The DJIA and the S&P 500 retreated from their record highs on Wednesday. The S&P dropped 0.2%, and the Dow snapped a four-day winning streak, falling 0.7%, dragged down by a 5% drop in Amgen. GM and Ford both took hits, falling 5.0% and 4.0% respectively after being downgraded by Morgan Stanley. Seven of the 11 sectors of the S&P 500 were in negative territory by the close, led by energy shared as crude oil futures in the U.S. dropped 2%, as did shares of Chevron.
Tech was a bright spot as HP gained over 4% following an upgrade from Barclays and Nvidia rallied 2%, taking its market capitalization above the $3 trillion mark. 33 stocks in the S&P 500 made record highs yesterday including Netflix, Walmart, Blackrock, IBM, CBRE and Palantir. One one stock made a new 52-week low, Walgreens Boots Alliance.
S&P 500
sources: Bloomberg, CNBC
Closing snapshot
source: MarketWatch
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“While we are postponing, life speeds by.” – Seneca
Is the market too relaxed?
Reversing a late-summer spike, the stock market’s “fear gauge” has been dropping of late. As optimism about the economy (or at least the stock market) as taken hold, the Cboe Volatility Index or VIX fell to 15.39 this week, its lowest level of the month. This is typically a sign that investors are steering clear of option trades that would profit from market turbulence.
sources: Bloomberg, FactSet
Cyber is big business
Cybersecurity startup Wiz. Inc. is in talks to sell existing shares at a valuation as high as $20 billion, according to sources with knowledge of the deal. Wiz, which walked away from Google’s $23 billion dollar offer in July, is considering a transaction that would let existing shareholders tender from $500 million to $700 million of their holdings, according to one person who asked not to be identified. The valuation being discussed reportedly ranges from $15 billion to $20 billion. The company, according to the source, may also raise money directly from investors, though there’s a chance terms could change, or the deal could fall apart.
Wiz connects to cloud storage providers such as Amazon’s AWS and Microsoft’s Azure and scans data stored their for security risks. VC firms reported to be involved in the deal include G Squared, Thrive Capital, and Lightspeed Venture Partners. Wiz turned down Google’s bid because it decided it could be worth more as a public company. Wiz was also concerned about a protracted regulatory process if it agreed to be acquired.
sources: Bloomberg, WSJ
AI needs power
A few years ago, tech companies promised that they would curb their carbon emissions, but that was before the AI boom. The push to build AI data centers that require massive amounts of energy, not only caused big tech to roll back their climate pledges, it has forced many firms to team up with energy companies in order to meet their power needs.
In Nevada, Google is joining forces with a utility to buy power generated beneath the earth’s surface. In the Carolinas, Google, Amazon, and Microsoft are partnering with Duke Energy to boost technologies such as smaller nuclear reactors. However, as these arrangements are being made, emissions have skyrocketed, setting back progress on U.S. climate goals.
sources: Bloomberg, WSJ
Google brings back AI superstar
Noam Shazeer, the co-author of a seminal research paper that helped kick off the AI boom, quit Google in 2021 to start his own company, Character.AI after the search giant refused to release a chatbot he developed. When Shazeer’s startup began to flounder, his former employer swooped in a wrote a check for $2.7 billionish to license Character’s technology but also to get Shazeer back. It’s nice to feel appreciated.
source: WSJ
Movers
KB Home fell nearly 5% after the homebuilder just missed fiscal third-quarter estimates and provided a weak outlook.
Google parent Alphabet is testing technical resistance at its 50-day moving average, following a sharp rally in recent weeks.
Tesla is forming support around $274 with longer-term support remaining at $235-$230.
Visa shares, which tumbled on Tuesday, are stuck below former support at $291. The longer the shares remain there, the worse it looks technically for bulls.
source: IBD
Chart of the day
Nvidia
Nvidia bounced back early Wednesday from their 50-day moving average. There’s a pretty steep trending reflecting the stocks rebound of the last few weeks. Technical support at the September 12th high of 120.79 is an important point to watch. As mentioned, its market cap now tops $3 trillion.
sources: ThinkOrSwim, CNBC
In other news:
Grain terminal workers on Canada’s west coast walked off the job this week, threatening exports of canola and other crops during the busy harvest season. The strike will halt nearly 100,000 metric tons of grain arriving at terminals every day, resulting in the daily loss of about $26 million.
According to OPEC, global demand for oil is projected to climb over the next two decades, with the fossil fuel expected to hold a nearly 30% share of the energy mix even as the world ramps up efforts to reduce emissions.
More central bank easing: China’s PBOC delivered another policy rate cut, a day after announcing a number of monetary easing measures meant to aid the economy amid concerns about its economy’s slow growth. Meanwhile, Sweden’s central bank cut its key interest rate for the third time this years and indicated there are more cuts coming as the economy falters and inflation falls.
Canva, a startup known for its easy to use design tools is expanding its use of AI as it attempts to compete with Adobe for business and professional clients. The Aussie company, valued at $26 billion is planning a highly anticipated IPO.
Moody’s, the credit rating agency, said that the U.S. could risk its AAA credit score if the next administration doesn’t do something to shrink the nearly $2 trillion budget deficit.
sources: WSJ, CNBC, Bloomberg, Forbes, IBD
The stinger
Disclaimer
This letter is not offering investment, trading, or investment advice nor is based on any individual portfolio or business operation. We are are not a registered investment, stock nor commodity advisor. One should consult with their own registered advisor to discuss investment strategies that are appropriate for their business or personal goals, risk tolerance and financial situation. Information in this report and on any website is derived from a variety of source believed to be reliable however no representation is made that the information is accurate, complete or correct. These lessons, newsletter and site content is not intended nor shall not constitute or be construed as an offer or recommendation to “buy”, “sell”, “trade” or invest in any securities, commodities, futures, options or other asset referred to in said lessons, reports or newsletters. Rather, this research is intended to identify situations and circumstances that those in the trading community should be aware of to better help assess and improve their own risk management skills.
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