Published March 8, 2024
Below we present an overview of the market from a sector perspective written by Delta Research followed by a few snippets from Blaine Rollins’ newsletter detailing where inflation remains sticky among a couple of positive signs for investors. Enjoy the ride while it lasts!
“As of last Friday, the S&P 500 was up 16 of the last 18 weeks, which is something that has not happened since 1971. If the market closed at the time of this writing, the record would update to positive 17 of the last 19 weeks.
Nvidia (NVDA) opened on January 2, 2024 at $492.44 per share. This week it rose well above $900 per share. This one company added a trillion dollars of valuation to the S&P 500 year-to-date. NVDA is responsible for 30% of the S&P 500 advance in 2024.
Although technology stocks that drove the market higher last year continue to generally appreciate this year, non-technology stocks are also beginning to show some life. The NASDAQ 100 (QQQ), which is very technology intensive, is up about the same amount as the broader S&P 500 index year-to-date. Healthcare, financials and industrials are having a strong start in 2024 and almost keeping pace with the technology sector.
The Magnificent Seven (AAPL, MSFT, GOOG, AMZN, NVDA, TSLA and META) is transforming into the Magnificent Four. Nvidia, Meta, Amazon and Microsoft have positive returns year-to-date. Google (-6%), Apple (-12%) and Tesla (-29%) have depreciated YTD.
The next potential sector to begin to appreciate may be small capitalization stocks. These stocks were most impacted by higher interest rates as they tend to be below investment grade borrowers and their debt has floating interest rates. Conversely, if interest rates were to decline, small capitalization stocks should appreciate.
Market momentum is running at a historic level. Bears point to higher interest rates have a lagged effect yet to be fully felt, fiscal policy is tightening, household excess net worth from Covid aid is coming down and investors are too complacent. Bears, somewhat like daredevils in Pamplona during the Running of the Bulls, are being run over by NVDA and broadening momentum. Earnings season was better than expected, economic growth is robust, artificial intelligence innovation is adding value and interest rates should move lower over time. For now, valuation concerns are secondary.”
Did you notice the U.S. retirees smiling a bit wider in January?
25% of American adults receive social security payments and in January, those checks rose by 3.2%. Now add in their home equity values and their stock portfolios and how are they not all on cloud nine?
The Daily Shot
Maybe it is because the inflation measures are still being stubborn…
Last week’s January core PCE data came in a bit hot as the housing component remains shrouded in mystery. But going forward, it should remain the heaviest weight to pulling inflation lower.
Goldman Sachs
The biggest unicorn in the private market had its equity change hands for a +30% price versus the last transaction in March of 2023…
While the price a year ago occurred at nearly a 50% cut to its previous transaction, the higher valuation today should give venture capitalists and growth private equity investors a bit more spring in their steps.
Stripe is allowing its employees to cash out more stock as the fintech giant continues to put off an initial public offering. Stripe and some of its investors agreed to buy over $1 billion of current and former Stripe employees’ shares, according to people familiar with the matter.
The deal will value Stripe at $65 billion, the people said. That is up from its $50 billion valuation nearly a year ago but significantly below its $95 billion valuation in 2021.
Investors participating include venture-capital firm Sequoia Capital and Goldman Sachs’s growth equity fund.
Stripe was founded in 2009 by Irish brothers Patrick and John Collison. As one of the most established and highly valued startups, it has grown into a bellwether of sorts for the health of all of Silicon Valley. It has also topped IPO watch lists for years.
With this deal, Stripe appears likely to delay an IPO until at least 2025.
WSJ
Market Update
Stocks opened the week with a pause easing -0.4% Monday as investors looked forward to new inflation, economic and earnings news later in the week. Tuesday brought a tick downward in consumer confidence and a slip in orders for durable goods. But markets nudged higher by +0.2% while smallcap stocks zipped ahead over +1%. Wednesday saw another mostly quiet day for the major indexes while bitcoin leapt higher to approach record highs. Cryptocurrencies have been ripping upward ever since the SEC approved a raft of bitcoin-related ETFs for trading. This allowed a much wider swath of investors to consider adding some money to this “new” asset group. The Nasdaq got a bid Thursday as an inflation report hit expectations to support the market narrative that interest rate cuts will begin sometime this summer. Thursday was also the final day of trading for what has been a strong February that defied many expectations for a pullback. In election years such as this one stocks often show weakness in the spring. So far, of course, the stock market has remained focused on a solid “not too hot” economy with moderating interest rates. Dell Technologies fueled a new round of AI mania Friday as the company’s earnings soared on strong sales of AI-related servers. Markets moved higher with the S&P 500 up almost +1%. But the real action was in semiconductors, yet again. Interest rates tumbled on a trio of relatively soft economic reports, fueling hopes for a May/June Fed rate cut. Gold ramped almost +2% to approach record highs while international stocks rose solidly, perhaps as investors rebalanced portfolios on the first day of the month.
The nonstop market rally marched forward as another AI-fueled rally met with a slip in interest rates to support shares. The S&P 500 (SPY) moved higher by +0.98% while the Nasdaq 100 (QQQ) pushed further into record territory with a +2.04% rise. Smallcap shares (IWM) finally closed above recent resistance on a +3.01% lift.
Warm wishes and until next week.