NVDA touches $2 trillion on strong earnings (but its not all great!)

The Macro event for this week was… a stock! I put a lot of focus on Nvidia in my last newsletter, and I am glad I did. Following Nvidia earnings, the Nasdaq and S&P spiked higher and the Dollar dropped significantly - in tandem with the broader risk tone.

Overall the week was fairly boring… Nvidia (review below) was strong - but not everything was perfect. I also mention the changes in Fed speak, and preview EZ CPI and US PCE.

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STOCK SPECIFICS:
Nvidia, Consumer Staples (Nestle/Danone)
Nvidia (WTD +6.4%) - Finally the big macro event for this week is over, and boy was it an interesting one! (1) Beat on both top and bottom line. (2) Raises Q1’25 Revenue view, above analyst expectations. (3) Data Centre revenue + Gaming Revenue both beat expectations. (4) On China: Data Centre sales decline significantly in Q4, due to US Government licensing requirements. (5) CEO noted that demand far exceeds supply for nextgen products, and is struggling to keep up! (6) Broker Moves: All (with the exception of UBS) raised its price target for Nvidia, with much of the PTs above $800. My thoughts? Overall, the earnings report was strong. Most analysts felt the company was destined to beat on its earnings, though much of the concerns lied on the forward guidance. Not everything is perfect! There was a drop in purchase commitments, potentially suggesting that lead times are shortening - and potentially an early sign of cooling demand. What GS said: Not indifferent to what I mentioned - Nvidia was strong. They did note that this strengthens its view on European semis such as ASML and BESI.

Nestle (WTD -1.8%) / Danone (-1.2%) - European listed consumer staples names are the most recent firms to forecast a slowdown in the pace of price hikes going forward. Perhaps pointing towards the end /slowdown of the inflationary cycle. Nestle: (1) Missed across its results. (2) Sees 2024 revenue growth lower than expectations. My thoughts? Ultimately as a consumer, this is a positive release, and one that should feed into the dovish direction we are heading towards.

KEY EVENTS:
General Fed Speak
Fed Speak - I wanted to make my readers aware of some of the recent Fed speak, which seemingly has been brushed aside by the markets. Overall it has been *more* hawkish in nature. Fed Chair Powell pushed back against March cuts at the latest Fed Policy Announcement, and no Fed members have disagreed with this view. Since, the likes of Waller and Cook (both voters) have stressed data dependency and wanted to see more confidence that inflation is going towards target. Currently the market has priced in 3 cuts in 2024, in-line with the FOMC guidance.

PREVIEWS:
US PCE, EZ CPI
US PCE - The Fed preferred measure of inflation will be the week’s key event. (1) PCE inflation is expected to rise in January, with consensus at +0.3% M/M. (2) Capital Economics predicts core PCE to fall to 2.7% Y/Y, anticipating a May rate cut as Fed aims for a 2.0% inflation goal. (3) Do remember, that the most recent CPI surprised to the upside, should this happen again - it may exacerbate a hawkish reaction.

EZ CPI - A bit of a different picture over in Europe - the economy is a *little* more dire than in the US. (1) Headline Y/Y HICP likely to decrease from 2.8% to 2.5%, and super-core metrics expected to drop from 3.3% to 3.0%. (2) ING analysts express doubts about the pace of inflation decline. (3) ECB policymakers are unlikely to endorse a shift in expectations until Q1 wage metrics are released after the April meeting, shaping their stance on policy adjustments.