by Ben Weiss, for the Call to Leap Team
As we're nearing the end of February and the beginning of spring, temperatures are starting to rise for many of us. Speaking of things warming up, Nvidia (NVDA) and the semiconductor industry really turned up the heat this week following blockbuster earnings results.
It looks like the market shook off the cobwebs from last week and continued to climb the ladder this week. Let's take a look at what happened this week and what's coming up...
The market this week
We definitely saw more green than red this week. The S&P 500 and Dow Jones indices once again set new record highs. While a few of the Magnificent 7 had neutral weeks, NVDA went for quite the rollercoaster ride, lifting much of the market along with it in the latter half of the week. By the numbers, S&P 500 (+1.15%), the Dow Jones (+0.98%), Nasdaq (+0.54%), Russell 2000 (-1.62%) finished broadly positive for the week. As you can see below, NVDA started the week by tumbling over 10% leading up to its earnings call before rocketing nearly 25% following the call to an intraweek high of over $820. This large of a swing from such a big player cause a lot of upward momentum for the market at large on Thursday.
Historically, the market on average has posted lower returns and can sometimes "take a break" in the first three months of the new year, like we started to see last week. The market bucked that trend this week, but we'll see if the Nasdaq and S&P 500 can keep the momentum heading into next week and beyond. I wouldn't be too surprised to see investors take a breather at some point from the solid bullish run we've been seeing, at least in the short term, but we haven't seen that play out just yet.
In the news
We had a fairly quiet news week with major economic reports and indicators domestically, but we did see new record highs set by stock market indices in Europe (Stoxx 600) and Japan (Nikkei), suggesting the US isn't the only one experiencing positive economic news globally. We also saw some significant moves from a few household name here in the US.
Gotta split...Walmart (WMT) announced recently that it will undergo a 3:1 stock split for shareholders of record yesterday, February 22. The stock will begin trading at its post-split price on Monday, February 26. If you hold shares of WMT, good news—you now own 3x as many shares without having to lift a finger! Often, but not always, stocks will see a positive bump following stock splits as a lower share price makes the company more accessible for more investors to participate in stocks and options. Let's see if WMT gets any boost!
Out with old, in with the Prime...We learned this week that Amazon (AMZN) will officially replace Walgreens (WBA) on the Dow Jones Industrial Average starting this Monday. Why is this a big deal? The Dow is comprised of only 30 companies, and this elite club hasn't had a shake-up in its ranks for four years. The move may be obvious to some given Amazon's gravity, but it's an important symbolic gesture nonetheless. Amaz-ingly, the company has created over $1.5 trillion in shareholder value since going public in the late '90s...wow!
Capital One plus one...For those of us with bank accounts or credit cards with CapitalOne, listen up! The company announced this week their plan to acquire Discover Financial Services (think: Discover "it" cards) in a deal worth $35 billion worth of stock. It's too early to tell a) if the Federal regulators will allow this merger based on anti-competition concerns, or b) how the merger will benefit vs. impact consumers. While the industry will be losing one credit card issuer, we could see more traffic through Discover's own payment network, providing additional competition against powerhouses Visa, Mastercard, and American Express and their notoriously high "swipe" fees incurred when using their credit cards.
All that and a bag of chips...Let's not forget about NVDA's notable earning results this week. By the numbers, the semiconductor chip maker beat expectations for earnings per share (EPS) by +12% and revenue by +8%, posting revenue of $22 billion last quarter—a 265% year-over-year increase—and forecasting even greater revenue of $24 billion next quarter. The majority of NVDA's revenue and profits are coming from its booming Data Center business where their "Hopper" graphics processor is well positioned for the massive demand in artificial intelligence (AI) modeling.
SPY
On the daily charts for both SPY and QQQ here, you'll see two sets of channel lines (orange and green). In both cases, I see a more-macro upward trend dating back to early 2023, however recently I've observed a secondary, steeper breakout trend that the indices seem to be following. Do you agree with how I drew my lines or do you see it differently? Let's chat on Discord!
QQQ
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