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SPEAKER_00: On hold, my weekly market review, September 1st, 2024.
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SPEAKER_00: Last week was all about Wednesday's after hours NVIDIA earnings report.
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SPEAKER_00: Since the stock accounts for more than 6% of the S&P 500's total market
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SPEAKER_00: capitalization in terms of its index weight and its unique position as a proxy for
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SPEAKER_00: the entire market impacting narrative of AI,
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SPEAKER_00: it has the capability to be a meaningful influence on the direction,
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SPEAKER_00: trend and momentum of the entire stock market.
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SPEAKER_00: Which also means that even highly diversified index fund holdings in the form of
- 0:40
SPEAKER_00: mutual funds and ETFs in the 401ks,
- 0:44
SPEAKER_00: IRAs and brokerage accounts of regular people are going to be affected somewhat by
- 0:49
SPEAKER_00: the market reaction to the fortunes of just a single company.
- 0:54
SPEAKER_00: In advance of the data release,
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SPEAKER_00: options markets were predicting a plus or minus 10% move in the stock price either
- 1:01
SPEAKER_00: way after the opening bell on Thursday,
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SPEAKER_00: so pretty much everyone had a reason to care.
- 1:08
SPEAKER_00: Worrying developments in the Middle East over the weekend drove oil prices back
- 1:12
SPEAKER_00: above $80 on Monday and bolstered the values of supposed safe haven assets.
- 1:18
SPEAKER_00: Stocks got off to a lethargic start,
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SPEAKER_00: with most of Wall Street's attention squarely focused on the sizable risk event
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SPEAKER_00: that was Wednesday evening's long-awaited Nvidia earnings report,
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SPEAKER_00: and to a lesser extent,
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SPEAKER_00: Thursday's weekly jobless claims data and GDP estimate.
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SPEAKER_00: But as the session wore on,
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SPEAKER_00: markets became more apprehensive about a potential disappointment and tech and AI names,
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SPEAKER_00: including the video itself,
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SPEAKER_00: got punished while the rest of the market barely stirred.
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SPEAKER_00: Monday's losers stabilized on Tuesday,
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SPEAKER_00: but it was another light trading volume snoozer overall,
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SPEAKER_00: with everything very much on hold ahead of the Nvidia numbers,
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SPEAKER_00: and stock prices hardly shifted at all,
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SPEAKER_00: despite a better-than-expected consumer confidence index and some mixed housing data.
- 2:08
SPEAKER_00: Markets churned lower again on Wednesday,
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SPEAKER_00: with investor jitters resuming about the effect of a possible Nvidia letdown,
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SPEAKER_00: that is,
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SPEAKER_00: anything less than total perfection that evening,
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SPEAKER_00: versus the colossal market expectation level,
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SPEAKER_00: resulting in tech and AI stocks getting particularly dumped on.
- 2:30
SPEAKER_00: Things weren't helped by the brutal 26% intraday plunge in the stock price of one
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SPEAKER_00: of 2024's unqualified winners,
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SPEAKER_00: Supermicrocomputer.
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SPEAKER_00: When the report finally dropped after the closing bell,
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SPEAKER_00: we learned that NVIDIA delivered really strong second quarter revenue and earnings
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SPEAKER_00: growth and a very robust financial outlook.
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SPEAKER_00: Revenue for the quarter was an astonishing $32.5 billion,
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SPEAKER_00: which actually exceeded the average of all analyst estimates,
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SPEAKER_00: but didn't match some of the more outlandish expectations of above 37 billion.
- 3:09
SPEAKER_00: In the crazy upside down Alice in Wonderland world of Nvidia earnings,
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SPEAKER_00: failing to beat even the most ridiculously optimistic forecasts was frowned upon by
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SPEAKER_00: traders and the stock price tumbled after market.
- 3:25
SPEAKER_00: Wall Street's attention finally began to zoom back out to more macro perspective,
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SPEAKER_00: pre-market on Thursday morning,
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SPEAKER_00: when the weekly jobless claims number came in as expected at plus 231,000,
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SPEAKER_00: and the latest second quarter gross domestic product GDP data surprised to the
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SPEAKER_00: upside with a raised growth estimate of 3%,
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SPEAKER_00: demonstrating that the economy is in great shape.
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SPEAKER_00: Consumer spending data came in better than expected too.
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SPEAKER_00: This all suggested a continued and orderly linear path towards the holy grail of a soft landing.
- 4:02
SPEAKER_00: Stocks regained their footing when markets opened and indexes initially rallied
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SPEAKER_00: hard in spite of the price of Nvidia sliding over 6% and a continuation of the
- 4:11
SPEAKER_00: super microcomputer debacle.
- 4:14
SPEAKER_00: But the rally abruptly ran out of steam after lunch,
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SPEAKER_00: as it became clear that the dip buyers weren't yet ready to come to the rescue by
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SPEAKER_00: piling straight back into Nvidia at lower prices,
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SPEAKER_00: and the session's gains swiftly evaporated.
- 4:29
SPEAKER_00: It was yet another day of two very different narratives in the world of retail.
- 4:34
SPEAKER_00: Best Buy surged 15% in a matter of minutes after a first-rate earnings report,
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SPEAKER_00: while Dollar General got crushed by a whopping 32% after a ghastly one,
- 4:47
SPEAKER_00: as low-income Americans appear to have simply stopped spending.
- 4:52
SPEAKER_00: The indexes ended the day unchanged.
- 4:55
SPEAKER_00: The Fed got to see its preferred measure of inflation,
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SPEAKER_00: the personal consumption PCI send-end index,
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SPEAKER_00: before the opening bell on Friday.
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SPEAKER_00: Entirely as expected,
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SPEAKER_00: it rose 0.2% in July and 2.5% from a year ago,
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SPEAKER_00: clearing the final hurdle for the now locked-in September interest rate cut.
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SPEAKER_00: Despite the long weekend ahead,
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SPEAKER_00: trading volume was vigorous,
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SPEAKER_00: but for most of the day,
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SPEAKER_00: stocks drifted aimlessly in a narrow range.
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SPEAKER_00: A late surge, however, pulled prices higher, with tech names outperforming.
- 5:31
SPEAKER_00: With more than 86% of the stocks in the S&P 500 rising on the day and all 11
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SPEAKER_00: sectors posting gains,
- 5:39
SPEAKER_00: the index ended the week just a hair's breadth below its all-time record high.
- 5:45
SPEAKER_00: Since the carnage of August 5th,
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SPEAKER_00: surveys have shown an explosion of positive stock market sentiment among investors,
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SPEAKER_00: while notably surveyed financial advisors remain a little more reserved about the outlook.
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SPEAKER_00: This matters because extremely bullish sentiment is evidence of complacent markets,
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SPEAKER_00: and complacent markets are vulnerable to air pockets like we saw at the beginning
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SPEAKER_00: of the month.
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SPEAKER_00: This is particularly important because September,
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SPEAKER_00: historically a highly volatile month,
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SPEAKER_00: is shaping up to be very important.
- 6:21
SPEAKER_00: Not only will we get a Fed decision to cut interest rates by either a quarter or a
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SPEAKER_00: half percent on September 18th,
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SPEAKER_00: for what it's worth,
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SPEAKER_00: my money is still very much on a quarter of a percent,
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SPEAKER_00: but we will also get some color on how quickly and by how much rates will fall
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SPEAKER_00: after that.
- 6:39
SPEAKER_00: Additionally, we'll learn at the end of this week just how much the labor market is slowing.
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SPEAKER_00: Because investors are so balled up right now,
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SPEAKER_00: the markets are legitimately vulnerable to a negative surprise from either event.
- 6:54
SPEAKER_00: And that could possibly cause a repeat of the early August or worse.
- 6:59
SPEAKER_00: A lot of the Johnny-come-lately buyers turn around and stampede for the exits.