In his Daily Market Notes report to investors, Louis Navellier wrote:
Tech Still Has Gas
Interest rates continue to creep higher, tech still bouncing back, NVIDIA opens at a new all-time high.
The US 10yr yield is at the high of the year, up only a couple of basis points on the day, but still up. The 2yr is at 5.03%, up 4bps. Mortgage rates are now 7.48%, the highest since Nov ’00. The strong move up in yields in the last 2 weeks has brought a lot of volatility to stocks, mostly to the downside, where the S&P and NASDAQ indexes bottomed on the 17th and have been fighting back since.
The Dow and Russell 2000 are not staging a rebound yet due to their relative underweighting in tech. Tech has been steering the boat all year with the mantra of AI and the significant labor savings it promises when fully realized.
NVIDIA Corp (NASDAQ:NVDA)’s seemingly monopoly of chips capable of running the massive databases AI demands, and companies with the wherewithal to pay the billions to fund and support AI systems, have been the primary beneficiaries of the enthusiasm.
In the last month, the market-weighted S&P has outperformed the even-weighted S&P by 160 basis points (11.17% YTD) due primarily to Mega Tech. Consider that 73% of the names in the S&P 500 are underperforming the index, and only 55% of the names are up on the year. Expectations for the high values of tech to run out of gas after the blistering first half and the rest of the market to see a partial catchup multiple expansion has yet to occur.
Other tech news is the pending ARM IPO, a British semiconductor maker owned by Softbank, at an estimated $40B market value, the $6B in proceeds make it the biggest IPO since Nov’21, spinning their story of how much they will be able to participate in the AI build out.
Disappointing Retail Earnings
Today, we got several retail earnings and they were relatively disappointing. Dicks Sporting Goods (NYSE:DKS) was a train wreck, missing slightly on top line and in a big way on the bottom line, and cutting the full-year outlook, with shrink (theft) accounting for a third of gross margin shortfall. Organized grab and go shoplifting is growing into a serious problem for many retailers with no easy solutions. The stock is down 24% today (-7.4% YTD).
Macy’s (NYSE:M) missed on the top line, with store sales down 8% y-o-y and online down 10%, and had a beat on the bottom, but also gave cautious guidance due to stressed consumers. The stock is down 10.7% today, down 34.6% YTD. Lowe’s (NYSE:LOW) had beats top and bottom, though sales were down 5.5% y-o-y, and is up 3.8% today and +13.3% YTD.
Overall, the consumer appears to be becoming noticeably more cautious and is spending most of their discretionary cash on travel and entertainment rather than merchandise.
The market waits for NVIDA’s earnings tomorrow, which will have a big impact on the AI theme, and Jay Powell’s comments on Friday, which may swing sentiment on interest rates.
Weak August Continues
As the morning progresses, both interest rates and stocks are slightly lower, with the notable exception of tech, both the NASDAQ & QQQ remain in the green. The seasonally weak month of August continues.
Coffee Beans: Curious Cat
A cat traveled over 500 miles after it got stuck in a Welsh taxi’s grille for days. Gizmo the cat was “quite happy” when she was finally freed and later reunited with her owner. Source: Sky News. See the full story here.
