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Last week’s market reports were a big deal. Not only that, but their overall trajectory toward a soft-landing for the economy has led the stock market to new record highs. Retail Sales, Homebuilder Confidence, Leading Economic Indicators and especially Consumer Price Inflation (CPI) all pointed to slower growth domestically, without threatening to crash into negative territory, at least not based on current data. We now start a new trading week with the Dow above 40K for the first time.
In fact, market indices are drifting higher from here. The Dow is currently up another +30 points, the S&P 500 is +10 and the Nasdaq is +50 points at this hour. We have few, if any, major economic reports expected in this last full trading week before Memorial Day Weekend — compared to last week’s busy time period and next week, which brings us the latest Personal Consumption Expenditures (PCE) a week from this Friday.
What we will see plenty of is Fed member appearances. Not only do we expect half a dozen Fed presidents and governors to give speeches this week — seven for just today and tomorrow — but we’ll also see the release of the Fed minutes from the latest FOMC meeting from April 30-May 1st. We’ve been at the same Fed funds rate level since July of last year, so any “reading of the tea leaves” will have to include no projected rate cuts likely for June, when many analysts expected cuts to commence. Contrast that with the European Central Bank (ECB), which does appear on a trajectory to cut rates next month.
Also on Wednesday, NVIDIANVDA reports fiscal Q1 earnings after the close. This stock is the poster child for the A.I.-driven bull market of the past year-plus; NVIDIA is up nearly +200% over that time period. With targets currently being raised and the company carrying a Zacks Rank #2 (Buy) into the trading week, expectations are for revenue growth of more than +230% and earnings growth of a whopping +400% year over year. You may say the stock is priced for perfection, but name a “more perfect” stock at this stage…
Regardless of outcome, NVIDIA’s earnings will be illustrative. There is no better gauge of the A.I. economy today, and so by Wednesday afternoon we shall see if the sky is still the limit or whether there is some thin air market participants should be wary of. From this vista, it would appear the graphic-chip innovator is sitting pretty, but “that’s why they play the games,” so to speak: the proof will be in the quarterly report (and forward guidance). After all, we’ve seen stocks that “can’t miss” in the recent past: TeslaTSLA, AmazonAMZN and AppleAAPL, to name but a few. And they’ve all taken a back seat.
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Goldman’s focus on IB and trading businesses as well as strong deal-making pipelines will likely aid top line. A solid capital position aids sustainable capital distributions.
The acquisition of renewable assets, sale of non-core assets, organic growth projects and focus on domestic operation — which are acting as tailwinds — will boost its performance.
We are positive about Intuit’s growing SMB exposure and believe that its strategic acquisitions will boost the segment. Increased adoption of its cloud-based services and products is another positive.
Marathon Petroleum's acquisition of Andeavor has expanded its foothold in the Permian Basin, thereby creating an enviable retail and marketing portfolio.
Product ramp-ups, deal wins, continuous growth of the network security market and expected benefits from ongoing investments, acquisitions and partnerships are upsides. A healthy balance sheet and cash flow are other tailwinds.
Alibaba's business structure involves certain risks due to the strict laws in China, which along with lower mobile monetization, increasing competition and integration risks are concerns.
Warren Buffett’s eventual stepping down, insurance business exposure to catastrophes and high expenses in the rail road operations are some of the headwinds faced by the company.
American Eagle remains well placed on the back of cost-reduction efforts, strength in Aerie and a solid online show. Also, its Real Power Real Growth value creation plan bodes well.
Broadcom is a leading player in the semiconductor market based on its expanding product portfolio, multiple target markets, accretive acquisitions and strong cash flow.
High rates, decent loan demand, efforts to improve revenues and expansion into new markets will likely aid Bank of America. Technological advancement will keep aiding cross-selling opportunities.
Target’s initiatives, including the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores, bode well.
