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“No pressure, no diamonds.” – Thomas Carlyle
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The market is currently digesting the economic equivalent of a Thanksgiving dinner in terms of the sheer quantity of reports. Like Thanksgiving, most of the platters were good. Headline GDP came in much higher than expected, inflation readings were in line with or better than forecasts, and Durable Goods were weaker than expected at the headline level but stronger after stripping out transportation. The only “yams” on the table were jobless claims, but even they weren’t that bad as both initial and continuing jobless claims came in only modestly higher than forecasts. In reaction to the reports, futures have rallied as the S&P 500 is indicated to open up by about 35 basis points versus just modest gains ahead of the data.
119 years ago today, in a mine 18 feet underground, workers came across what was and still is the largest diamond ever discovered. Weighing in at 1.33 points, the 3,106-carat Cullinan diamond was immediately sold to the local government who then gifted it to Britain’s King Edward VII. The stone was ultimately cut into nine major stones (the Cullinan IX) and dozens of smaller ones, but the two largest, at 530 and 317 carats, respectively, remain on display in the Tower of London along with the other crown jewels.
The equity market’s version of the Cullinan IX is the Magnificent Seven, and while TSLA has had some trouble of late, the remaining “Cullinan Six” of Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon.com (AMZN), Nvidia (NVDA), and Meta Platforms (META) have continued to hum. Through yesterday’s close, the stocks were collectively 22.5% above their 200-day moving averages (DMA) with AAPL the closest at 7.1% and NVDA a seemingly outrageous 43.3% above its 200-DMA. While that may sound crazy, back in the summer NVDA was trading at more than double its 200-DMA.
Putting them all together, the chart below shows the daily historical market cap of the “Mag Six” stocks since the start of 2023 along with the 200-DMA. As of Wednesday’s close, the “Mag Six” had a combined market cap of $12.02 trillion which was more than $1.85 trillion above its 200-DMA. To put that in perspective, that’s the equivalent of over 65% of the Russell 2000’s entire market cap, and if just those six stocks were to experience a correction and pull back to their 200-DMA, it would knock about 5% off the price of the S&P 500.
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