sees upside risks for inflation BUT will follow the herd in cutting rates rather than see the labor market cool.
And then add in all chaos created in the Middle East – sending oil higher and gold higher as the temperature in the region rises and you have reasons for caution ahead.
Bonds didn’t do anything yesterday and this morning the 2 yr. is yielding 3.93% and the 10 yr. is yielding 3.83%.
Oil (WTI – West Tx Intermediate) rose by 3.1% yesterday – closing at $77.16/barrel….Now, in addition to the angst created by the weekend drama between Israel and Hezbollah - Libya announced that they are halting exports as the tension builds in the middle-east – and all that does is take supply off the market putting upward pressure on the asset.
But this morning – oil is down 40 cts at $76.82…The story today? Yeah, it’s that OPEC+ story about raising production even as China demand is (supposedly) slowing, it’s the NON-OPEC producers continuing to add barrels to the market and it's the global crude supply outstripping demand story…..Overnight both Goldman and Morgan Stanley CUT their 2025 Brent crude price forecast to sub $80 barrel. Brent is currently trading at $81/barrel. Whatever – all I know is that the world needs energy to spin… and while all the big boys – think XOM, CVX are big oil producers, they also have a (substantial) stake in the renewables business as well….I’m good owning the biggest players in the industry that also pay healthy divvy’s (3.2% and 4.4% respectively) as part of a portfolio.
Gold traded in a $20 range…. $2544/$2564 only to close at $2553. This morning Gold is down $7 at $2546. It remains in the $2525/$2575 trading range on the hopes that we get a 25 bp cut in September…If we do, I would not be surprised to see gold traders take profits in the recent move to new highs…while remaining in the broader $2500/$2600 trading range.
Eco data today includes Conference Board Consumer Confidence – expected to be 100.8 along with the Conference Board Expectations…. We will also get the Richmond Fed Manufacturing Index of -14, along with the Dallas Fed Services Activity Index.
US futures are UP…. Dow futures are flat, S&P +6, while the Nasdaq +46 pts and the Russell is +2. Now while futures are up this morning, volumes are expected to be thin….as investors wait for NVDA tomorrow and more inflation data at the end of the week.
Again, the stakes are high for NVDA and while they are expected to ‘double’ both earnings and revenues – the ‘whisper’ number is a double PLUS – and all that does is create even more excitement and anxiety…. Capisce?
Don’t forget even if the numbers blow the roof off – it will be the guidance that everyone focuses on….and if for some reason the guidance isn’t what the algo’s expect – then watch as the algo’s melt down……and since NVDA’s weighting in the S&P is second only to APPPLE – any disappointment will create large waves of selling that will reverberate across the whole tech space…. And a 10% drop in NVDA would take 160 pts out of the Nasdaq, add in losses for other tech and it could be an ugly day…. but if he surprises then it could also be a beautiful day So, let the games begin.
European markets are all higher by about 0.2%. Again, it is the dog days of summer, trading volumes across Europe are half of the norm….and they too – wait.
The S&P closed at 5616 – down 18 pts…. I do not expect much action today as we wait…. Overnight – we learned that Marky Z (META) wrote a letter to Congress admitting that the Biden Administration forced them to CENSOR covid 19 stories, Hunter stories, Biden/China stories…..OH boy…..Can’t wait to see how this turns out….or will it just get downplayed as if it doesn’t matter anymore….The MSM and the Dem’s will just ignore the story…Nothing to see, move on.
In the end - it is important to always take a ‘balanced’ approach to long term investing…try not to make ‘emotional’ or ‘rash’ decisions, yet do not become so complacent that you lose sight of what is going on around you.
Steak florentine
You will need: The steaks – you need a nice thick steak, Garlic cloves, Pork fatback, dried rosemary, coarse salt (kosher salt works nicely) and pepper.
Rinse under cold water and pat dry with a paper towel. Leave on a platter for about 20 mins so that they get to room temp.
In a food processor blend the pork fatback, garlic, rosemary to a paste like consistency. Next - wash your hands and massage this mixture into the steaks - taking time to make sure that you have worked the meat and the mixture well. Now season with S&P. Set aside.
Light the grill and turn the heat to high and allow the grill time heat up - it must be nice and hot. Place the steaks on the grill and cook for about 4 min/side - depending on thickness - This will result in a med rare steak...so if you add a couple more mins on each side you will get a more cooked center.
Remember though - when you remove the steaks from the grill - you will cover and let them rest for 4 mins allowing them time to continue cooking and allowing for the juice to flow. Once ready serve immediately on warmed plates. Mashed potatoes and peas always work well with this dish along with a mixed green salad with red wine vinaigrette dressing.
This meal deserves a robust red wine - my favorite is Brunello di Montalcino.
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