The results are in. Nvidia’s second quarter earnings beat analysts’ expectations and provided stronger guidance for current-quarter revenue. The leading AI chipmaker, reported earnings-per-share of 68 cents adjusted versus 64 cents expected and revenue of $30.04 billion versus expectation of $28.7. The company also announced the approval of up to $50 billion in share buybacks. Its stock is up 34% since it last reported quarterly earnings. Nvidia shares, which traded lower during Wednesday’s regular session, were down 4% in extended trading.
sources: CNBC, IBD
Snapshot
at the close (before Nvidia earnings release):
source: MarketWatch
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Consumer Confidence
U.S. consumer confidence is at its highest level in six months. A drop in inflation along with expectations for an imminent series of rate cuts by the Fed have made the American consumer feel better about the economy than they have in a long time. It’s still to early to sound the “all clear” as employees remained concerned about the labor market. Though the unemployment rate remains below its historical standard, it’s currently at 4.3%, it has been trending higher for the last four months.
Chinese consumers aren’t feeling as good as Americans.
Chinese consumption remained weak throughout the first half of 2024. Chinese officials aren’t counting on the consumer to bail out their economy. Beijing is putting most of its chips on manufacturing. To that end, China’s industrial profits rose for the fourth consecutive month in July, which has been a positive sign for their strategy. Officials caution that demand weakness persists and an economic recovery is not yet on solid footing.
sources: Bloomberg, WSJ
“The future rewards those who press on.”
Around the world
Hackers backed by the Chinese government penetrated four U.S. internet service providers (ISP) in order to spy on users according to the Washington Post. The group, known as Volt Typhoon, planted malware in the ISPs. The U.S. government has warned that the group is targeting critical infrastructure.
Down under – Australian inflation eased in July thanks in part to government rebates aimed at offsetting escalating energy costs and soaring rents. Hoo Roo!
U.K. shop prices dropped in August, primarily due to significant discounts in the non-food sector.
sources: Bloomberg, Washington Post, WSJ
Take that road trip
Gasoline prices are expected to drop to their lowest levels in a year, in large part because of decreased demand. Americans are estimated to save $750 million in gas from Friday to Monday (more if you fill up at CostCo!) vs last year’s Labor Day weekend. The average price per gallon is predicted to fall to $3.27 by Monday’s holiday.
source: Forbes
Private Equity in the Red Zone
P/E firms have been buying stakes in pro sports teams as fast as they can in recent years, though the NFL has remained off limits. That’s about to change though. At a meeting on Tuesday, NFL owners approved a new policy allow owners to sell up to 10% of their team to a select group of pre-approved firms.
source: WSJ
In other news:
Walmart is taking steps to build a third-party logistics operation similar to Amazon’s Fulfillment business, which has been a key driver of revenue for Bezos’ baby. Walmart is following Amazon’s lead in investing in logistic infrastructure by pushing third-party sales that leverage other warehousing and distribution networks used by its core business.
Buffett sells more BofA – According to filings, Berkshire Hathaway sold another $982 million of the U.S. bank’s stock recently as BH continues to take profits. Buffett has sold about 13% of his holdings of Bank of America since mid-July. Though he remains mum on his reasons behind selling, Berkshire still remains BofA’s largest shareholder.
IPO woes – September is usually a popular month to bring companies to market but it looks like it will be a slow month for IPO on top of an already sluggish year. To date, IPOs in the U.S. have only raised about $25 billion, well below the 10 year average of $55 billion. Fears about stock market turbulence, the November election and the timing and size of Fed rate cuts are some of the factors keeping IPO activity tepid.
On the other hand – Junk bond issuance is booming. Companies are expected to sell between $55 billion and $65 billion of junk bonds and leveraged loans new month. Some sales that were delayed at the start of August (remember the start of August? Yikes!), look like they will end up premiering in September. After September though, issuance could slow as corporations seek to avoid volatility around the election and the Fed.
sources: WSJ, CNBC, Bloomberg, IBD, MarketWatch
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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