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Stock bulls will be looking to deepen control this week with all three indexes near record territory. For what it’s worth, the Dow and S&P 500 are just off recently set record highs but the Nasdaq hasn’t managed to set a new record since November 2021.
Bulls are hoping to get a big leg up from Nvidia later this week, which reports Q4 earnings after the close on Wednesday (2/21). The company’s stock is already up nearly +50% this year amid sky-high earnings expectations and investors’ overall excitement surrounding AI. Nvidia’s Q3 earnings results topped Wall Street expectations by nearly +20%, with companies racing to adopt AI capabilities faster than analysts anticipated.
As a result, expectations for Q4 results are extremely optimistic, with earnings forecast to rise +422% while sales climb +237%. If realized, it will be the company’s third straight quarter of triple-digit gains. The big risk is that Nvidia disappoints and investors start dumping tech stocks, which would obviously deal a huge blow to wider stock indexes. Even if Nvidia tops expectations, many Wall Street insiders think the stock may sell off in classic “buy the rumor, sell the fact” style, which could also cause indexes to wobble. Others think strong results from Nvidia could once again supercharge investor sentiment surrounding AI and help send stock indexes roaring higher.
Bottom line, Nvidia’s earnings results could be the biggest market moving event so far this year.
Today, Walmart and Home Depot results are in the spotlight. As the first of the big US retailers to report, these two companies will establish expectations for the rest of the sector.
Investors are particularly interested in forward guidance after the Retail Sales report last week showed a bigger than expected slowdown in January, suggesting consumers have begun reining in spending. On the data front, there is nothing on the calendar today.
The top economic highlight this week will be Wednesday's release of the “minutes” from the Federal Reserve’s January FOMC meeting, though it is unlikely to provide any new insights into the central bank’s current thinking. Speeches from several Fed officials this week are probably going to be more consequential to markets. A top draw will be Fed Vice Chair Philip N. Jefferson and Fed Governor Christopher J. Waller, which are scheduled to deliver separate speeches regarding the US economic outlook and monetary policy on Thursday.
One of Russia's Biggest Victories Happened Yesterday: Russian forces on Monday claimed full control of the town of Avdiivka, cementing the biggest battlefield gain in nine months after one of the most intense battles of the war. Ukraine said it had withdrawn its soldiers to save troops from being fully surrounded after months of fierce fighting. Putin hailed the fall of Avdiivka as an important victory and congratulated Russian troops. This more than likely places further pressure on Washington to pass the $95 billion aid bill to Ukraine. Source Reuters
Consumer Sentiment Rises to Multi-Month High: Consumer sentiment crept up in early February, fueled by slowing inflation and a strong job market. The first of two readings of the sentiment survey released on Friday by the University of Michigan rose to 79.6 from 79.0 in January. That’s the strongest reading in two-and-a-half years. Americans appear to be more confident inflation will continue to slow and that jobs will remain easy to find. A rising stock market has also buoyed confidence. A measurement of expectations for the next six months also climbed to two-and-a-half-year highs. The economy is growing at an above-average speed, unemployment is extremely low at 3.7%, gas is cheaper, stocks are rising, and inflation is slowing, though not as fast as investors had hoped. The Federal Reserve is also primed to cut interest rates later this year. Source Market Watch
Builders Upbeat Despite Sluggish Housing Starts: New home construction plunged in January, but one measure for single-family homes perked up, a sign that the data isn’t as gloomy as it looks on first glance. Housing starts fell to 1.33 million, -14.8% lower than the revised December rate of 1.56 million. Permits fell to 1.47 million, -1.5% below the revised December rate of 1.49 million. The data initially looks out of sync with rising builder optimism, which rose in February to its highest level since August. Builders were particularly bullish on selling conditions later this year; an index component tracking their expectations in the next six months increased to its highest reading since June. But the greatest declines came from multifamily building. Single-family starts fell -4.7% in January, while large multifamily construction dropped a much larger -36%. Compared with one year prior, single-family housing starts were +22% higher in January, while large multifamily starts were down -38%. Source Barrons
DraftKings Bets on the Lottery: DraftKings last week plunked down a $750 million bet that a lottery app will help it win the fierce battle for customers in its own core business. The sports-betting giant said it would buy Jackpocket, a company that allows users to buy state lottery tickets from their phones. In one sense the rationale is simple — DraftKings can branch into the massive U.S. lottery industry. But "more importantly" (its words), the deal is about acquiring customers cheaply, who will drive increased value on DraftKings' sportsbook and iGaming business. "It's a very efficient way to acquire customers in mass," DraftKings CEO Jason Robins said on a conference call about the deal. "And we know from overlap analysis that those customers will cross-sell very effectively" to higher spend on DraftKings' core businesses. Customer lifetime value is an important metric in the online gaming industry, as is the cost of winning new customers. By increasing the first metric and lowering the second, DraftKings believes it's made a very good bet. Source Axios
Why Your Google Searches May be Returning Bad Result: Have you noticed lately that some of your Google searches have steered you wrong? There’s a reason for that. Spammers are using artificial-intelligence tools to create an ocean of content, and Google’s algorithms are ranking some of those robot-generated pages ahead of the information you actually need. This adds a new layer onto tricks that spoil your searches, including misleading targeted ads and low-quality websites built to appear atop the results page. At best, this clickbait is annoying. At worst, it can lead you to scams intended to get your credit-card number and other personal information. To rank highly in search results, spammers are now publishing posts on established sites that Google tends to favor, such as LinkedIn, Reddit and Quora. Generative text chatbots make producing this “parasite” content easier, said Mark Williams-Cook, a search-engine specialist and director at marketing agency candour. Source WSJ
Realtors are Struggling as House Sales Decline: Not as many people are buying homes in an expensive housing market. And it's slowing things down for real estate agents. The number of home sales per agent has fallen to its lowest level in over a decade, a note from Apollo Management's Torsten Sløk stated. "With many homeowners locked into sub-4% mortgage rates, existing home sales are at the lowest level since 2010," Sløk noted. Mortgage rates have fallen from their recent peaks of 8% back in October last year, but they're still historically high. Home prices are also too high for many homebuyers. The S&P CoreLogic Case-Shiller Index shows prices in many markets around the country are still sitting at all-time highs. There's also a geographic nuance to this trend, with fewer real estate agents per 1,000 jobs in states like California and New York as people flock to southern states. The agent-to-jobs ratio is higher in places like Florida, Texas, Arizona, and Colorado. Source Business Insiders
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