Transcript

Very Little Room. · ANGLES.

0:01
SPEAKER_00: Very Little Room, my weekly market review, February 25th, 2024.
0:06
SPEAKER_00: There was only one name on Wall Street's lips last week, chipmaker NVIDIA.
0:12
SPEAKER_00: And yes, I did look up, apparently that is the way it's pronounced.
0:16
SPEAKER_00: The last of the magnificent seven stocks to report Q4 2023 earnings on Wednesday evening.
0:23
SPEAKER_00: The first part of the week was spent in fear of the firm failing to meet strongly enhanced expectations.
0:30
SPEAKER_00: Thursday was one big NVIDIA-inspired celebratory party after it blew through those expectations and markets spent Friday nursing a quiet post-celebration hangover.
0:42
SPEAKER_00: The net outcome was yet another up week for most large-cap US stocks.
0:49
SPEAKER_00: The week began on Tuesday following the President's Day holiday, with big tech dragging the whole stock market ecosystem lower and away from its all-time highs.
0:59
SPEAKER_00: With Wall Street breathlessly awaiting earnings and outlook from Nvidia, the so-called most important stock on the planet, up by 220% in the last 12 months and responsible for about a third of the total stock market gains so far in 2024,
1:14
SPEAKER_00: For confirmation that the chipmaker could meet expectations that were now sky high, there was a sense that there was very little room for disappointment.
1:25
SPEAKER_00: That almost whatever the company's earnings looked like, it was always likely to be a letdown versus the now astronomical expectation level brought about by market AI mania.
1:37
SPEAKER_00: As a result, the prices of Nvidia's fellow big dog stocks also fell, anticipating a possible across-the-board sell-the-news reaction to the earnings report, since any signs that the AI boom may be slowing could lead to a big reversal in the stock price, so traders were understandably nervy.
1:57
SPEAKER_00: The price of Nvidia fell almost 4.5% on the day.
2:01
SPEAKER_00: More of the same on Wednesday, as frenzied speculation about Nvidia's upcoming report that night dwarfed almost everything else, even the rather downbeat minutes from the most recent Fed rate-setting meeting, which seemed to confirm that officials are going to tread very carefully on interest rate cuts.
2:20
SPEAKER_00: Stocks fell at the outset and spent most of the session in the red, before a late charge higher got prices back to pretty much flat by the close.
2:29
SPEAKER_00: In the end, of course, we needn't have worried.
2:32
SPEAKER_00: as all fears of any disappointment failed to materialize.
2:36
SPEAKER_00: After the closing bell, NVIDIA shattered even those absurdly raised expectations, delivering yet another jaw-dropping sales forecast, anticipating an amazing $24 billion in revenue this quarter.
2:51
SPEAKER_00: Even the most wildly optimistic of Wall Street estimates have been for about $21 billion.
2:56
SPEAKER_00: Results for the last quarter of 2023 also blew decisively through what had been anticipated.
3:03
SPEAKER_00: As Barrons put it, NVIDIA is selling shovels in a gold rush.
3:09
SPEAKER_00: Predictably, stock markets responded by going on a massive rocket ride on Thursday, needing to completely reverse its early week caution.
3:20
SPEAKER_00: NVIDIA stocks surged, increasing the company's value by $277 billion in just 6.5 hours, to almost $2 trillion.
3:31
SPEAKER_00: The S&P 500 ripped higher, breaking through its recently achieved record all-time high within the first 10 minutes of trading.
3:39
SPEAKER_00: The tech-heavy NASDAQ 100 did even better, soaring to within a hair's breadth of its own all-time record high, which dates back to November 2021.
3:49
SPEAKER_00: Markets held on to those gains all day, as the bulls celebrated the Nvidia report and bought up pretty much everything else they could lay their hands on as well.
3:59
SPEAKER_00: Stocks struggled to follow through on a rather more sober Friday, with big tech in particular losing a little steam after the previous day's powerful rally.
4:08
SPEAKER_00: The S&P 500 barely budged, while still posting a gain for the week, although its small-cap cousins lost ground across five days.
4:18
SPEAKER_00: There's little that Wall Street loves more to come up with than a clever new word for something.
4:23
SPEAKER_00: Previously, the current economic situation had always been described as Goldilocks, i.e.
4:29
SPEAKER_00: just right.
4:30
SPEAKER_00: After last week's Nvidia-driven new leg higher in stock prices, a new term was coined to describe what is even better than Goldilocks.
4:39
SPEAKER_00: Platinum Locks.
4:41
SPEAKER_00: I'm not sure that one will stick.
4:43
SPEAKER_00: But it's indicative of the enormous level of optimism on Wall Street right now.
4:48
SPEAKER_00: The Fed is like a stern pastor warning from the pulpit about the need for patience and temperance on interest rate cuts, but the stock market just doesn't want to listen and keeps slugging from the AI punch bowl.
5:01
SPEAKER_00: Even while at the same time acknowledging that its overly optimistic assessment from as recently as the beginning of this year of the timing and extent of interest rate cuts is now probably dead and buried.
5:14
SPEAKER_00: 7 rate cuts in 2024?
5:17
SPEAKER_00: The latest most-liked projection is now for just 3, and the market-driven probability of any cuts at all before June is now just 8%.
5:27
SPEAKER_00: The fact is that to bring this rally to a crashing halt, actual news now needs to be not just disappointing, but outright bad.
5:38
SPEAKER_00: because the current positive momentum in this market is so strong.
5:42
SPEAKER_00: For inflation data, for example, to be powerful enough to challenge the bullish momentum, it has to show not just that inflation has stopped falling, as was in fact implied in the data earlier this month, but that it is rising again, because that will challenge the very idea of any upcoming rate cuts.
5:59
SPEAKER_00: And we simply aren't there right now.
6:02
SPEAKER_00: So the almost inevitable short-term overbought pause or pullback that we're likely to experience in the next week or two probably will not represent any kind of meaningful turnaround in the upward trend.