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VRA Investing Podcast: Nvidia Crushes Earnings Once Again, and Markets Finish at Their Highs – Tyler Herriage – February 21, 2024

Tune into today's podcast as Tyler recaps the day's roller-coaster ride with our major indexes spending most of the day in the red before a strong finish during the smart money hour. Forget the FOMC minutes, all eyes were on NVDA' ...

Posted On February 21, 2024Episode 1327
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About This Episode

Tune into today's podcast as Tyler recaps the day's roller-coaster ride with our major indexes spending most of the day in the red before a strong finish during the smart money hour. Forget the FOMC minutes, all eyes were on NVDA's earnings after the close which sparked excitement in the market and led to significant after-hours moves.

Transcript

Don’t look back because the market is closed. Good Wednesday afternoon, everyone. Tyler Herriage here with you for today’s VRA investing podcast. Hope you all had a great day out there today. And what a day it was here. Kind of a bit of a roller coaster in a lot of regards. After a day, we spent most of the day in the red for our major indexes, a lot of the big names, most of the day in the red as well. And then once again here, we got a strong smart money hour, which is exactly what you want to see from our markets.

That’s been a pattern recently. Even on days when we’re finishing lower, we’ve seen a lot of buying into the close for our major indexes to finish at or near their highs of the day. And that continued today, folks. That’s exactly what you want to see from our markets. And not only do we finish at or near the highs of the day, but both the Dow and the S and P 500 managed to finish positive on the day, really only going positive just before the close and again at their highs of the day. And I’ll point out for our two major indexes that we track here, they also finish at or near their highs of the day for the Nasdaq and the Russell 2000, even if they finish lower. That’s exactly what we want to see here. But after the close, well, let me take a step back here.

[00:01:36]:
Because of that smart money hour, you have to wonder if some of Navidea’s earnings might have been leaked a little bit before the close. Maybe not, because that has been a pattern recently regardless, but that’s where all eyes were today. You can forget about the Fed meetings, the Fed minutes that came out, although I’ll cover that in today’s podcast a little bit. But everyone forgot about that quickly when Nvidia reported earnings after the close. And, wow, they did not disappoint here. Now, I will say for the last week or so, we’ve been talking about this potential for a buy the rumor, sell the news kind of event. We put on a hedge just in case of that. Although I’ll point out we did not sell any positions here ahead of this event.

Just a bit of a hedge, which if we happen to be wrong on no problem. That’s what a hedge is for. But it did look like we got that selling ahead of this event, right? We got a few days of a pullback for our big tech names here. Got out of extreme overbought territory, and after these earnings, it looks like we could be back off to the races here. So let’s dive into it and you can see a little bit more of what I’m talking about here. So Nvidia reported after the close, another big beat here. As we’ve been talking about a lot. Navidea really kicked off the most recent rally in this market with their Q one earnings last year.

Massive improvement there and the trend continues. The estimates for today were for revenue of 20.6 billion. They came in at 22.1 billion. A big beat on revenue margins. Crushing as well. Earnings per share coming in very strong now. The initial move for Nvidia was lower actually, after they reported. But as investors started to dive into these numbers and see that their guidance for the company in now Q one, 2024, the revenue guidance for 24 billion, well above expectations.

[00:03:54]:
It seems like they’ve been coming in with earnings ahead of their next quarter’s expectations time and time again since their big beat last year. We’ll see if they can do it again. But now revenue expectations for 24 billion in Q one. The stock now up nearly 10% in after hours trading, just below what would be an open at an all time high tomorrow as well. If you can tell, I’m a little bit worked up here. This is an exciting day today and it’s taking the rest of the market with it. A lot of the semiconductor names are up big in after hours now as well. AMD up over 4%, some of the other ones as well.

If I had a list in front of me, I could show you, but a lot of these names up two, three, 4% on the back of Nvidia’s earnings, just a monster move higher here, and for good reason. In this quarter, Nvidia just posted 265% year over year increase in revenue for this big of a company. That is a massive increase here. So it looks like the buy the rumor, sell the news event won’t take place. We got that little bit of a sell off I mentioned before that got us out of extreme overbought territory. And now it looks like we’ll be back off to the races. And that hedge may not be worth as much, but hey, that’s what they’re for, right? So good day today overall. Now back to the less exciting factors of today that we also got the January FOMC meeting minutes.

Really not any big updates here, but there is one factor that I want to emphasize here, which I’ll get to in a second. But as far as the Fed goes, continuing to talk about patience here and they’ll wait to get back to the 2% inflation target before considering rate adjustments. As Kip covered yesterday on his podcast, which I thought was very good, that that’s really a load of crap. If things were to get ugly here again, like they did last year during the regional banks crisis, they would absolutely consider cutting rates, right? Because they’re invested in this market as well. That’s their money on the line, even though it should be against all regulations to be able to do that. Same thing for politicians. They should not be able to trade when they have this information. But if something went wrong, the Fed would absolutely consider cutting rates before they got to their 2% target.

[00:06:35]:
So don’t let them fool you there. But what was most interesting I thought about the minutes, were that it showed that FOMC participants are quote unquote eager, eager to start off discussions at the March meeting about how to conclude the reduction of the Fed’s bond holdings. So right now they’re in Qt quantitative tightening, letting those bonds roll off their balance sheet. Now it’s looking like the Fed, instead of cutting rates, they’ll stop QT. That is a big change there, something that we haven’t talked much about here. But that is another factor in the Fed and what their tools are. Instead of cutting rates, they’ll stop QT. Believe me, we talk about this here often.

They cannot wait to get back to quantitative easing, the easy money policies. So that’ll be something to watch for in the March meeting. I will point out that yields were higher after the news today, hitting their highest level so far in 2024, closing today at a 4.32. That close might have been a little below the highest closing price, but during the day, today hit a high of a 4.33. Again, that’s the highest reading since December 1 of last year. So you don’t have to go back too far. But no real concerns here from us on what the yields look like here. As we’ve talked about here often as well, we have equated this time period, the roaring 2020s most closely to the.com meltup from 1995 to 2000, where the Nasdaq rallied over 500%.

During that time, the average rate on the ten year yield was over 5%. A large portion of that time, it was over 6% as well. So no, we don’t see rates in the 4% range as a big deal here. As big of a deal as market watchers on CNBC would like to have you believe. Really, these are more normalized rates overall. Now, the ods of a rate cut, according to the CME Fed watch tool have continued to fall drastically over the last month. One month ago, the majority view was that there would be a rate cut. At the March meeting, it was over 50%.

[00:09:09]:
Now that has fallen to just a 29% chance today. Excuse me, sorry. That’s for a May rate cut. I said March in there. Now it’s like over 90% believe that there will be no rate cut in March. So talking about May a month ago, over a 50% chance of a rate cut in May, that has now fallen to just a 29% chance here. With a 69% chance of the Fed staying put in May, June remains the majority view of a 25 basis point cut, 53% chance, according to the CME’s Fed watch tool here. But again, overall, no real big news out of the Fed, and especially not any big news in regard to yields.

As we said for some time, we’re fine with the higher for longer. Know what was interesting, though, was the potential to end quantitative tightening. I actually a little bit surprised that hasn’t been a little bit bigger of a story since the Fed minutes. But now that’s going to be dwarfed by Nvidia’s earnings. Just seeing the gross margin here, 76.7% in Q four. Just incredible numbers from Navidea, again, up nearly 10% in after hours. And if they opened at these prices, tomorrow would be an all time high for Nvidia. So that said, let’s take a look at our market action on the day.

Again, not a bad day today at all. We finished two out of our four major indexes higher on the day, and we finished near or at the highs of the day as well. So we’re led by the Dow up just over one 10th of 1% at 38,612. And I’ll point out we’re not at extreme overbought readings anymore here for this market. That’s what we like to see. And one other factor that got some love today, that if you’re a believer in Dow theory, one area that has been underperforming lately that we want to see perform better has been the transports, which were positive all day today. That’s a bit of a pattern change as well. Even with the market lower, transports continued to head higher.

[00:11:25]:
We want to see that continue. I’ll point out they are near extreme oversold levels, not quite there, but more oversold than the rest of our major indexes. After that, we had the S and P 500 up 0% as well, same as the Dow to 4981. After that, the Nasdaq down three tenths of 1% on the day to 15,580. And lastly, the Russell 2000, down just under half of a percent to 1994. Next up here, taking a look at our internals on the day. We continue to get resilience under the hood of this market. A lot of days where the market was down, you would have expected much worse readings in the internals, and it just hasn’t been the case yet, especially if you’re looking for stocks hitting 52 week lows.

We’ve seen some uptick there, but really nothing worth noting. And that’s been a big bullish factor. Even on days where you’re not seeing a ton of stocks hitting 52 week highs, the trend has been lower in stocks hitting 52 week lows. That’s really good to see. So let’s take a look here on the NYSE. We actually managed to finish higher across the board here today. We had more advancing than declining stocks, although not by a whole lot. But hey, we’ll take it here.

Nasdaq did come in negative, but no big concerns. Next up, 52 week highs to lows coming in over three to one positive on the NYSE. Just under two to one negative on the Nasdaq. Kind of a tale of two markets here today. Higher across the board on the NYSE. Lower across the board on the Nasdaq. We think especially after today’s earnings, that could change pretty quickly. Lastly here, volume coming in positive for the NYSE.

[00:13:18]:
Not a big beat or anything, but we’ll take it. And again, negative on the Nasdaq, but also not a big beat there either. So again, after Nvidia’s earnings today, that could quickly change tomorrow. Next up here, looking at our sectors on the day today. Energy leading the way today. Oil prices are higher as well. We were followed there by utilities, which was an interesting one, with rates continuing to head higher. After that, we had real estate, which I will point out we don’t really follow the real estate sector for the S P.

It’s mostly made up of reits. We like following the home builders. That really tells you the story here. Home builders were also higher on the day today and just below an all time high here. Housing index also just below an all time high here. And then our one, laggard on the day. As you might expect, the tech sector, we did have the semis lower on the day. Kind of led the way lower compared to our major indexes.

Again, that one’s going to change tomorrow. Let’s see what they look like in after hours trading. Since we’re talking about it right now. SmH, the semiconductor etf up three and a half percent in after hours trading. Finally here for today, our VRA commodity watch. Gold now lower on the day, just over one 10th of 1%, lower to $2,036 an ounce. After that, silver, down nine tenths of 1% to $22.92 an ounce. Copper now higher on the day, just over three tenths of 1% to $3.88 a pound.

[00:14:59]:
And oil, as I mentioned earlier, higher on the day at $78 a barrel. And finally here for today, bitcoin. Pretty soon here we’ll have kips interview from today on real America’s voice. Stay tuned. You can see the replay on real America’s voice. We’ll try to get the recording out to you as well here soon, talking about everything we’ve been discussing here on the podcast and a few more fun facts in there for you and why we remain so bullish on bitcoin here. But bitcoin now down just under one and a half percent to $51,288 a bitcoin, folks, that’s 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@vraletter.com click the podcast link at the top. You can sign up there and view our transcripts of every podcast as well. So thanks again for tuning in. Until next time. We’ll see you back here tomorrow for the close. Bye.

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Time Stamps

00:00 Markets finish positively, showing strong buying.
05:35 Fed signals patience, but could cut rates.
07:25 March meeting to focus on quantitative easing. Yields hit 2024 high at 4.32%.
11:25 Major indexes fluctuate, showing resilience amid low levels.
14:59 Oil at $78 per barrel, bitcoin down.

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