Monday Takeaways: The Markets Are Off to the Races

Shah Gilani|September 2, 2024

It’s a short trading week… and the markets are off to the races now that the specter of Nvidia earnings is behind us.

The market’s reaction to the earnings was revealing…

And gave dip-buyers an opening. (Like my Alpha Money Flow subscribers.)

Are there clear skies ahead?

We just got another clue in the latest government report.

It’s all in your Labor Day takeways.

Click on the thumbnail below to watch.

Transcript

Hey, everybody. Shah Gilani here with your weekly takeaways. Now, I’m recording this on Friday for next week, which is a holiday-shortened week because we got Labor Day on Monday. So next week’s trading is going to be shortened by a day.

And I’m wearing my racing attire because the markets are off to the races.

The takeaway from what happened this week and the biggest takeaway was that Nvidia’s earnings, which came out Wednesday after the bell, had the market on tenterhooks.

If the earnings were going to disappoint, then the commentary was the markets would likely tank. If not tank, then drop somewhat, maybe correct, maybe test the old load.

What the…?

Nothing like that happened.

Earnings came out on Wednesday post close.

Yes… Nvidia traded down 5% in the aftermarket. Yes… The futures were down. But come Thursday, guess what?

Doesn’t matter that Nvidia ended Thursday down around 6.8%. Doesn’t matter that it knocked off something like $275 billion of its market cap. The rest of the markets didn’t care.

The S&P was flat. And the Nasdaq 100, where Nvidia’s market cap weight is north of 8%, was down 0.15%.

So the markets shrugged it off and moved higher. Flat for the most part, but then higher.

So here we are Friday. Futures were higher in the morning. Markets are still up. It looks like they’re giving up some of the gains.

But the takeaway from Nvidia was it’s not all about one stock. It’s about the market.

And what happened was, guess what?

If the markets were flat or down just only a little bit in the case of the Nasdaq 100, then there must have been a lot of buying of other stocks, and that’s what’s happening.

That’s the takeaway… Nvidia isn’t the only game in town. Yes. It’s important. Yes, you want to buy the dip. But as far as I’m concerned, it isn’t the only game in town as far as the market.

So takeaway there is the markets brushed it off and moved higher.

Now, Nvidia, as far as its earnings goes, hit it out of the park… beat every which way. The problem for traders and investors was, wow, is revenue growth slowing?

Because two quarters ago, it was up 300% on a year-over-year basis. Last quarter, it was up 200%. This quarter, it’s only up 122% year over year.

What the triple-digit gains, people?

Revenue can’t go up forever in terms of 100%, 200%, 300%, 400%, 500% every quarter.

Yes. The trend is down. But triple-digit revenue increases.

Wow.

So the market got a little shaken up by that. The worries are behind us now. We’re off to the races.

Another takeaway is the PCE number that came out this Friday morning.

Not a surprise, really, but I’m going to say a scooch better than expected.

Both core and headline were up 0.2% month over month. The year-over-year headline number came in at 2.5%. The expectation was 2.6%, so a little scooch better than expected. As far as core, it came in at 2.6%, and estimates were for 2.7%. So a scooch better there.

The trend is your friend. As far as inflation goes and the Fed’s preferred measure, that means PCE, it’s good.

So the next move and all subsequent moves from the Fed are going to be rate cuts. The market has that to look forward to.

And here’s my last takeaway from the week.

GDP was revised upward from 2.8% to 3% growth on an annualized basis.

The bump from 2.8% to 3% was caused primarily by a huge revision upward in spending.

Wow. A big revision up. That’s what moved the whole GDP number up… that revision estimate from 2.8% to 3%.

The consumer is still swinging the bat, people.

If you’re anything like me, you scratch your head and think, how long can consumers keep this up if they’re putting stuff on their credit cards with north of 20% annual interest rate charges? But they keep doing it!

Until the trend changes, the trend is your friend. So we’re off to the races.

Markets are hanging in right now. I don’t know how they’re going to close this Friday. But as far as I’m concerned, the takeaways from this week are all positives, and I see higher for longer for the market.

That’s my takeaway. I’ll catch you guys next week. Cheers.

Happy Labor Day.