Stocks were little changed overnight as the US, its people and their markets took a day off because of Presidents.

Futures for the Dow Jones Industrial Average are down about 0.3%, the S&P 500 is down 0.2%, and futures for the tech-heavy Nasdaq Composite are flat.

Over in Europe, the record-breaking FTSE 100 is up 0.2%.

Meantime, in the words of The Kinks, except for Lola it was a mixed-up, muddled-up, shook-up world that ended US trade last week as the Dow Jones somehow found 130 points while the Nasdaq and the S&P500 closed lower.

 

On Friday, unfamiliar 2023 selling dominated the so very tech-heavy Nasdaq index, with the very heavyweight names like, Amazon (AMZN), Apple (AAPL) and Microsoft (MSFT), leading the 0.6% slip.

Nvidia (NVDA) also ended lower, but remains more than 30% stronger than the 20th of January. More on that below.

For the week, the S&P 500 gave up 0.3% and posted its second consecutive weekly decline while the Nasdaq added 0.43%.The Dow rose 0.4%, ending at 33,826.69, while posting a 0.1% weekly drop.

A surprise outperformance from healthcare sector drove gains for The Dow courtesy of large caps like Amgen (AMGN) and Johnson & Johnson (JNJ), where – full disclosure – me old mate and colleague from my UNSW maintenance and gardening days, Max , who works in an undisclosed role as some kind of killer executive. Many a time we’d sit happy but irritated under an unswept fig tree and dream of a better talcam powder.

Anyhoo. After last week’s totally unwelcome rebound in US retail sales and just awful timing for stronger-than-expected CPI and PPI data, Wall Street is now utterly priced in for a 25bp rate hike in March and May and currently’s sitting at 70% priced for the same in June.

That’d take the Feds target rate to 5.25-5.50%.

Of late, it’s fair to say Wall Street’s become a little numbed to this all too familiar cash target tango. Last year, the expectation of any hint of an additional Fed rate hike would’ve inspired panic selling across all kinds of equities and risk assets. These days, a full year into the attempted annihilation through bombardment of Ukraine, the US market appears able to get on with life despite the regular detonations.

The only real sign of madness as usual: Bitcoin rose 13% last week.

 

What to expect this week

There’s also a looming bombardment of US data  due to be dropped over the coming days.

The fireworks start on Tuesday in New York with the business surveys for February, ahead of the Fed minutes on Wednesday. Then on Thursday, the second estimate of GDP for Q4 is out, before the week closes out with the latest core PCE price index on Friday.

Most of the focus will of course will be on the FOMC minutes. This was the meeting when the Fed chief signalled that a ‘disinflationary’ impulse had started to emerge, sending the dollar tumbling.

The consensus on Wall Street remains that the Fed will hike rates by another 25 basis points in March, just as it did this month.  It remains to be seen what the number is and while worries over that moderated on Friday trade the tone of Fed officials  has been notable more hawkish of late. In fact one could say Brainard et al have been screeching that rates might need to go ‘higher than previously envisioned.’

 

Elon Watch

Chinese state media which is also basically China’s EV industry including Elon beating BYD is revelling in anything which makes tesla look… I don’t know… out of control?

US Q3 Corporate Earnings Worth Staying Up For

 

Nvidia (NVDA) – Wednesday

Nvidia is a chipmaking tech play with gaming, AI, data centre, cloud and all sorts of the right, just and terrifying interests in 2023 and really, we should know more about it here in the ‘lackey country’ (I’m so sorry, I don’t know where that came from).

Firstly, it’s also up about 30% in the last month of trade. Analysts at Oppenheimer reckon it’s a growth stock with great defensive qualities and should be ‘insulated from any slowdown in the broader economy by increased spending on artificial intelligence.

Both Oppenheimer and KeyBanc have followed last week’s Bank of America lead and lifted their price targets on shares of the could become anything White House backed semiconductor company.

BofA referred to Nvidia’s “full stack” of accelerated silicon, systems, software and developers which puts the company in a position to “lead the nascent generative AI arms race among global cloud and enterprise customers.” Eek.

Consensus is that Nvidia will drop 81 cents of eps on revenue of $6.01 billion, Vs last year of $1.32 eps on revenue of $7.64 billion.

 

Alibaba (BABA) – Thursday

Alibaba Group’s Q3 earnings on February 23 is another landmark moment in the rehabilitation of fallen angel Jack Ma’s own wayward Jackenstein.

It’s got to be a release brimming with all kinds of positivity to not disappoint… esp. considering BABA’s value is up more than 95% from its October lows.

New state-owned CEO Daniel Zhang has to get out and convince shareholders that BABA’s shiny new valuation is legit even as China’s economic recovery remains far from. Chinese regulators might be eager to reopen the country’s economy, reversing their long-standing zero-Covid policy, but what about the group’s dependence on that domestic recovery? Some 70% of BABA’s rev comes from local commerce and (anyway) can it grow its export markets soon?

Goldman Sachs seems convinced a bet on Alibaba to drive a strong Chinese reopening is a good one, particularly given its diversified revenue sources at home.

The long-term booster however could dominating China’s cloud. Zhang recently announced plans to invest US$1 billion in just 3 years and it seems Zhang sees the cloud as central to BABA’s long-term success.

Analysts have Alibaba at $2.37 per share on revenue of $35.73 billion Vs last Q3 of $2.59 eps on revenue of $33.71 billion.

Wall Street seems to believe the stock can keep climbing if Alibaba brings home both a  top-line and a bottom-line beat and most importantly provide confidence in guidance for the coming full year.

 

Nikola Corp. (NKLA) – Thursday

Wall Street expects Nikola to lose 43 cents per share on revenue of $32.13 million. This compares to the previous quarter when the loss came to 54 cents per share on revenue of $24.24 million.

Here’s a US auto maker that last week, The WSJ said was already breaking ground on its first ‘hydrogen plants’, part of some super American network the company reckons will be the train tracks to its the nascent zero-emissions trucks.

The manufacturer has also signed on ‘a handful’ of local producers for hydrogen supply fright across North America. Nikola has said it wants enough fuel for circa 7,500 heavy-duty trucks within 4 years.

With Teslaian impatience, Nikola’s strategy is to begin assembling hydrogen fuel-cell electric trucks to market by year’s end.

“The infrastructure for hydrogen doesn’t really exist for heavy transport,” Carey Mendes, the president of Nikola’s energy business told the WSJ.

“If we’re going to sell hydrogen fuel-cell trucks, we have to have that infrastructure.”

On Thursday the market will want to know whether this high capital adventure has the legs to make it. Nikola has met its delivery targets and appears on track to boost production but does it have a clear path towards sustained revenue and profitability?

Again from Carey Mendes:

“The strategic mission of HYLA at Nikola is to secure supplies of clean hydrogen and then to distribute it to our customers at very competitive prices… It will, of course, support not only our vehicles, but it’s also going to support every other manufacturer of hydrogen-powered vehicles who are going to need this in the future.”

 

The Global Economic Calendar
Monday February 20 – Friday February 24

Most of the focus this week will of course will be on the FOMC minutes. This was the meeting when the Fed chief signaled that a ‘disinflationary’ impulse had started to emerge, sending the dollar tumbling.

The consensus on Wall Street remains that the Fed will hike rates by another 25 basis points in March, just as it did this month.

MONDAY
US Markets closed for President’s Day
EU Feb consumer confidence
UK Feb house prices
China PBoC Loan Prime Rate

TUESDAY
US Feb S&P Global manufacturing PMIs
US Feb S&P Global services PMIs
US Jan existing home sales
Japan Feb Nikkei manufacturing PMIs
Japan Feb Nikkei services PMIs
EU Feb S&P Global manufacturing PMIs
EU Feb S&P Global services PMIs
UK Feb S&P Global manufacturing PMIs
UK Feb S&P Global services PMIs

WEDNESDAY
US FOMC Feb meeting minutes

THURSDAY
US Jan Chicago Fed activity index
US Q4 GDP, annualised
US Initial jobless claims
US Fedspeak Bostic and Daly
US Feb Kansas City Fed index
EU Jan CPI
Korea Interest Rate Decision

FRIDAY
US Jan personal income / personal spending
US Jan PCE deflator
US Jan core PCE deflator
Jan new home sales
Feb Uni. of Michigan sentiment
US Fedspeak – Jefferson, Collins and Waller.
Japan Jan CPI
UK Feb consumer sentiment