Nvidia Weighs On Us Stocks As Investors Fret Over Valuation And Fed Outlook

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets 

Today was a bad day for the US stock market, especially for the smaller companies. Nvidia dragged down the tech sector as investors worried about its high price before its earnings report tomorrow.

Even the big names like Amazon, Microsoft, and Meta couldn’t escape the sell-off and lost more than 1% each.

The financial sector had some excitement with the news that Capital One Financial will buy Discover Financial Services for $35.3 billion in stock. The deal is expected to close sometime between late 2024 and early 2025, so don’t hold your breath.

This comes after a week of losses on Wall Street, as economic data showed that the Fed may not lower interest rates as much or as soon as the market hoped this year. Some indicators were disappointing and pushed up the expectations for a rate cut in 2024.

The MAG7 stocks (Microsoft, Amazon, Google, and Meta) suffered a breakdown from their previous uptrend, while the most hated stocks also fell.

The bond market was mixed, with the 10-year yield dropping slightly, which made the dollar weaker and gold stronger, but oil prices slid below $78 a barrel.

And as we wait for NVDA’s earnings report, this chart that compares the AI Boom with the Covid bust may come back to haunt us.

Or will NVDA surprise us all and break the pattern?

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ETFs On The Cutline – Updated Through 02/16/2024

Ulli ETFs on the Cutline Contact

Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.

The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (251 vs. 258 current).

Take a peek:

The HV ETF Master Cutline Report

If you are confused by some of the terms we use, don’t panic. I have a helpful Glossary of Terms for you.

If you want to learn more about the Cutline method and how it can make you rich (or at least less poor), read my original post here.

Hot Inflation Report Burns Stocks, No Rate Cuts Soon

Ulli ETF Tracker Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets 

Stocks took a hit on Friday, as another spicy inflation report raised doubts about the timing of Fed rate cuts this year.

The PPI for January, which tracks wholesale inflation, rose 0.3%, beating the expected 0.1% increase. Without food and energy, the core-PPI jumped 0.5%, much higher than the forecasted 0.1% rise.

The 10-year Treasury yield spiked above 4.3% after the hot PPI report but cooled down to 4.29% by the end of the day. The 2-year Treasury yield reached 4.7%, the highest since December.

It was a wild week for stocks, as traders tried to figure out where the U.S. economy was heading and when the Fed might lower rates. On Tuesday, the Dow had its worst day in almost a year, after January’s CPI, which measures consumer inflation, came in at 3.1%, above the 2.9% that was expected.

The market shrugged off the report for the next two days, with the S&P 500 bouncing back on Thursday to close at a new record high.

But today’s wholesale inflation report added to the worries that the Fed might delay rate cuts until later in the year. The market swings show the struggle between high sticky inflation — which means no rate cuts soon — and strong earnings and other signs of a healthy economy, which boost investors’ confidence that stocks have more room to grow.

The S&P 500 was on track for its 15th positive week out of the last 16, but a late-day sell-off ruined the historic run that hadn’t happened since March 1972.

Looking at the economic data of higher-than-expected inflation (CPI and PPI), but lower-than-expected retail sales, industrial production, and housing activity – the outcome looks like stagflation to me.

Rate-cut chances dropped this week, with June now only a 60% probability of being the first cut, while traders are betting on only a 50-50 chance of 3 or 4 rate cuts for the year.

While the indexes recovered from the CPI shock on Tuesday, they failed to make more gains, which left the Nasdaq as the week’s biggest loser, Small Caps as the biggest winner, while the S&P edged lower, and The Dow barely broke even.

Bond yields went up, and so did mortgage rates, which hit two-month highs. The MAG7 stocks slipped, the dollar ended the week higher, while gold dipped but rebounded and stayed above $2,000. Oil prices rose for the 4th week out of 5 and got back to over $79.

Will gas prices at the pump follow suit, as this chart suggests?

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 02/15/2024

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ETF Data updated through Thursday, February 15, 2024

How to use this StatSheet:

  1. Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
  1. Trend Tracking Indexes (TTIs)

These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.

  1. All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.

If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.

  1. DOMESTIC EQUITY ETFs: BUY— since 11/21/2023

Click on chart to enlarge

This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +8.84% and is in “Buy” mode as posted.

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Nasdaq 100 And 10-Year Yield Diverge: Which One Will Blink First?

Ulli Uncategorized Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets 

The stock market had a strong finish today, with the S&P 500 hitting a new record high and the other major indexes recovering from their earlier losses in the week.

But don’t pop the champagne just yet because the economic picture is still murky at best.

Retail sales fell more than expected in January, dropping 0.8% from the previous month. That’s a bad sign for the U.S. consumer, who is feeling the pinch of rising prices and higher interest rates.

Treasury yields also fell, reflecting the gloomy mood of the market. The earnings season didn’t help much either. Some companies, like Tripadvisor, beat expectations and saw their shares soar 9%. Others, like Cisco, disappointed the investors and announced job cuts and lower sales forecasts. Their shares dropped 2%.

The star performers of the day were the Small Caps, which rose 2.5% thanks to a short squeeze. They managed to overcome the negative effects of bad retail sales and the dismal manufacturing report. The latter showed that U.S. factory output barely changed in January, staying flat from a year ago.

Meanwhile, bond yields dipped slightly, the Mag7 stocks (Microsoft, Apple, Google, Amazon, Facebook, Netflix, and Tesla) stagnated, the dollar weakened, and gold climbed back above $2,000 an ounce.

The most puzzling thing, however, is the widening gap between the Nasdaq 100 and the 10-year yield, as shown in this chart.

The question is: Will the tech stocks fall, or will the bond yields rise to close this alligator jaw?

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Love Is Back In The Air: Markets Bounce Back From Inflation Scare

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets 

The markets rebounded today after a Pre-Valentine’s Day massacre yesterday. Traders were feeling the love again as they shrugged off a higher-than-expected inflation report that spooked them on Tuesday.

They worried that the Fed might not lower interest rates soon enough to keep the economy humming. The market had been overheated for a while, but it’s not yet in the bargain bin.

There could be more bumps ahead, but I don’t think this is the end of the road for the bulls. I think this is a healthy correction that will set the stage for more gains later.

Small caps stole the show today, recovering most of their losses from yesterday. Nvidia also had a good day, briefly surpassing Alphabet in market value. The chipmaker is one of the “Magnificent 7” stocks that have been driving the market higher.

The Russell 2000, which tracks small cap stocks, jumped more than 2% today, beating the big three indexes by a wide margin. That’s a big turnaround from yesterday, when the index plunged 4% while the S&P 500 only fell 1.4%.

The most hated stocks also bounced back today, recouping more than two-thirds of their losses from yesterday. The Mag7 tried to do the same, but they were not as lucky. Bond yields fell and then rose again, reversing some of their moves from yesterday. The dollar gave up some of its gains, while gold stayed put at $2k.

There’s an interesting chart that compares Nvidia’s price action with Cisco’s from 1999 to 2004. It looks eerily similar.

Could Nvidia follow Cisco’s fate?

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