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VRA Investing Podcast: Earnings Highlights, Amazon and Meta Soar While Yields Collapse – Tyler Herriage – February 1, 2024

In today's episode, Tyler breaks down the latest earning reports from the tech giants as we got Q4 earnings back from Apple, Amazon, and Meta (Facebook) today. We also explore the market's reaction to yesterday's FOMC meeting and ...

Posted On February 01, 2024Episode 1317
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About This Episode

In today's episode, Tyler breaks down the latest earning reports from the tech giants as we got Q4 earnings back from Apple, Amazon, and Meta (Facebook) today. We also explore the market's reaction to yesterday's FOMC meeting and its effects on the bond market, as well as the implications of the upcoming Bitcoin "halvening" event.

Transcript

Don’t look back because the market is closed. Good Thursday afternoon, everyone. Tyler Herridge here with you for today’s VRA investing podcast. Hope you all had a great day out there today. It was a good day, to say the least, for our markets today. So we got a lot to cover here today. First, we’ll get into the latest in earnings, strong earnings that we got back today. A little bit of what we can expect to see from the month of February at least looking back historically.

And then our usual market analysis as well, where I’ll cover the latest reaction to what we saw at the first FOMC meeting at 2024 yesterday. But if you’re looking to get the full scoop on the FOMC meeting, Jay Powell’s press conference, then I highly encourage you to go first. Give a listen to Kip’s podcast from yesterday, where he broke it all down and what we see looking forward from the Federal Reserve and the market’s reaction yesterday as well. Or you can take a look at our write up on kipherage.com as well, where we just put out our most recent blog there today. And then stay tuned until the end of this podcast in our VRA commodity watch just after it. We always cover bitcoin as well. Some big events taking place in bitcoin right now in the upcoming having and what we can expect for the price of bitcoin going forward. So let’s jump right in here.

[00:01:37]:
And first off, welcome to the month of February, which is historically not a strong month for the market. Now, past results or past data don’t always guarantee future results, but that is the case. February typically slows down a little bit, but we just had a really strong month to start off the year for January. And so far so good. From the month of February today, strong start. Our major indexes finished higher across the board. We got all time highs here. Again, our major sectors either hitting 52 week highs or all time highs as well.

And then, as I said earlier, earnings absolutely crushed today, which bodes well for tomorrow’s trading as well. So let’s take a look. Let’s dive in here. Gonna cover this kind of quickly. Earnings today after the close were led off with Amazon reporting with big beats here, beating on revenue, beating on earnings per share, and one that a lot of analysts were looking for, continued growth from their cloud division AWS. We just saw big cloud division growth from Azure, that’s Microsoft’s cloud division on Tuesday. So continuing here as the cloud business expands, the stock though, up big in after hours trading. Now at $172 a share.

That’s up almost eight and a half percent for Amazon since the close. And keep in mind, this is a $1.6 trillion company. That’s up eight and a half percent. Now, that stock just added roughly $150,000,000,000 in market cap within about three to four minutes after the news broke. That’s the fastest $150,000,000,000 that’s ever been made from a theoretical point of view, the market cap, but still very impressive numbers and we’re just getting started after that. Meta reported as well, beating expectations in a big way. So beating on earnings per share, beating on revenue, even outpacing their own guidance. So not just outperforming what the market expected, outperforming what they expected from their previous results as well.

[00:03:54]:
And also on the news, Meta declaring their first quarterly dividend ever, about a 50 cent per share dividend as well as $50 billion in share buyback. So one other side point here, now that we’re really getting to the heart of earnings season means that we’re getting out of the share buyback blackout period, which takes place I believe it’s six to eight weeks before earnings, and then companies can start buying back their stock after that as well. That is more fuel to the fire here for stocks, and we expect it to be another big year for share buybacks as well. The stock now up over 14% in after hours trading, trading at $450 a share. That is an all time high. Also, I’ll point out Amazon stock, that’s a 52 week high that it’s trading at quickly approaching its all time high as well. Will you see some of the largest companies in the United States? I mean, like I said, Amazon $1.6 trillion, company gaining $150,000,000,000 in market cap in just a few minutes after the close. Same story from meta or Facebook.

Market cap of over $1 trillion as well. So you put it up 14%, $140,000,000,000 in market cap added there again, all time high here. Exactly what you want to see. As we say here, often new highs beget new highs. So looking good for the tech sector as a whole. And again, just so impressive that ten minutes after earnings out gaining $140,000,000,000 in market cap, really impressive earnings today. If we could hold these gains overnight, it’s going to be a rip roaring day tomorrow. And lastly here, I guess we’ll finish with the decent news.

I definitely wouldn’t say bad news here, but Apple, Apple also beat on earnings per share, beat on revenue. The stock is down, though, in after hours trading, roughly 2%. Now, there’s a lot of reasons for that and a lot of forward looking items from Apple that could be some major catalysts to the upside for this stock as well. But right now, Apple is down in after hours trading, but again, beat on earnings estimates. So overall, a very good day here as we now kind of wrap up the big names on the week. Again, as we talked about at the beginning of this week, the company’s reporting represented over $10 trillion in valuations. Tomorrow we’ll get a few more, some energy names before the open as well. So we’ll continue to be reporting on that here.

[00:06:42]:
Overall, it has been a solid Q four earnings season. These numbers are only going to make those look even better. Pull up this really quickly from the earnings scout. This is from yesterday’s close. So again, not including this morning or this afternoon. So this will likely improve quite a bit tomorrow. But so far, solid earnings season. 77% of companies have beat on earnings per share estimate, slightly lower from the three year average, but it’s been a pretty good last few years and 69% topping sales estimates as well.

Just a little bit below the three year average, but still strong growth that we’re seeing here. And that growth doesn’t look to stop anytime soon. Just looking at the broad market economy, the Atlanta Fed was out earlier today with their Fed. Now our GDP now tracking roughly 4.2% growth in the first quarter for GDP. So the growth rolls on here. Just what you want to see. Were so many people talking bad about the economy. We continue to get more and more upsides here.

If you haven’t followed us closely, we’ve been talking about a lot of these trends. I won’t dive into all of them here, but this economy does remain strong. So don’t listen to all the consistent perma bears out there. They love getting loud. When stocks are starting to hit 52 week highs, they’ve only got one way to go from here. That’s not true. We’re in blue sky territory now. We’re hitting all time highs.

[00:08:22]:
The Dow Jones just hit an all time closing high today. And we are in within percentage points for most of our major indexes here as well, including our favorite sector, the semiconductors. So overall, what a day here. And let me just say this one more time. We don’t see this at all as a sign of a market top. We take this as a sign that we are here in the roaring 2020s. That’s been our call for the last two years since we released our book the big bribe. We see this as a special time for the market.

One thing I’ll touch on with Apple here that Kip and I just talked about in our afternoon call is a great point, that the iPhone eleven was the last real major upgrade to the systems of an iPhone. And now, I don’t follow all of their hardware processes and everything that closely, but that was the 5g rollout. So nothing has been as big as that rollout since then. And the speculation is that the next big rollout will be AI built into your phone. They’ve already tried to do a little bit of that with some assistance with Siri. Now, if we could take that to the next level, Grok level, chat GBT on the iPhone as well, consistently working with you, that would be a big move right there from Apple, not to mention what it could do for their other products as well. So plenty of upside potential there for apple to capitalize on, no doubt. So again, kind of getting back to the roaring 2020 themes AI is just now rolling out.

People are starting to see the use cases on it. Kip has covered this week as well in our podcast. This is different from the.com era bull market. We wrote about this in the big bribe as well, where you had companies like Pets.com or I think of that one specifically because now we have chewy out as well, companies that you might not think of as they’re not the apples or Amazons of the world. But those were big promises that companies like Pets.com made back in the 90s that companies like Chewy are executing on now, that was the miss in the.com bus is there was so much hype, so much promise, and the tech just wasn’t quite there yet. Now here we are 25 years later, and that tech has been developed. It didn’t stop being developed just because of the.com bus. Now, these are real use applications that we’re getting from this tech.

[00:10:56]:
And as AI begins to roll into that, the upside is limitless here. As we see it now, it’s going to take some time to roll out, sure. But as we keep growing, I think it’s already beginning to roll out faster than people expected. It was a big talk at the financial marketing summit that we were at last week that Kip talked about as well. For a lot of different areas where people wouldn’t expect AI to be used. People are finding use cases for those as well. So again, we think we’re early here still in the early innings of the roaring 2020. So it’s not too late to participate if you feel like you’ve been left out of, you haven’t gotten the returns that you’re looking for, which is an easy feeling to get when you see stocks hitting all time highs, the market hitting all time highs, and then you see the returns on your portfolio and you don’t feel like you’re maximizing the potential there.

Well, come and join us here at the VRA. We crushed Mr. Market last year, 50% plus in our portfolio. We don’t see anybody else out there putting up those kind of returns, absolutely crushing the market there. So you can come and join us, check out everything we have to offer for 14 free days on us@vrainsider.com you can check it out on Vraletter.com as well, where you’ll find our podcasts and our other systems there as well. So come and join us. We’d love to have you here with us. And as always, feel free to reach out to us at support@vrainsider.com.

So to wrap that up again, what a day here. Big beats from some of the largest companies in the world and adding on to a big turnaround day here after yesterday’s FOMC sell off. Again, I won’t cover it too much here today, but suffice to say, Jay Powell living up to his reputation of sending, he’s back into old Jay Powell mode here, sending the market lower every time that he talks, really putting his foot in his mouth. All they had to say yesterday, I’m diving into it more than I even anticipated. But all he had to say yesterday was that they were going to remain data dependent. Instead of that, he wanted to talk down the market yesterday when he said basically that March rate cuts are off the table and the bond market today really seemed to try to call Jay Powell’s bluff on that as yields continue to fall here, we think this is another major unforced error here from the Federal Reserve by saying that yesterday from Jay Powell. I won’t even say it’s an unforced error on the Fed. It’s an unforced error on J.

[00:13:41]:
Powell specifically. Now, we’ve said it for some time. We’re fine with the higher for longer theme from the Fed, but they also need to listen to the market. They are too restrictive. And that’s what the bond market is telling us now, where yesterday, if they’re talking about higher for longer and rates collapse, yesterday we fell below 4% on the ten year. Today, the ten year down another 2.6% on the day at a 3.86. This is the market telling the Fed, hey, you’re too restrictive, you can go with the higher for longer. But we need a little relief here.

And much like we said last year, that every additional, when they’re doing those final rate hikes, just a quarter percentage point there, 25 basis points hikes, they’re just speeding up the timeline in which they were going to have to cut rates. It would be fine to do it in a slow and controlled manner. Doesn’t matter when you start as we see it. So again, fine with the higher for longer, not fine with the execution of it so far. And the market is telling us that here as well. Again, with treasuries down big, specifically the ten year down big, we’ve got a fed funds rate at five and a quarter to five and a half. The most closely watched with that is the two year at a 4.2, a full percentage point lower. That’s about where the Fed should be right now.

That’s what the market is saying. And the market has a much better track record of getting this right than the Federal Reserve does. So we do see yields heading lower from here. That’s been our call for a long time. And we see that it’s very bullish for a lot of areas here, specifically precious metals, the miners, and of course our favorite tech stocks and small caps as well. One other plus side here, actually from yesterday’s sell off though, is not just that yields Kip wrote up this morning as the reverse bond vigilantes. So that’s one plus side. But one thing I talked about on Tuesday was how overbought we were in this market, specifically a few areas.

[00:15:52]:
But with the sell off that we had yesterday and the little bit before the day before that, those short term overbought conditions have been eased here. Now, we’re not anywhere near oversold conditions, but in a strong bull market, you don’t get back to those oversold conditions. So we are out of overbought here. And that tells us this market has further to run in the short term here. We’re also seeing it in our sentiment indicators as well. I was going to touch on this in a little bit, but I’ll go ahead and cover it now as sentiment is much less bullish than just a few weeks ago, despite the fact that we’re still right at those 52 week or all time highs. The fear and greed index still in greed mode, but it’s at a 68. One month ago it hit 80.

Right. So significant pullback there. AI did jump back some this month after falling below 40%. Bulls last week. Now onto the higher side. That’s all right there. What was interesting on the day was the put call ratio. Despite the rally today, spent almost the entire day above a one which is seen as excessive bearishness.

So the bulls aren’t out in full force just yet. All right, so that said, let’s take a look at our market action on the day because we did get a hell of a rally after yesterday’s sell off from the Fed, finishing also at or near their highs of the day today. Exactly what you want to see, Nasdaq leading or, sorry, small caps leading the way up 1.39% to 1974 on the Russell 2000. After that, the Nasdaq up 1.3% to 15,361. I will also point out semis didn’t lead the way today. Still up nicely though. Nine tenths of 1% after that. The S and P 500 up 1.25%, closing above 4900 here again at 4906.

[00:17:55]:
And finally, the Dow Jones closing at an all time closing high today. Didn’t quite get back to the intraday all time high, but it is an all time closing high here. Up zero point 97% or nearly 370 points to 38,519. All right, next up here, let’s take a look at our internals on the day today where we got exactly the numbers we want to see. Advancing stocks beating out, declining socks. Over three and a half to one positive on the NYSE. Just under two to one positive on the Nasdaq. 52 week highs to lows coming in just under five to one positive on the NYSE.

Now, we were negative here on the Nasdaq. We were negative on the Nasdaq, but no real concerns here. This is a bit of a lagging indicator. Negative by just twelve issues. When you get a pullback like we saw yesterday, you can’t expect all those stocks to get back to 52 week highs in one day’s trading. So we’ll look for that to improve and to stay positive going forward. Lastly here, volume coming in over two to one positive for both the NYSE and the Nasdaq. So good day overall from the internals.

Next up here are sectors on the day. We finished with ten out of our eleven s and P 500 sectors higher on the day today. Let’s see, I do want to run one chart here. All right, so we were led by consumer discretionary after that, consumer staples, which did hit multimonth high today. Defensive sector there they were up big by 2% today. After that, utilities finally catching a little bit of a bid on a day when yields lower. Real estate also higher on the day. Last I saw, home builders were positive as well.

[00:19:46]:
I’ll just keep running these charts for you. Home builders up two and a half percent. HGX up 1.8%. We don’t look at the real estate sector, we look at the housing sector and home builders and all of those. Right? Getting back close to 52 week highs and all time highs, actually there as well. We did have one other all time high from our sectors. Industrials, its four largest holdings. Companies, you would expect.

Big industrial companies. I’m blanking on the name. Well, we had Caterpillar up over 2%. Uber, which didn’t hit a 52 week high. Caterpillar did. Anyway, I’m blanking on the name. It’s not a huge deal. But point being, three out of those four companies, the top holdings in industrials hit 52 week highs today.

So it makes sense. The Dow also hitting all time highs today. But as we say here, often new highs beget new highs. So we’d love to see those continue. One other high today, healthcare, hitting an all time high today as well. We may not have a whole lot of love for the healthcare sector, much like financials, but it is important, and it continues to tell the story of a market that’s broadening, that’s very healthy action in a bull market. You still want to see financials participating, healthcare participating, even if you don’t have positions there. It’s good to see them.

[00:21:20]:
Then. Our one laggard on the day, really pretty much flat, was energy, down just 0.6% on the day today. Finally here for today, our VRA commodity watch. Gold up about a quarter of 1% now to $2,070 an ounce, getting back close to its highest levels of the year. And I will point out the gold miners were up in a big way today, up 3.9%. Following that, silver, up three quarters of 1%, or, excuse me, up half a percent to $23.29 an ounce. Copper lower on the day by 1.3% to $3.85 a pound. And finally here, oil getting a little bit of sell off, still hanging out in the $70 a barrel range, down two and a half percent to $73.92 a barrel.

Finally here for today, bitcoin is higher on the day by three quarters of 1% to 42,974. Now, at the beginning of this podcast, I said I was going to cover some of the having here going on, as we’re now estimated, roughly 80 days away from that event. And for those of you who are wondering exactly what takes place here, I’m going to explain it. So the bitcoin having takes place every 210,000 blocks that are mined. It’s been roughly a four year process on average. And what happens here is all of the bitcoin miners who are out there running these systems that solve complex problems where they mine new blocks. Each block is now producing half as much bitcoin for verifying those transactions. So we already know there’s 21 million bitcoin in total existence.

That is all that will ever be made. Not all of those have been mined. They won’t be totally mined until like 21 40, as the having takes place every four years. So this specific one right now, miners receive 6.25 bitcoin for every mined block. Before this. In 2020, the last having, they were receiving twelve and a half bitcoin for every block mined. So now, as this having happens, that number will be cut to 3.125 bitcoin for every block mined. Again, the reward decreases roughly every four years or every 210,000 blocks.

[00:23:57]:
So what does this mean for the price of bitcoin? Well, one, it means that there’s a limit on the new supply of bitcoin being generated on the network, so less supply out there. With these new etfs launching, demand has been high. We’ve seen those etfs continue to add to their portfolio of bitcoin. So if demand remains strong and supply is being constricted, you can see price increases rapidly from the last few happenings. Here’s specifically the one from 2020. In May of 2020. Well, I’ll go back a little further. In April of 2021, month before the happening, bitcoin was at roughly $6,900 of bitcoin.

In one month, it jumped to $8,800 of bitcoin. 8800, less than one year from that event. So from May of 2020 to May of 2021, bitcoin had rallied over $64,000 of bitcoin. By April of 2021, it fell a little bit into May. But if you had bought it 8800, I don’t think you’d be disappointed with bitcoin over $50,000. So again, with the new demand coming from bitcoin etfs, we think we can expect some fireworks from the price of bitcoin in the near future, especially with the havening being a catalyst for a big move higher. Will it be? Maybe. So.

Regardless, one year from now, one year from that havening event, should be very bullish overall. This is a group we do remain bullish on, and we continue to recommend dollar cost averaging going forward. Big believers in dollar cost averaging here. But folks, that is all that we have time for here today. Please be sure to subscribe to receive our VRA podcasts every day at the market close. You can sign up at v raletter.com. Check out the podcast link at the top. You can also find our transcripts there as well.

[00:25:56]:
So thanks again for tuning in. Until next time. We’ll see you back here tomorrow for the close.

Podcast Newsletter

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Time Stamps

00:00 Market analysis, FOMC meeting, bitcoin, podcast.
03:54 Meta announces dividends and buybacks, stocks soar.
08:57 iPhone 5G upgrade and potential AI rollout.
12:32 Market reacts to Powell's negative comments.
15:52 Short-term market is out of overbought conditions.
17:55 Dow Jones at all-time high, positive day.
22:12 Bitcoin price increases, explaining process of halving.
24:41 Bitcoin's price surged over $64,000 in 2021.

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