The market hangs in balance…

Thoughts of the Day

Investors are nervously waiting for Nvidia’s (NVDA) earnings report that will be released later today after the close of New York trading hours (expected EPS: $4.64, Revenue: $20.55b). The stock is down nearly 7% from the highs, and the Nasdaq index is around 3% from all-time highs as investors are nervous that these lofty expectations may not be met. Read our full report on what we think…

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Day Ahead

The Federal Reserve meeting minutes will be released. May provide more details of the Federal Reserve’s plan to cut interest rates this year. 

Earnings today: Nvidia (NVDA) reports after hours. 

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What Happened Yesterday

Market Movements as of New York Close 20 Feb 24

In January 2024, Canada’s annual inflation rate as measured by the Consumer Price Index dropped to +2.9%, reaching its lowest point since June 2023, down from +3.4% the month before and significantly below the anticipated +3.3%. This significant decrease from December’s high inflation rate fuels optimism for disinflation within the Canadian economy and supports the argument for the Bank of Canada to adopt more accommodative measures amid growing economic concerns. Additionally, Canada’s annual core inflation rate, which removes eight highly volatile items including food, energy, and mortgage interest costs, continued its decline, falling to +2.4% in January 2024 from +2.6% the previous month, marking the lowest rate since April 2021. On a month-to-month comparison, prices remained unchanged in January 2024 with CPYI being 0%. The USDCAD moved +0.21% in immediate reaction to the data release as higher hopes for an interest rate cut by the Bank of Canada weakened the CAD

The US Treasury Yield curve inversion narrowed to 0.32% as the US 2-year bond yield fell -0.05% to 4.59% while 10-year yield slipped -0.03% to 4.27%.

The US stock futures traded weak through the Asian and London trading sessions with the S&P 500 futures down -0.45% when the New York session began.

The US stock market opened lower from Friday. The weakness in risk sentiment continued through the New York session. As a result, the S&P 500 lost -0.60% (high: -0.24%, low: -1.01%), the Dow Jones slid -0.17% (high: +0.09%, low: -0.43%) while the Nasdaq fell -0.79% (high: -0.16%, low: -1.62%).

Nvidia was down -4.35% on the day after Microsoft announced that it is developing a network card for its AI servers for improved performance and reduced reliance on Nvidia’s network cards. Profit taking and risk reduction ahead of nvidia earnings added to the weakness as well.

The crypto market continues to edge higher as interest in the sector remains.
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Headlines & Market Impact

Conference Board gives up on U.S. recession call

Notable Snippet: The Conference Board on Tuesday abandoned a long-running call for the U.S. economy to fall into recession, although its Leading Economic Index still sees economic output flatlining in the months ahead.

The business research group’s index, meant to be a gauge of future economic activity, fell 0.4% in January to 102.7, the lowest level since April 2020 when the U.S. was in a brief recession after the onset of the COVID-19 pandemic and related shutdowns.

It was the 23rd straight monthly decline, just one month short of the record-long slump that began in April 2007 and ran through March 2009 during the global financial crisis. The LEI’s six-month annualised rate of decline, however, has slowed sharply and the growth rate is around its least negative since August 2022.

“While the declining LEI continues to signal headwinds to economic activity, for the first time in the past two years, six out of its 10 components were positive contributors over the past six-month period,” said Justyna Zabinska-La Monica, senior manager, business cycle indicators at the Conference Board. “As a result, the leading index currently does not signal recession ahead.”

Growth in the second and third quarters, however, should be near zero, she said.

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Amazon to replace Walgreens in Dow Industrial Average next week

Notable Snippet: Amazon will replace Walgreens Boots Alliance in the Dow Jones Industrial Average, according to a Tuesday announcement from S&P Dow Jones Indices, which manages the price-weighted measurement of 30 stocks. Amazon shares moved up 1% in extended trading, and Walgreens stock moved 3% lower.

The move will result in more exposure to the online retailer for investors who bet on the average, which is far smaller than the S&P 500 index. The change goes into effect prior to market open on Feb. 26.

“Reflecting the evolving nature of the American economy, this change will increase consumer retail exposure as well as other business areas in the DJIA,” S&P Dow Jones Indices said in a statement.

The company said the revision was “prompted” by Walmart’s 3-for-1 stock split, resulting in lower index weight for Walmart.

Amazon’s arrival in the Dow Jones comes three years after business software maker Salesforce joined, along with Amgen and Honeywell International.

Walgreens has been a Dow component since 2018, when it replaced GE, which had been part of the stock grouping since the beginning in 1896.

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Microsoft develops AI server gear to lessen reliance on Nvidia, The Information reports

Notable Snippet: Microsoft (MSFT.O) is developing a new network card that could improve the performance of its Maia AI server chip and potentially reduce the company’s reliance on chip designer Nvidia (NVDA.O) The Information reported on Tuesday.

Microsoft CEO Satya Nadella has tapped Pradeep Sindhu, who co-founded networking gear developer Juniper Networks (JNPR.N) to spearhead the network card effort, the report said citing a person with knowledge of the matter. Microsoft acquired Sindhu’s server chip startup, Fungible, last year.

The new network card is similar to Nvidia’s ConnectX-7 card, which the chip developer sells alongside its graphic processor units (GPUs), the report added

The equipment could take more than a year to develop and, if successful, could lessen the time it takes for OpenAI to train its models on Microsoft servers as well as make the process less expensive, according to the report.

The company had introduced Maia, a chip meant to run large language models and support AI computing, in November.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord