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“Bang! Zoom! To the moon, Alice!” – Jackie Gleason
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Equity futures have moved fractionally into positive territory off their overnight lows as shares of Nvidia (NVDA) turned positive with a gain of nearly 1%. The 10-year yield is down 1 bps to 4.04% while crude oil trades down 2% to $64 per barrel. Gold prices are also down by about 0.5%, while silver plunges nearly 5% and Bitcoin drops over 1% to just over $68K.
Asia was mostly positive overnight. The Nikkei finished higher by a modest 0.3%, and Hong Kong declined more than 1%. South Korean stocks, however, continued to surge as the KOSPI rallied 3.7%, taking its YTD gain to 49.7%! Nearly 50%! Japanese PM Takaichi nominated two dovish candidates for roles within the BoJ, and the yen is weakening as markets now price the odds of a rate hike in April down to just 50%. This comes even as Leading Indicators in Japan came in better than expected.
European stocks are positive again this morning, with the STOXX 600 up 0.2%, with France’s 0.9% gain leading the way higher. February Business and Consumer Confidence unexpectedly declined, although Confidence in Italy bounced.
In the US this morning, the only reports on the calendar are Jobless Claims at 8:30, followed by the KC Fed Manufacturing report at 11. At 10 AM Eastern, Fed Governor Bowman will also testify in front of a Senate panel.
Jackie Gleason, best known as the hot-tempered bus driver Ralph Kramden from the 1950s sitcom The Honeymooners, would have turned 110 years old today. Ralph’s most iconic line from the show was “To the moon, Alice”, and that’s the way things seem to be going for semiconductor stocks. While Nvidia’s (NVDA) stock price, despite surging profits and revenues, has been rangebound for months now, the Philadelphia Semiconductor Index (SOX) hit another record high yesterday, taking its YTD gain to just under 20%.
Along with the index itself, breadth in the sector has also been strong. Yesterday alone, nine of the index’s 30 components hit 52-week highs, even as NVDA closed nearly 8% below its respective high.
While semis have been strong, software stocks continue to try digging out from the AI-pocalypse. The latest setback for the sector was earnings from Salesforce (CRM) last night. CRM exceeded EPS forecasts on inline revenues. Guidance was mixed with the company raising Q1 EPS forecasts while keeping full-year forecasts in line with expectations. Despite a somewhat positive report at the surface, CRM is down more than 2% in the pre-market.
As software stocks have been cratering in recent weeks, investors have been asking where company managements are with respect to purchasing their stocks. If the declines were a major overreaction, as CRM CEO Benioff and others say, shouldn’t they be buying back stock hand over fist?
CRM addressed that last night when the company announced a $50 bln buyback. CRM’s market cap is $180 billion, so $50 billion represents more than a quarter of the company’s entire market cap. Ideally, investors would like to see company executives putting their own actual money where their mouths are, but a $50 billion stock buyback is a step in the right direction.
Semis and software are two of the market’s largest sectors, and each one moving in the opposite direction has contributed to the ping pong action at the overall index level. As we noted on X yesterday, the S&P 500 has now crossed its 50-day moving average on a closing basis ten times in the last 50 trading days. That’s the longest streak since March 2018 and one of only a handful of periods with that many crosses in such a short period of time. As we’ve all said to someone close to us multiple times, make up your mind already!
