Market 02/22: Market peaks on NVDA's blockbuster earnings report

Market highlights: Nvidia ER explodes - green floods the market

Nvidia earnings report: revenue +265% YoY - far exceeds expectations

• Revenue: +22% QoQ, reaching 22.1 billion USD (> expected 1.6 billion USD).

  • YoY revenue surges +265%.

• Gross margin: 76% (+2% QoQ).

• Operating margin: 62% (+4% QoQ).

• Non-GAAP EPS: 5.16 USD (> expected 0.52 USD).

Q1 FY25 guidance:

• Revenue: ~24 billion USD (> expected 2.0 billion USD).

• Data center now the largest revenue source, up 409% to 18.40 billion USD, a new record high.

  • Nvidia CEO: “….demand for GPUs in 2025 remains high, supply may be short despite increased production”.

    • …especially the new generation B100 chip, expected to ship end of this year.

US-European stocks rise on Nvidia effect

As of now, Nvidia has added nearly 250 billion USD market cap in 1 day after earnings report, record high in market history.

• Just 5% more and Nvidia will become the 3rd company with market cap over 2000 billion USD.

• Nvidia stock up more than 15% today - record high.

• Investors raise Nvidia price targets en masse, average now at 880 USD (+19% DoD, ~140 USD).

  • BofA: 925 USD from 800 USD.

  • Wolfe Research: 900 USD from 630 USD.

  • HSBC: 880 USD from 835 USD.

  • Goldman Sachs: 875 USD from 800 USD.

  • JP Morgan: 850 USD from 650 USD.

  • Morgan Stanley: 795 USD from 750 USD.

  • Citi: 820 USD from 575 USD.

  • Deutsche Bank: 720 USD from 560 USD.

• Green dominated the market at the opening trading session as predicted.

• Not only in the US, Nvidia supported gains in both European and Japanese markets.

Some other key points:

• Nvidia share buyback worth 9.2 billion USD.

• Nvidia continues shipping replacement chips to China without needing a license.

Fed statements Jefferson: rate cuts possible by year-end

• Rate cuts may be appropriate in end of this year.

• 3 main risks to watch: strong consumer spending, easing unemployment and geopolitical risks.

• Expectations for growth rate and output to slow in 2024.

Update on the $9 billion TIPS 30Y special bond auction

• TIPS (Treasury Inflation-Protected Securities) are Treasury bonds protecting buyers from inflation.

  • The principal when buying TIPS (principal) will be adjusted upward with inflation and downward with deflation.

    (TIPS interest rate remains fixed but coupon payments will be adjusted based on inflation conditions)

  • TIPS 30Y auctioned only every 6 months, with most demand from foreign investors.

• High Yield: 2.2% (higher than the August 2023 auction: 1.970%)

  • 63.66% of bidders bid at High Yield.

    

Unemployment claims fell to the lowest in a month

Initial jobless claims drop to 201,000 (below expected 218,000, prior week: 213,000).

• Continuing claims: 1.862 million, (below prior week: 1.895 million, expected: 1.884 million).

  → Labor market remains tight despite rising layoffs at major companies.

Layoff updates for some major companies in 2024:

1. Twitch: 35% workforce
2. Roomba: 31% workforce
3. Hasbro: 20% workforce
4. LA Times: 20% workforce
5. Spotify: 17% workforce
6. Levi's: 15% workforce
7. Xerox: 15% workforce
8. Qualtrics: 14% workforce
9. Wayfair: 13% workforce
10. Duolingo: 10% workforce
11. Washington Post: 10% of workforceof workforce
12: Snap: 10% workforce
13. eBay: 9% workforce
14. Business Insider: 8% workforce
15. Paypal: 7% workforce
16. Okta: 7% workforce
17. Charles Schwab: 6% workforce
18. Docusign: 6% workforce
19: CISCO: 5% workforce
20. UPS: 2% workforce
21. Nike: 2% workforce
22. Blackrock: 3% workforce
23. Paramount: 3% workforce
24. Citigroup: 20,000 employees
25. Pixar: 1,300 employees

Manufacturing PMI increases at the fastest rate since 2022

S&P Global Manufacturing PMI surges to 51.5 (up from previous 50.7)

→ Manufacturing activity is expanding at the fastest pace since Sep 2022.

• New orders rise at the highest rate since May 2022,

• Output increases at the strongest rate in 10 months.

→ Manufacturers are emerging from prolonged recession.

Existing home sales strongest increase in nearly a year

Existing home sales increase 3.1% MoM in January, the highest in nearly a year. → Buyers took advantage of the slight mortgage rate drop in January 2024.

• However, Fed officials have repeatedly stated they are not in a hurry to cut rates

  → Mortgage rates have started to rise in recent weeks.

Median home price (median home price) rises to 379,100 USD, the highest ever for January.

• …due to limited inventory putting upward pressure on prices.

Other news:

1. Chicago Fed National Activity Index for January reaches -0.3 MoM (< expected -0.21). Only 26/85 component indicators are positive.

   • This is a composite index based on already published data → It does not provide much forward-looking economic activity forecast.

     

2. AT&T telecom outage causes disruptions: about 70,000 incidents reported

   • calls, messages, and emergency services disrupted in major cities including San Francisco.

   

3. Update on China stock market and economy:

   • Small banks cut term deposit rates to ease cost pressures.

   • About 1,294 listed companies in China have announced share buyback plans this year to support the stock market.

   • Expected more trading curbs on quantitative funds.

     (Chinese source)

4. Japan's Nikkei stock index surpasses 39,000 peak, highest in 34 years.