Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, May 23. The Bottom Line segment of today’s podcast starts at (3:00 for listeners who want to skip ahead. Be sure to check out the new ‘One Year Ago Today’ segment at the bottom of this page. Today’s episode is free brought to you by HX Research. More on them below.
State of Play
Investors were briefly spooked by Fed meeting minutes yesterday, sending stocks lower. Then after the close Nvidia (NVDA 0.00%↑) earnings came through again, blowing away estimates (again) and upgrading guidance (again). The stock moved higher overnight, predictably enough. As we look at our board of indicators at 0650, risk-on is the mood, especially for tech stocks:
Stock index futures are pointing to major gains, led by tech. The Nasdaq is up another 1% with S&P 500 (SPY 0.00%↑) futures up 0.6%;
Commodities are mixed. WTI crude oil is up 0.8% to trade around $78/barrel but copper is down 0.7%. Gold and silver are getting dumped, with the latter down 2.5%;
Bonds aren’t doing anything. The 2-year yields 4.87% whilst the 10-year yields 4.43%;
Cryptos are unchanged with Bitcoin trading around $70,000.
Today’s Known Events
A few earnings to tell you about: Ralph Lauren (RL 0.00%↑) and BJ’s Wholesale Club (BJ 0.00%↑) report before the open at 0930. After the close at 1600 we’ll hear from Intuit (INTU 0.00%↑) and Ross Stores (ROST 0.00%↑), among others.
It’s Thursday so we have initial jobless claims at 0830. Economists who were surveyed expect 221,000 new claims, in line with last week’s 222,000 and ahead of the four-week average of 217,000.
New home sales are out at 1000. The expectation here is for 677,000 new transactions, down from the 693,000 recorded last month.
The Bottom Line©️
Nvidia to the rescue again. Just when markets were starting to worry about the Fed, NVDA earnings reclaimed the narrative. It helped that Snowflake (SNOW 0.00%↑) was positive as well. There isn’t anything on the calendar that can probably change that. Maybe jobless claims will put a dent in it but these have been so predictable for so long. New home sales? Boring, but you never know…
If you’re wondering how this has affected our ‘undiscovered’ AI chip names, six of the eight rode Nvidia earnings to rally overnight. The two outliers were Photronics (PLAB 0.00%↑), which reported disappointing earnings of its own yesterday and is down multiple percent, and Ichor Holdings (ICHR 0.00%↑), which is flat for whatever reason.
The other six, if you must know:
ACM Research (ACMR 0.00%↑)
Camtek (CAMT 0.00%↑)
FormFactor (FORM 0.00%↑)
Kulicke and Soffa Industries (KLIC 0.00%↑)
Ultra Clean Holdings (UCTT 0.00%↑)
Veeco Instruments (VECO 0.00%↑)
This would lend credence to our suspicion voiced yesterday that these stocks are all Nvidia proxies.
The Contrarian did buy some Target (TGT 0.00%↑) yesterday, getting a favorable price of $140/share.
One Year Ago Today…
There were longer-term concerns about the US economy after earnings from Home Depot (HD 0.00%↑) and Target (TGT 0.00%↑) cited lower discretionary spending on behalf of US consumers (Daily Contrarian, May 23, 2023).
…and What Happened:
Safe to say the concerns were short-lived as the US consumer continued to increase spending. As for HD and TGT:
Neither stock has kept pace with the S&P 500, as the chart above illustrates. Target is now down for the last 12 months after yesterday’s sell-off. The company continues to lament US consumers pulling back spending on big-ticket items (they sang the same tune again on yesterday’s earnings call). While this may be true in Target’s experience, it has not (as of yet) translated to a pullback in consumer spending, at least according to any official statistic (retail sales, etc).
A Word From Today’s Sponsor
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Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
There is a good chance we will skip tomorrow’s briefing as there is nothing on the calendar and it’s a three-day weekend in the US.
Monday’s briefing is definitely canceled as markets in the US are closed.
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Nvidia Rocket Ship, New Home Sales