Month: August 2023

This is it: the moment all traders, and certainly tech-heads, have been waiting for for the past 3 months: Nvidia, which single-handedly pushed the Nasdaq into a bull market since May when it reported blowout earnings that sent its stock up a stunning 25%, and which has sent market breadth to the lowest on record as traders have dumped anything that it not AI-related and bought, well, Nvidia…

… reports earnings after the closing bell at 4:20pm ET, and as many veteran traders have suggested, the fate of the next 10,000 Nasdaq points is in the hands of the versatile video graphics, bitcoin mining, AI-chip company.

Based on what I am seeing on my feed, Nvidia $NVDA earnings tonight hold the key to the next 10,000 points in the Nasdaq

— Joe Kunkle (@OptionsHawk) August 23, 2023

Let’s preview today’s main event starting with consensus expectations:

• Q2 EPS exp. 2.07,
• Q2 revenue exp. 11.224bln

The outlook will be absolutely key:

• Full year EPS view exp. 8.25
• Full year revenue view (exp. 44.5bln).

Revenue breakdown:

• DataCenter (exp. 7.691bln)
• Gaming (exp. 2.4bln)
• Automotive (exp. 317mln)
• Professional visualisation (exp. 308mln)
• OEM and IP (exp. 101mln)

As everyone knows, NVDA has soared an unprecedented 221% YTD on AI optimism given the company is a huge beneficiary with its equipment a necessity for those looking to build powerful AI tools, helping take its market cap north of $1 trillion.

The strength in the stock now sees it hold a 4.3% weight in the Nasdaq 100 and a 2.9% weighting in the S&P 500. Just this past Monday, NVDA rose another 8.5% in anticipation of its earnings where analysts are seemingly more and more optimistic about their results following a slew of PT upgrades.

Citing Refinitv/Reuters data, Newsquawk notes that tech earnings so far have predominantly beaten estimates with 93% beating, 2% being in line, and 5% missing expectations, showing a quarterly surprise of 7.6% for the sector overall. Looking at the subsector, Semiconductor & Semiconductor Equipment, 94% have beaten with 6% being in line with estimates, showing an overall quarterly surprise of 18.4%, making it one of the outperforming sectors over the latest earnings season, only falling behind the 23.5% upside surprise in autos (TSLA, GM, F, BWA, APTV) and the 26.3% upside surprise in the retail sector (AMZN, AZO, EBAY, HD, TJX etc).

Some more details from the sell-side:

• 15 Analysts rate NVDA as a strong buy, while 29 have it as a buy, 6 are hold and 1 recommends a sell, with 0 holding a strong sell opinion on the Co.
• Analysts at Zacks recall the Q1 report, where it saw huge beats on both EPS and revenue, which helped the stock rally 24% in the following week. With the strong outperformance in NVDA. analysts have been heavily raising expectations with the quarterly estimates expected to show a 304% Y/Y gain in EPS and revenue is expected to show a 65% Y/Y gain.
• KeyBanc, HSBC and BMO were the latest to raise their forecasts for the name ahead of earnings, all citing the longer term potential and guidance given accelerating AI trends.

Here is how JPM tech trader Stuart Humphrey summed up the semi sector in general, and Nvidia in particular, earlier this week:

“Last week brought trying times. But the tide has turned, and it feels like NVDA might be back. And thank the lord as the AI bellwether name has been more than a crowded long. There is still longer term concern that major customers in China and now (as the FT points out) Saudi Arabia are racing accumulate as many GPUs as possible – though once this demand is satisfied and GPUs have been optimized, folks wonder if we run into a demand problem?  Nevertheless, sell-side previews are out and about and pumping up bogeys. Topline sounds like people are expecting $12B for next Q with DC at least $8B of that. And in terms of a guide, some folks getting crazy and are in the $14-15B range- which at the high end would imply +36% q/q topline growth!  This kind of number feels a touch high to me, but if it sniffs this- one could argue that into this print, it doesn’t matter if demand will eventually decline next year – still will be rerated higher. Have spoken to a few, who will look to sell the news after next Q and Oct end guide. But until then, think we ought to be ready for the rumor mill to continue to provide a little boost. Stock reports after the bell next Wednesday.”

Humphrey followed up with the following note late yesterday: “The anticipation is LITERALLY killing us! The line in the sand Oct-Q guide feels like $14B but maybe creeping up after yesterday’s chatter to $14.5B. While I know there is pushback because people worry too much too fast isn’t sustainable, I am reminded that non-linear math is tough to anticipate and to model. Even still, I am positive on the stock and believe it will trade higher after numbers. Tactically there is a number it needs to work because it is the most crowded name out there, but even if it doesn’t hit expectations perfectly, I think we have a while before we really do have to worry about the current demand falling off. Call me an optimist – so be it! On the flow front, our supply last week is nowhere and instead we have seen HFs adding in smaller lots with LOs more apt to wait for the print.”

To be sure, expectations are sky high, and NVDA may have to truly blow them away to move higher than the 9% move that is currently priced in. On the other hand, even a small hiccup in the outlook and the stock could plunge.

JPM’s Tech Sector Specialists Jack Atherton and Scott Silver conducted a survey, and the results are below. Jack tells us, “Focusing on NVDA, myself and Scott Silver have received >70 entries to this survey and I’d say a good portion of those are bulls trying to keep expectations in check. While the answers below reflect buyside expects of $11.9b FQ2 revenue, and $13.5b FQ3 guide, I think it needs to be $12b+ and $14b+ respectively for the stock to work. Given the technical pressure across mega-cap tech, investors need an incremental reason to defend the names they’re already max long.”

• FQ2 revenue (guide $11.0b +/-2%): $11.9b (range $11.1 – 13.0b)
• FQ3 revenue guide (consensus $12.3b): $13.5b (range $12.8 – 15.0b)
• FQ3 GM guide (consensus 70.5%): 71.1% (range 70.0 – 73.5%)

A Q&A with JPM Equity Analyst Harlan Sur (courtesy of Dave Reller): Harlan thinks we’re coming out of the bottom of the cycle in the next 1-2 quarters, and we should start to see positive earnings revisions that should be the next leg higher for the group.  Harlan wisely called for a bottom in the group in late summer 2022 when I met him in his office in San Francisco.  Semi stocks have outperformed the broader markets since July 2022, and we expect that trend to continue through 2023.  The most frequent questions from PMs we met with this week…

• “How much is priced into Nvidia?”  Harlan is Overweight on NVDA but is concerned that people are looking at supply chain data points from TSMC and getting too optimistic on CY24.  He hosted a call with 185 investors in Asia this week and some expect NVDA to earn $18-20 in EPS next year.
• “When do I need to pay attention to Intel again?”  Not for at least 12 months until we see more execution success especially around their 18A node.
• “Who aside from NVDA and AMD are the biggest AI beneficiaries?”  AVGO
• “What stock is the Rodney Dangerfield of the group?”  MCHP
• “When will the group hit the next air pocket or when will customers realize they ordered too many GPUs?”  Probably not until late ’24 or early ’25.

More in the full note available to pro subs.

Authored by Cyril Widdershoven via OilPrice.com,

• BRICS leaders are gathering today in South Africa to discuss the future of the BRICS bloc.

• Although often overlooked, BRICS’ expansion efforts encompass a diverse list of countries, with Argentina, Egypt, and Saudi Arabia among those expressing interest.

• The potential integration of OPEC and gas-exporting nations into BRICS threatens Western energy interests.

From August 22nd to 24th, BRICS leaders are set to convene in South Africa, marking a pivotal moment for this loosely knit coalition of major non-Western nations including Brazil, Russia, India, China, and South Africa. The conference aims not only to strengthen cooperation but to forge a robust international alliance designed to counteract Western influence. Amidst this strategic push, BRICS seeks to expand its reach, encompassing a multitude of countries from the “Global South,” with Africa, Latin America, and the Middle East at its core.

Heads of state such as Russia’s President Putin, China’s Xi Jinping, and South Africa’s President Cyril Ramaphosa have made clear their intentions: challenging the entrenched geopolitical dominance of the West. However, cracks in this united front are already evident. Vladimir Putin’s absence, driven by fears of arrest over war crimes in Ukraine, casts shadows over the project. Simultaneously, India, a BRICS heavyweight, is wary of China’s ascendancy potentially sidelining its interests within the alliance.

Amid the fervor, media attention has swiveled toward the ongoing “de-dollarization” initiatives driven by China, Russia, and others outside the BRICS framework. While this has garnered significant interest due to potential shifts in global trade dynamics, the reality remains that over 90% of global trade continues to be conducted in US dollars. The financial aspect, especially when considering the collective GDP of BRICS versus the G7, holds great significance. The aspiration of non-Western nations to challenge established norms is not new, tracing back to post-colonial times and the subsequent economic successes of China and India.

Although often overlooked, BRICS’ expansion efforts encompass a diverse list of countries, with Argentina, Egypt, and Saudi Arabia among those expressing interest. Roughly 40 nations are considering participation, driven by economic incentives and the growing economic might of China and India. While the West’s concern is palpable, its focus might be misplaced.

Beneath the surface, a formidable energy-oriented bloc is forming, aligning BRICS with key energy exporters like Saudi Arabia, Egypt, and potentially Algeria and the UAE. Although not officially tied to a BRICS-OPEC+ affiliation, the convergence of interests in the list of participating or invited nations could revolutionize energy and commodity markets. An integrated alliance of energy giants would reshape global energy supply security, possibly prioritizing BRICS routes. This also extends to ambitious global supply chain projects, including China’s One Belt One Road, UAE’s port expansions, and Saudi’s Vision 2030 initiatives.

Simultaneously, BRICS’ expansion into Africa, particularly in mining, minerals, and metals, merits attention in the coming months. The inclusion of new members with critical mineral and metal resources could fundamentally shift this coalition, possibly with China and Russia spearheading efforts. Arab nations like Saudi Arabia and the UAE have also entered the global mining sphere, aligning with renewable energy and decarbonization strategies. BRICS’ expansion holds implications not just for the US dollar’s dominance but for Western influence and access to energy resources and supply chains.

The Biden Administration acknowledges this evolving landscape and is intensifying efforts to manage the perceived fallout. The US’s oil and gas reserves, alongside geopolitical influence, provide a cushion, but Europe seems complacent. Despite talk of distancing from China’s sway, Europe’s reliance on Asian manufacturing and markets grows. European strategies hinge on African minerals, metals, hydrocarbons, and renewable energy sources, all increasingly at the mercy of shifting alliances.

As Riyadh, Abu Dhabi, Cairo, Algiers, and others pivot toward the East, including Russia, a significant challenge emerges. Not just hydrocarbons, but access to supply chains and maritime trade routes, will be high on the agenda. The integration of North Africa and the Middle East into a Beijing-Moscow-led BRICS+ adds pressure. China and Russia are no longer bystanders; they actively undermine Western interests. The potential integration of OPEC and gas-exporting nations into BRICS threatens Western energy interests. The convergence of Saudi Arabia, Egypt, Algeria, Brazil, and Russia empowers BRICS with control over 60% of global energy reserves and production.

Amidst the de-dollarization discourse, practical and security concerns come to the forefront, demanding attention beyond the hype.

As you may have heard, former President Donald Trump is skipping Wednesday night’s GOP debates, and will instead appear for an interview with Tucker Carlson – where the pair will undoubtedly upstage the current crop of GOP candidates, who according to current polls, have no chance in hell of receiving the Republican nomination.

Former President Donald Trump confirmed in a social media post that his interview with former Fox News host Tucker Carlson will be released tonight (Aug. 23), just before the network’s Republican presidential primary debate.

The former president announced on Truth Social that his previously recorded interview with Mr. Carlson will broadcast at 9 p.m.

“Sparks will fly,” President Trump wrote in his post about the interview, which will reportedly stream on X, the platform formerly known as Twitter.

“Many people are asking whether or not I will be doing the DEBATES?” Trump wrote on Truth Social last week.

“ALL AMERICANS have been clamoring for a President of extremely High Intelligence. As everyone is aware, my Poll numbers, over a ‘wonderful’ field of Republican candidates, are extraordinary. In fact, I am leading the runner up, whoever that may now be, by more than 50 Points. Reagan didn’t do it, and neither did others. People know my Record, one of the BEST EVER, so why would I Debate? I’M YOUR MAN. MAKE AMERICA GREAT AGAIN!”

Of note, the former president now holds the largest lead over his rivals according to a CBS News poll released on Saturday, while his nearest rival – Florida Governor Ron DeSantis – has fallen even further behind.

When it comes to Trump’s multiple indictments, it’s clear the right sees them as nothing more than a partisan attempt to dislodge him from the 2024 race. And with each new charge, Trump’s status as a martyr (and ratings) continue to rise.

First, as was the case with Trump’s previous indictments, Republican primary voters’ overwhelming concern about the Georgia charges is that they’re politically motivated.

They dismiss the premise of the charges: the bulk of them do think Trump tried to stay in office, but to them, it was legal and constitutional because these Republican primary voters overwhelmingly think President Biden didn’t win legitimately. -CBS News

When asked whether the GOP candidates should argue the case for themselves, 91% agreed, vs. 9% who said they should talk trash against Trump.

What’s more, around 75% of Trump voters are those who “show support for his legal troubles” as their rationale, while 99% say that “things were better under Trump.”

Trump voters also generally believe Trump is telling the truth (duh), which is why the indictments aren’t having an impact in support among his base. Voters who say they place top importance on a candidate being “honest and trustworthy” picked Trump at 61%, followed by DeSantis at 17%.

The context here is that Republican primary voters believe the political system is corrupt at an even higher rate than Americans overall do. That could mean perceiving Trump as railing against — or prosecuted by — that system might well make him seem, from their perspective, like the one telling a larger truth. 

And when it comes to who voters think has the best chance of beating President Biden, it’s once again Trump in a landslide.

Is there a path forward for the other candidates?

Perhaps if they get used to being called “Mr. Vice President,” if Trump should pick them.

Authored by Steve Watson via Summit News (emphasis ours),

Former Speaker of the House Newt Gingrich encapsulated Joe Biden’s jaw droppingly disastrous fly by of Maui on Monday, calling it “beyond just being heartless.”

“I think this visit to Maui frankly is just plain frightening,” Gingrich said, adding “How can you have a commander-in-chief who is totally out of touch with reality, who makes up a story which is a lie, who has no understanding of the scale of the disaster which has occurred, who has literally has no empathy for the human beings around him. And I think, and of course as you point out, can’t even stay awake.”

Was Biden dozing off in Maui? pic.twitter.com/IkMrmQ8sDf

— RNC Research (@RNCResearch) August 22, 2023

“This guy is nuts,” Gingrich urged of Biden, adding “He is out of touch with reality. How can you stand in Lahaina surrounded by death and talk about your ’67 Corvette?”

As we highlighted, Biden visited the scenes of the horrific blaze and was cracking jokes and comparing it to a small kitchen fire that happened in his house in 2004, quipping “I nearly lost my Corvette and my cat.”

“Frankly as an American, I am ashamed,” Gingrich stated, adding “to realize almost like Pompeii in Italy, you have families, entire families who were burned to death. I saw one report that firefighters are having a very hard time psychologically going from house to house because the scenes of little children, the scenes of families who had gathered in the bathtub and the shower trying to find one last place where there was water.”

Gingrich continued, “I think that people need to look at this not as a political problem but as a national problem.”

“We have a commander-in-chief, makes you wonder who’s making the decisions in the White House. I personally have a hunch it’s Barack Obama. You have to wonder how is the system running in a real crisis? How could Joe Biden decide anything? It would all be delegated,” he further asserted.

“It really worries me that this is the guy who’s commander in chief for the most powerful military in the world and believe me every leader on the planet watches Joe Biden collapsing and knows that the U.S. Is beginning to be available as the victim,” Gingrich emphasised.

“I would say he’s closer to being a sleeper-in-chief than he is to being a commander-in-chief,” he further proclaimed.

Here is Biden in January 2022 telling Colorado wildfire victims that he “almost” lost his home to a fire — also not true.pic.twitter.com/cfBDyo6KkT

— RNC Research (@RNCResearch) August 22, 2023

Here is Biden in October 2022 telling the Summit on Fire Prevention and Control that a fire “came up through the ground” and destroyed “everything” in his home — still not true.pic.twitter.com/PRiQO7orQ3

— RNC Research (@RNCResearch) August 22, 2023

*  *  *

[ZH]: And of course, the MSM – while completely ignoring Biden’s tone-deaf lie about his wife, car and cat, is pouncing on Biden’s apparent nodding off, insisting that he was ‘bowing his head solemnly.’

Morning Joe spends 6 mins praising Biden in Hawaii, insist he didn’t fall asleep but was just “moved”:

“The local people [were] thanking [him] .. saying it made such a difference that he & Jill were so empathetic, they were so giving, they gave them hope” pic.twitter.com/Mr5PMdafX5

— Tom Elliott (@tomselliott) August 23, 2023

No, Biden was not sleeping at the Maui memorial. He was bowing his head in solemnity. https://t.co/lHbOb2rvHA

— Benjamin Ryan (@benryanwriter) August 23, 2023

Which were promptly mocked…

He is a prayer warrior.

— David Vance (@DVATW) August 23, 2023

🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣 pic.twitter.com/tzQn9PVewN

— Jackie (@jackie1321_67) August 23, 2023

Of course, the mask mandates are starting again in, of all places, Hollywood.

The coddled liberal elite are apparently already in a panic over a coming fall Covid wave that it appears everyone has already decided will once again debilitate the country this year. The new variant EG.5 has become “dominant” in the U.S., according to reports. Congrats to those who celebrate!

Leading the charge is film company Lionsgate, which reportedly “has instituted a mask mandate for its employees in light of the current COVID wave”, according to a new report from The Hollywood Reporter. 

The company emailed its staff “asking them to mask up on certain floors of its Santa Monica office after several employees caught the virus”, the report says. 

The latest variant of the virus has caused a boost in cases, according to data sources like the L.A. Public Health Twitter feed and the CDC, however, as THR notes, experts have said that the new variant “has thus far shown to be no more of a cause of concern than previous variants”. 

Even the New York Times has admitted the new variant isn’t expected to cause a major wave, the report says. 

As we noted just hours ago, there are reports all over the country that colleges and offices are beginning to reinstate COVID mask mandates and contact tracing despite no new cases of the virus being reported.

The Atlanta Journal-Constitution reported Monday that Morris Brown College, a black private liberal arts college has reinstated the measures as part of a “precautionary step.” 

The report notes that students and staff will all be asked to mask up while on campus, only one week after classes began.

A communication issued by the college claims there have been “reports of positive cases among students in the Atlanta University Center,” a consortium of black colleges and universities located on the western side of Atlanta.

From Instagram Morris Brown College bringing back a mask mandate. pic.twitter.com/KyqJUjMJgy

— Covid Report (@CovidDataReport) August 21, 2023

The measures, which include social distancing, temperature checks and no large gatherings are to be in place for two weeks, it is claimed. 

We all know what happened the last time we heard measures would be in place for two weeks…

In this video from 2020, a woman was tased and arrested at a high school football game for not wearing a mask.

This happened because CDC’s exaggerated and lied about the science of masking.

The CDC called it science, but it wasn’t.

It was evil. pic.twitter.com/1w4UoWwUFk

— Kevin Bass PhD MS (@kevinnbass) August 19, 2023

Moments ago, the Treasury sold $16BN in 20Y paper in a solid, if hardly memorable, auction.

The high yield of 4.499% was the highest on record since the 20Y auction was introduced in May 2020.  It tailed the When issued 4.490% by 0.9bps, the biggest tail for the tenor since October 2020.

The bid to cover of 2.56 was below last month’s 2.68 and below the six-auction average of 2.64.

The internals were average: indirects were awarded 68.4%, just below last month’s 68.7% and below the recent average of 70.8%; and with Directs taking down 20.2%, or just above the recent average of 19.3%, Dealers were left holding 11.4%, above last month’s 9.6% and above the recent average of 11.4%.

Overall, a solid if certainly not memorable or spectacular auction, whose tail can be explained by the lack of concession in a session which has seen yields tumble across the board following a spate of poor US eco data, slamming the hopes of the “highers for longers.”

 

Authored by Simon White, Bloomberg macro strategist,

Despite disappointing European data released this morning, PMIs around the world are in the main beginning to rise. The dollar is thus likely to fade the current rally and soon re-establish its downwards trend.

Today is PMI day, with France, Germany, the euro-zone, UK, and US data all out.. .and disappointing.

The temporary bump in Europe’s PMIs earlier this year fueled heady optimism that not only had the euro zone escaped the worst predictions made in the early days of the Ukraine war, but was on course to perform well in general terms.

But as the weaker-than-expected European data underscores, PMIs are just hopium if not followed by solid hard data.

Euro-zone growth as a whole stagnated in 4Q22 and 1Q23, and despite picking up slightly in 2Q23, the outlook for the rest of the year remains tepid at best. Germany is effectively in a recession, the Netherlands is in a technical one, while Italy is flirting with a downturn.

US PMIs for August both slowed more than expected with orders sliding but prices rising.

Globally, manufacturing is very interest-rate sensitive and remains in a recession.

The median manufacturing PMI from DM and EM countries remains stuck below the 50 level that marks the line between expansion and contraction.

Services – which were late to catch up to the goods economy after the disruption caused by the pandemic – are above 50, but have been rolling over.

France and German PMI services from today both weakened from last month.

Nonetheless, at the margin, manufacturing PMIs are improving.

The chart below shows the percentage of DM manufacturing PMIs that have risen over the last six months. That was at zero at the start of the year, but has slowly risen as the manufacturing outlook of some PMIs begins to improve from beaten-down levels.

The chart also shows that a rise in the number of DM manufacturing PMIs increasing lead to a weaker dollar.

This is a reflection of the dollar-smile theory, where the geared impact from the US economy causes other economies and thus their currencies to strengthen even more, i.e. the dollar weakens.

The tallies with the ongoing message from the flattening real yield curve, which also leads a weaker dollar, intimating the current counter-trend rally should soon peter out.