US Market Rises as Nvidia Renews Investor Optimism, iShares Silver Trust (SLV) +4% with 2X Volume Today

MARKETS TODAY August 23rd, 2023 (Vica Partners)

Overnight/US Premarket, Asian markets finished mixed, Japan's Nikkei 225 gained 0.48% while Hong Kong’s Hang Seng up 0.31%. China’s Shanghai Composite lost 1.34%. S&P futures opened trading at 0.20% above fair value.

European markets finished higher, London's FTSE 100 gained 0.68%, Germany's DAX up 0.15% and France's CAC 40 up 0.08%.

Today US Markets finished higher, the NASDAQ gained 1.59% while the S&P 500 was up 1.10% and DOW up 0.54%. 10 of 11 S&P 500 sectors advancing: Information Technology +1.92% outperforms/ Energy -0.30% lags. Trending Industries: Office REITs , Interactive Media & Services, Semiconductor & Semiconductor Equipment , Personal Care Products. On the upside, NYSE Fang+ ^NYFANG, iShares Semiconductor ETF ^SOXX, KraneShares CSI China ETF ^KWEB, SPDR S&P Banking ETF ^KRE, Credit Hedge ETF ^CDX , Gold Futures, Bitcoin, Bloomberg Commodity Index.

In US economic news, S&P flash services and manufacturing PMIs for August missed estimates. Order in both manufacturing and services declined while prices rose moderately. New home sales beat consensus with highest level activity since March of ‘22.

Takeaways

• S&P flash services and manufacturing PMIs for August missed estimates
• Nvidia renews investor optimism in the market
• NYSE Fang+ up 2.31%
• 10 of 11 S&P 500 sectors advancing: Information Technology +1.92% outperforms/ Energy -0.30% lags.
• Trending “on the Day”: Office REITs +2.77%, Interactive Media & Services +2.52%, Semiconductor & Semiconductor Equipment +2.47%, Personal Care Products +2.19%, Technology Hardware, Storage & Peripherals +2.15%, Life Sciences Tools & Services +2.10%
• iShares Semiconductor ETF ^SOXX +2.04%,
• KraneShares CSI China Tech ETF ^KWEB +2.0%
• Silver jumps and Sector Leader Pan American Silver Corp ^PAAS +4.27%
• Gold and Bitcoin rise
• Bloomberg Commodity Index +0.68%
• NVIDIA (NVDA), Snowflake (SNOW) with solid after-market earnings beats

Pro Tip: The 5-day average put/call ratio indicates when the ratio of puts to calls is rising, it is a sign that investors are growing cautious. A ratio above 1 is considered pessimistic.

Sectors/ Commodities/ Treasuries??

Key Indexes (5d, 20d, 50d, 100d, 200d)

S&P Sectors

• 10 of 11 S&P 500 sectors advancing: Information Technology +1.92% outperforms/ Energy -0.30% lags.
• Trending “on the Day”: Office REITs +2.77%, Interactive Media & Services +2.52%, Semiconductor & Semiconductor Equipment +2.47%, Personal Care Products +2.19%, Technology Hardware, Storage & Peripherals +2.15%, Life Sciences Tools & Services +2.10%, Real Estate Management & Development +2.08%.
• *1 Month Leaders: Energy +3.27%, Communication Services +2.28%
• *YTD Leaders: Communication Services +38.58%, Information Technology +37.17%, Consumer Discretionary +29.25%
• *S&P 500 +14.27% *as of Aug-22-2023

Factors

US Treasuries

Earnings

Q2 ’23 Top Line Top Line

• Q1 ’23 Actual: 79% of companies beat analyst estimates by an average of 6.5%
• Q2 Forecast: S&P 500 EPS was expected to decline <7.2%>/ Fiscal year 2023 EPS flat YoY

Q2 Seasonal Actual (TBA)

Notable Earnings Today?

• +Beat: NVIDIA (NVDA), Snowflake (SNOW), Autodesk (ADSK), Splunk (SPLK), NetApp (NTAP)Grab Holdings (GRAB), Bath & Body Works (BBWI), Dycom Industries (DY), Kohl’s Corp (KSS), Abercrombie&Fitch (ANF)
• - Miss: Analog Devices (ADI), Lancaster Colony (LANC), Advance Auto Parts (AAP), Peloton Interactive (PTON), Foot Locker (FL)

Economic Data

US

• S&P flash U.S. services PMI Aug: act 0, fc 52.5, prior 52.3
• S&P flash U.S. manufacturing PMI Aug: act 47.0, fc 48.9, prior 49.0
• New home sales July: act 714,000, fc 704,000, prior 684,000

Vica Partner Guidance August ’23, (updated 8-22)

• Q3+/4: highlighting: the Energy sector which is typical in a mature/ late business cycle. Expect continued Q4 sector shifts to Defensives, Health Care and Utilities.
• Trending Industries: Communication Services/ 1. Media??Consumer Discretionary/ 1. Broadline Retail 2. Specialty Retail??Consumer Staples/ 1. Consumer Staples Distribution & Retail??Energy/ 1. Energy Equipment & Services, 2. Oil, Gas & Consumable Fuels??Financials/ 1. Insurance??Health Care/ 1. Pharmaceuticals 2. Biotechnology??Industrials/ 1. Construction & Engineering??Information Technology/ 1. Communications Equipment??Materials/ 1. Containers & Packaging??Utilities/ 1. Gas Utilities
• Cautionary Industries: Consumer Discretionary/ 1. Automobiles 2. Automobile Components?Consumer Staples/ 1. Personal Care Products??Financials/ 1. Consumer Finance??Health Care/1. Health Care Equipment & Supplies??Industrials/ 1. Passenger Airlines??Materials/ 1. Construction Materials??Real Estate/ 1. Real Estate Management & Development 2. Specialized REITs 3. Hotel & Resort REITs??Utilities/ 1. Independent Power and Renewable Electricity Producers
• General: ?Continued shift from Growth to Value. Materials and Real Estate remains volatile on China deflation. Credit default swap (CDS) to pick-up through Q4/Q1.?>20 Year Treasuries price erosion.
• Longer Term: NASDAQ 100^NDX/FANG+ ^NYFANG companies will continue to outperform “BIG allows you to invest at scale”. TOP Sector outperform includes AI and Semiconductor Equipment. Look for strong CAGR growth from Chinese Mega Cap Tech. Other: key materials Lithium and Uranium. Real Estate with focus on Builders in anticipation of ’25 cycle growth.
• Company: we continue to emphasize longer term positions *quality and strength of balance sheet for all investments. * Strong Mega Cap longer support – NVIDIA (NVDA), Meta Platforms (META), Microsoft (MSFT), Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), Tesla (TSLA), Taiwan Semi (TSM), ASML Holding NV (ASML). **Select Value - United Health Care (UNH), Centene (CNC), Elevance Health, Inc. (ELV), Sociedad Quí Min de Chile (SQM), Vale (VALE), Alpha Metallurgical Resources (AMR), Merck & Co Inc (MRK), Lilly Eli & Co N(LLY), Coca Cola Co (KO), D.R. Horton (DHI) Toyota Motor (TM).

The Federal Reserve as of August 2023 was no longer predicting Recession: To quote Investor Jeremy Grantham “the Federal Reserve record on predicting recessionary cycles is guaranteed to be wrong!

So why don’t we support the soft-landing scenario...

1. Vica forecasts that the US will have a Recession, starting as early as Q4 ’23 and deep into ’24: the combination to date of Fed tightening, surging oil prices, stock market overvaluations and a strong dollar will shortly give us our bottom.
2. Market bottoms are made on bad news and with deflationary signals: economic reports are currently mixed and arguably too much focus placed on product prices and weekly jobs. Our biggest concern is rising interest rates and the depressing slow-moving effect it has on the Real Estate market. And… all with Consumer debt rising to historical highs.
3. Current S&P 500 Sector Metrics support contraction: strong trends in the Energy sector indicate the US is in a late business cycle (see chart below).
4. A correction in excessive market asset valuations: the current shift from Growth to Value stocks and the Information Technology sector pullback are both underway.

Pundits can all agree that the Fed has never called any recession in-kind.

Realignment is needed ...

1. The Federal Reserve has limited power in controlling inflation: applying old school economic principles is ineffective in a highly automated and expanding global economy. By simply raising rates to counter jobs (1.6 jobs available for every job seeker) will NOT moderate on demands.
2. A?2% inflation target is not realistic today:?perhaps a >3% base rate could help fund a) appropriated wages for skilled workers and training b) an executable and efficient energy transition c) improving operational efficiencies across the economy d) and most importantly (look at China today) protection from deflation!

News

Company News/ Other

• Nvidia Sales Surge as AI Boom Lifts Earnings - WSJ
• Nielsen Plans to Incorporate Amazon’s Data on ‘Thursday Night Football’ Viewership - WSJ
• Conservative Attacks on Diversity Efforts in Corporate America Keep Coming - Bloomberg

Energy/ Materials

• BlackRock Backs Fewer Climate, Social Shareholder Proposals - Bloomberg
• Conoco Deal Triggers Divestment Alert From Pension Investors - Bloomberg

Real Estate

• How High a Rate Can Housing Take? - WSJ

Central Banks/Inflation/Labor Market

• Recession Fears Have Been ‘Blown Out of the Water,’ Long-Serving Fed President Says - WSJ
• Half a Million US Jobs at Risk of Vanishing in Payroll Revision - Bloomberg

Asia/ China?

• As China’s property crisis plagues its economy and financial system, is a ‘Lehman Moment’ looming? - South China Morning Post