Broker Check


THIS WEEK'S UPDATE

| February 26, 2024


Stocks Rally to Record Highs
Stocks traded in a fairly tight range for the first half of the short week, yawning at the lack of economic data while awaiting earnings results from one key company that creates chips that power the artificial intelligence operations of many firms. A strong Q4 corporate report and long-term message from Nvidia Corp. pushed the S&P 500 and Nasdaq to new closing highs on Thursday. Nvidia’s market cap rose by $277 billion on the news, pushing it to a $2 trillion valuation. To put that in perspective, Nvidia's market cap is now roughly the same size as Canada’s economy. Its 16% gain on Thursday was the largest one-day market cap increase by any U.S. company.
 
Inflection Point?
Nvidia’s seismic increase in market cap gave investors pause for reflection, wondering whether this marked an inflection point for artificial intelligence. The main story that investors took away was that, because of its market dominance as the leading global provider of AI computer chips, Nvidia served as a proxy for AI. Some of the world’s most influential companies rely on Nvidia technology to power their own AI initiatives. Investors appear to have concluded that AI’s impact may just be starting, and anticipate it will be a driving economic force in 2024 and beyond.
 
This Week: Key Economic Data
Monday: New Home Sales. Two-year Treasury Note Auction.
Tuesday: Durable Goods. Case-Shiller Home Price Index. Consumer Confidence.
Wednesday: GDP report (second estimate). Petroleum Status Report.
Thursday: Jobless Claims. Personal Income and Outlays.
 
This Week: Notable Companies Reporting Earnings
Monday: Workday, Inc. (WDAY), Zoom Video Communications, Inc. (ZM)
Tuesday: Dell Technologies Inc. (DELL), Agilent Technologies, Inc. (A), eBay Inc. (EBAY)
Wednesday: Salesforce Inc. (CRM), HP Inc. (HPQ)
Thursday: Hewlett Packard Enterprise Company (HPE)
 
Final Thoughts
Well, in case you haven’t figured it out from above, Nvidia’s earnings report was a thunderbolt straight to the heart of the market late last week.  It electrified markets in what had appeared to be an already short-term overbought market.  However, the stock market loves growth and innovation.  So, for now, keep an eye on Nvidia and the other tech titans as they are currently a barometer of the health of the overall market.  They make up almost a third of the S&P 500 and technology is estimated to grow to as much as 50% of the S&P 500 over time. This isn't your late 1990's tech. These companies are printing money.
 
Being in stocks feels great at the moment, which frankly has me a little nervous.  Not nervous in a sense we are awaiting some kind of collapse, but nervous in a sense we are due for a little correction at some point.  I think we end the year higher than we are now, but it is rarely a straight line.  I guess what I am saying is don’t panic if you see a pullback of 5-10%.  We’ve had a long hard run and as long-term investors know, a little breather wouldn’t be out of the realm of normalcy. Also, it is election year.
 
Stay tuned…