In his podcast addressing the markets today, Louis Navellier offered the following commentary.
If you wish to listen to this commentary, please click here.
Earnings “Grand Finale”
Nvidia (NASDAQ:NVDA) is going to announce after the close and that’s supposed to be the “grand finale” to this earnings announcement season. Their sales are forecast to be up over 60% while their earnings are forecast to be up over 300%.
The analyst revisions to the upside have been very aggressive in the past few months, so it’s going to be interesting to see what Nvidia says on its guidance. Nvidia’s CEO was very upbeat after the last report and obviously very excited that they’re selling all these chips to facilitate artificial intelligence. We own a lot of Nvidia in Navellier-managed accounts so we have high expectations.
The Commerce Department announced today that new home sales rose 4.4% in July to an annual pace of 714,000 and have risen 31.5% in the past 12 months. The median price for new homes was $436,700 in July, while the average price was $513,000.
There is now a 7.3-month supply of new homes for sale, so builders are expected to be more cautious moving forward due to higher mortgage rates. I should add that Toll Brothers (TOL), which is held in Navellier-managed accounts, also announced that its revenue and earnings were respectively 8.8% and 30.4% better than analysts’ consensus estimates.
Meanwhile, it is clear that existing homeowners are reluctant to move and are hanging onto their low mortgage rates, so many homeowners are reluctant to move. The National Association of Realtors on Tuesday announced that existing home sales declined 2.2% in July to an annual pace of 4.07 million and the slowest monthly sales pace since January. Compared to July a year ago, existing home sales declined 16.6% to the slowest July monthly sales pace since 2010.
Median home prices rose to $406,700 in July, which is an increase of 1.9% compared to July of 2022. Since there is only a 3.3-month supply of existing homes for sale, until mortgage rates decline, existing home sales are expected to remain lower than normal. Nevertheless, I will admit that the homebuilding sector has been one of the strongest sectors this year.
Crude oil prices are down today despite the fact that crude oil inventories continue to drop but I’m not worried about energy prices. What happened is the American Petroleum Institute reported the inventory drop, but it was less than expected. We’re in the midst of peak seasonal demand, and after Labor Day, the demand should drop off and inventories might start to replenish themselves a bit.
However, in the upcoming months, the refiners have to switch over to oxygenated winter fuels, so the inventory of gasoline distillates might be tight. We own a lot of refinery stocks and we are still very bullish on them.
Zigzagging Stocks
I’m very grateful that energy stocks were zigging when my tech stocks were zagging. The last two months have been my strongest relative performance compared to the S&P 500 since last October and November since we have been benefitting from both AI and energy-related stocks.
So as long as you remain diversified, you can invest confidently. I should add that I do not have exposure to financial or insurance stocks that can suffer from higher interest rates as well as natural disasters, from earthquakes, fires, hurricanes, and tornados.
We have a growing EV glut in the world. Tesla (NASDAQ:TSLA) is reducing its production at its Berlin factory. They hit 5,000 vehicles a week in March, they’ve lowered their production target to 4,350 vehicles, and they reported they might have to lower production even further. Last I looked, the inventory of the Ford Mach-e is around 116 days.
Even GM’s Hummer apparently has excess inventories. It’s an extremely expensive vehicle, but GM has started to make more Hummers, so I don’t think they’ll be able to get any premiums for them. In fact, I think when you order one, you get a discount online already.
It will be interesting to see how this EV glut affects Tesla and other automakers. More than half of Tesla’s production in Shanghai is being exported somewhere else. The deflationary pressures in China are being exported around the globe via EVs. It will be interesting to see if other deflationary forces in China get exported. That’s what I’m hoping because that’s what I hope really kills inflation.
Economic Transparency
The Biden Administration’s National Security Advisor, Jake Sullivan, on Tuesday called on China to be more transparent about the state of its economy. Specifically, Sullivan said “For global confidence, predictability and the capacity of the rest of the world to make sound economic decisions, it’s important for China to maintain a level of transparency in the publication of its data.” I should add that U.S. Commerce Secretary, Gina Raimondo, is scheduled to travel to China at the end of the month for high-level talks, so it will be interesting if China’s economic data is discussed.
Speaking of economic transparency, the Labor Department is expected to dramatically reduce overall U.S. payroll growth in the past 12 months. This big payroll revision is anticipated to finally fix the bogus seasonal adjustments (like in January) as well as overstated manufacturing jobs (like in June and July) relative to ADP.
This is why I do not trust the monthly payroll reports from the Labor Department since there are simply too many seasonal “fudge” factors. Ironically, the U.S. government does not have much credibility when it tells China to be more economically transparent.
Coffee Beans: Free Ride.
Austria is offering residents a year of free nationwide public transportation in exchange for getting a tattoo reading “Klimaticket,” which translates to “climate ticket” and is aimed at discouraging motorized individual transport and bringing the country closer to its climate change goals under the Paris Agreement. Source: UPI. See the full story here.
