The shovel-seller continues to crush it

Thoughts of the Day

Nvidia, the leading AI-chip maker, exceeded expectations with $22.1 billion in revenue (11.28% vs EXP) and $5.16 EPS (+7.55% vs EXP) for Q4 2023, up 265% and 486% respectively from the previous year. This bullish report sent the stock soaring over 9% after the release and is now within sight again of its all-time high. The trend remains intact. Stay with it.

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Day Ahead

Purchasing Managers Index from the EU, US and the UK will be released. 

The ECB Monetary Policy Meeting Accounts will be released as well.

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What Happened Yesterday

Market Movements as of New York Close 21 Feb 24

The US Federal Reserve meeting minutes showed that policymakers are still worried about lowering rates too early and that more needs to be seen before interest rates are brought down. However, officials also acknowledged that policy moves thus far have succeeded in lowering the inflation rate.

The US Treasury Yield curve inversion remained at 0.32% as the US 2-year bond yield and the 10-year yield rose +0.05% to 4.64% and 4.32% respectively. The results of the US 20-year bond auction came in at 4.59% (way above both the current 10-year and 30-year yields), indicating that the demand for the 20-year bonds are far weaker than the 10s and 20s. 

The US stock futures drifted lower through the Asian and London trading sessions with the S&P 500 futures down -0.24% when the New York session began.

The US stock market opened lower from Tuesday. It then started off trading sideways before experiencing some weakness as the result of the US 20-year bond auction came in higher than expected. Further weakness ensued following the release of the US Federal Reserve meeting minutes. However, the day ended with a spike higher, possibly due to short-covering ahead of the release of Nvidia’s earnings report. As a result, the S&P 500 gained merely +0.13% (high: +0.15%, low: -0.59%), the Dow Jones rose +0.13% (high: +0.14%, low: -0.58%) while the Nasdaq fell -0.38% (high: -0.36%, low: -1.29%)

Nvidia rose +9.07% in aftermarket trading following a stronger than expected earnings results. Earnings per share: $5.16 vs $4.64 expected. Revenue: $22.10 billion vs $20.62 billion expected. The AI chipmaker projects a strong quarter in Q1 ’24 with $24.0 billion in sales in the current quarter against expectations of $22.17 billion in sales.

The crypto market saw a mild correction after gains over the past few days.
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Headlines & Market Impact

Fed officials expressed caution about lowering rates too quickly at last meeting, minutes show

Notable Snippet: The discussion came as policymakers not only decided to leave their key overnight borrowing rate unchanged but also altered the post-meeting statement to indicate that no cuts would be coming until the rate-setting Federal Open Market Committee held “greater confidence” that inflation was receding.

“Most participants noted the risks of moving too quickly to ease the stance of policy and emphasised the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent,” the minutes stated.

The meeting summary did indicate a general sense of optimism that the Fed’s policy moves had succeeded in lowering the rate of inflation, which in mid-2022 hit its highest level in more than 40 years.

However, officials noted that they wanted to see more before starting to ease policy, while saying that rate hikes are likely over.

“In discussing the policy outlook, participants judged that the policy rate was likely at its peak for this tightening cycle,” the minutes stated. But, “Participants generally noted that they did not expect it would be appropriate to reduce the target range for the federal funds rate until they had gained greater confidence that inflation was moving sustainably toward 2 percent.”

The minutes reflected an internal debate over how quickly the Fed will want to move considering the uncertainty about the outlook.

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US believes Russia developing space-based nuclear weapon, says source

Notable Snippet: The United States believes Russia is developing a space-based anti-satellite nuclear weapon whose detonation could disrupt everything from military communications to phone-based ride services, a source familiar with the matter said on Tuesday.

The source, who spoke on condition of anonymity, said it was his understanding the system would involve a nuclear explosive device placed into orbit.

Russian President Vladimir Putin on Tuesday said Russia was against the deployment of nuclear weapons in space and his defence minister flatly denied reports Russia was developing a nuclear capability for space.

Reports about possible Russian development emerged after the Republican chair of the U.S. House of Representatives intelligence committee on Feb. 14 issued a cryptic statement warning of a “serious national security threat.”

The clearest public sign Washington thinks Moscow is working on a space-based anti-satellite nuclear weapon was a White House spokesperson’s comment on Thursday that the United States believes the system being developed would violate the Outer Space Treaty.

Bloomberg on Tuesday reported Russia could deploy a nuclear weapon or a mock warhead into space as early as this year. It also cited unnamed sources as saying the United States believes Russia does not plan to detonate a device but that there was risk of an accidental explosion, disabling scores of satellites.

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China policymakers will struggle to give markets what they want, chief strategist says

Notable Snippet: “Chinese policymakers are going to continue to struggle to give the market what it wants, and what it needs, which is really some kind of plan to extract the economy from debt deflation in the wake of a massive property bust,” he said.

The latest monetary policy announcement from the People’s Bank of China (PBOC) saw the central bank cut the benchmark 5-year loan prime rate by 25 basis points earlier this week.

Many observers saw the move as an effort to boost the country’s struggling property market, as the majority of mortgages are pegged to this rate.

Policymakers have been trying to counteract the trend with what McCarthy called “a string of half measures that, you know, weren’t really satisfying market participants at all.”

The 5-year loan prime rate cut was a more “aggressive” move within these decisions, he added.

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord