🔬Nvidia Is Numero Uno
Plus: The Fed gives up on 2024; Retail Spending is getting ugly; and much more!
"Don't follow the crowd, let the crowd follow you"
- Philip Fisher
"“You know I always wanted to pretend that I was an architect.”"
- George Costanza
Yet another positive day for the big US markets with the S&P 500 +0.3% and Nasdaq +0.03%.
8 of 11 sectors closed higher, led by Financials and (obviously) Tech (both +0.6%). Communication Services (-0.8%) and Consumer Discretionary (-0.4%) were weakest, likely impacted by weak retail spending data (more below).
WTI Crude Oil gained +1.2% to be back above $80 a barrel.
Notable companies:
Qualcomm (QCOM) [+2.2%]: Positive comments from TF International Securities that QCOM will likely be the sole SoC supplier for Samsung's Galaxy S25.
Silk Road Medical (SILK) [+24%]: To be acquired by Boston Scientific for $27.50/share in cash, a 26% premium to Monday's close.
Boeing (BA) [-1.9%]: Bloomberg reported a quality inspector alleges mishandling and loss of faulty parts potentially installed on new 737 Max planes. Added BA "intentionally hid" improperly stored, nonconforming parts before FAA inspection.
Street Stories
Nvidia Is Numero Uno
Nvidia is now the largest publicly traded company in the world after surpassing Microsoft yesterday and Apple on June 5th.
The rise of Nvidia over the past few years has been incredible and the stock doesn’t seem to be slowing down. So far in 2024 the company has added $2.1 trillion in market cap - dwarfing every other company in the world. By a mile.
This has led to Nvidia contributing an unprecedented 36% of the S&P 500’s return for the year.
The inflection in revenue has also been pretty wild too. There are no other examples of 31 year old companies able to go from $11 billion in revenue (2020) to a Wall Street estimate for $184 billion in just 7 years.
The Street’s almost daily increase to revenue estimates has also been unique for a company of this size. In just the last year the 2025 revenue bogey has progressively been ratcheted up by 126%, as the market opportunity and their dominant positioning continues to grow the story every time I look.
Is the Fed throwing in the towel?
At the Fed meeting last week, JPow and friends updated their estimates for the future. And it wasn’t exactly positive.
One of the downers was their increased expectations for PCE inflation by year end, which they (expectedly) pulled back further away from their bullseye of 2%.
Part of the result was pushing their expectations for year-end interests rates higher yet again. For context, in December their midpoint for the year-end policy rate was around ~4.75%. Now that figure sits at ~5.25% - essentially implying only one interest rate cut for the year.
Investors and Wall Street have taken their recent cues as signs that the Fed has absolutely no eagerness to do anything anytime soon. Currently the midpoint for December sits at around 1.5 interest rate cuts of 25bps. For context, at the end of last year the Street had priced in a 100% chance of 3 cuts or more.
If you offered me a bet 6 months ago that 2024 would see nearly 30 fresh stock market all-time highs and a sound economy but that expectations were for year-end interest rates to still sit at multi decade highs, I would have taken that bet.
And lost.
Like I always do.
Soft Retail Sales (again)
US retail sales barely moved, gaining only +0.1% in May vs. consensus estimates for +0.3%, with prior months revised lower, indicating increased financial strain on consumers.
The figures highlight a slowdown in consumer spending due to persistent inflation, a cooling job market, and signs of financial stress, prompting economists to predict more cautious spending ahead.
Joke Of The Day
A man’s home is his castle…In a manor of speaking.
An armed man ran into a real estate agency and shouted…“Nobody move!”
Hot Headlines
Reuters / Apple suspends manufacturing on Vision Pro VR headset. Claimed that the move allows them to focus on cheaper model - but could just mean that they realized no one can afford the $3.5k device.
CNBC / Fisker files for bankruptcy protection in wave of EV startup failures. The liquidation of the EV maker once valued at $2.9 billion, is a moment of déjà vu for its founder who’s Fisker Automotive failed in 2013.
Reuters / The US FTC says it has referred a complaint to the DOJ against TikTok and ByteDance over potential violations of the Children's Online Privacy Act. A statement released by TikTok stated that many of the claims ‘relate to past events and practices that are factually inaccurate or have been addressed’.
CNBC / Amazon Labor Union votes to join forces with Teamsters. Not saying I’m for or against unionization, but if I had to pee in a bottle at work I’d be very pro-union.
Reuters / Putin vows to support North Korea against United states and will deepen trade. Trade what? They have nothing but people. Oh yeah, eww, they did that already.
Bloomberg / US shale oil output to grow for years before peaking, according to HSBC. The US is already the largest oil producer in the world and that lead could keep on growing despite expectations by OPEC+ and others that believe it to be maxed out. They wish!
Trivia
This week’s trivia is on ‘first year economics’.
Which is not a characteristic of a 'perfectly competitive' market?
A) Homogeneous products
B) Few barriers to entry and exit
C) Significant market power for individual firms
D) A large number of buyers and sellersWhat does the term 'Fiscal Policy' refer to?
A) The management of a country's currency
B) Government spending and taxation decisions
C) Corporate investment strategies
D) Banking regulationsThe 'Marshall Plan' was primarily aimed at:
A) Developing the agricultural sector
B) Rebuilding European economies after World War II
C) Establishing military bases in Europe
D) Promoting free trade globally
(answers at bottom)
Market Movers
Winners!
Silk Road Medical (SILK) [+24%]: To be acquired by BSX for $27.50/share in cash, a 26% premium to Monday's close; equity value of $1.26B, expected to close 2H-24.
La-Z-Boy (LZB) [+19.4%]: FQ4 EPS and revenue beat with strong Q1 guidance; better margins; expects industry challenges through 2025 but relief from interest rate cuts; total sales decreased 1.4% y/y, less than feared.
Rocket Lab USA (RKLB) [+13.1%]: Signs deal with Synspective for 10 Electron launches; terms undisclosed.
Patterson Cos. (PDCO) [+11.1%]: FQ4 in line, revenue beat; adj. EPS impacted by $0.04 due to Change Healthcare cybersecurity attack; strong dental consumables and production animal businesses; FY25 EPS guidance in line.
Six Flags Entertainment (SIX) [+5.8%]: Announced senior management team for merged company with FUN; merger to close 1-July; special dividend of $1.53/share.
Micron Technology (MU) [+3.8%]: Added to US1 list at BofA Securities.
Chegg (CHGG) [+3.4%]: Announced restructuring, reducing global headcount by ~23%; more resources to international, revamped marketing, diversified distribution channels.
Qualcomm (QCOM) [+2.2%]: Gain likely due to comments from TF International Securities analyst Mind-Chi Kuo that QCOM will likely be the sole SoC supplier for Samsung's Galaxy S25.
Losers!
Veris Residential (VRE) [-6.5%]: Withdrew public offering of common stock; intends to terminate acquisition of 55 Riverwalk Place.
Ball Corp (BALL) [-6.3%]: Declined after releasing FY24 baseline and long-term targets at investor day.
Lennar (LEN) [-5%]: FQ2 earnings and revenue beat; deliveries and new orders ahead of consensus, but backlog light; consumers pressured but responsive to sales incentives; report seen as in line, with underwhelming Q3 guidance, particularly on GM.
Boeing (BA) [-1.9%]: Bloomberg reported a quality inspector alleges mishandling and loss of faulty parts potentially installed on new 737 Max planes; added BA "intentionally hid" improperly stored, nonconforming parts before FAA inspection.
Market Update
Trivia Answers
C) Significant market power for individual firms isn’t a feature of ‘Perfect Competition’.
B) Fiscal Policy refers to Government spending and taxation decisions.
B) The goals of the Marshall Plan focused on rebuilding European economies after World War II.
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