Read on the Trading Floor - 21 Feb 2024
Today’s focus… Nvidia, waiting for a correction, Easter egg shrinkflation and much more
Macro Themes At Play
Theme 1 - The most important stock on planet earth
Theme 2 - Waiting for a correction?
Theme 3 - Is the Easter Bunny going to struggle to deliver?
Further reading and listening of note
Theme 1 - The most important stock on planet earth
The market has been in a slumber, dormant for two weeks now as holidays and lack of material change in economic data have left us glued to narrow ranges. As a result of the moribund trading conditions, like moths to a flame, traders and analysts are attracted to the potential volatility that may come from Nvidia's earnings. With the economic calendar bare until the middle of March, there is a lot of "hope" not just in equity break evens (implying 10-11% move following the results) that Nvidia will induce some meaningful cross asset trading activity that US CPI failed to ignite. After all, Nvidia "boasts the best performance in the S&P 500 this year after more than tripling in 2023, and is responsible for a third of the benchmark’s year-to-date gain" (Source Bloomberg). There is not a lot that we can add to the Nvidia debate, as the stock that is now traded the most on Wall Street is suddenly the center of attention of the macro community. Place your bets or save your premium, eventually this mkt will come to life in 2024....
Brent Donnelly - NVDA is not a macro story
Bloomberg - Nvidia Options Signal Nearly $200 Billion Swing After Earnings
Bloomberg - Goldman’s Trading Desk Calls Nvidia ‘Most Important Stock’ on Earth
Reuters - Nvidia dethrones Tesla as Wall Street's most traded stock
Two Minute Drill by James Barrineau - Narrative "friction"
The Gryning Times - 43x Earnings!
Theme 2 - Waiting for a correction?
As we settle around 5k on SPX and the Fed cutting cycle is unwound, there has certainly been a growing narrative on Harkster.com that a correction in assets is overdue. In particular Daily ChartBook highlights the latest from MS Mike Wilson.... Stocks vs. bonds vs. Fed. "While the back end of the bond market has reacted to this potentially slower pace of cuts, equity valuations have not, creating a divergence that could be reconciled either via lower rates or lower multiples."
Fidenza Macro - Equities and bitcoin to take a breather
The Blind Squirrel - Coming off the fence on bonds
AlphaPicks on Wall street - Super Micro Crash Incoming
Theme 3 - Is the Easter Bunny on a diet?
Shrinkflation, unseasonal rains (climate change), freight costs, geopolitics, supply shortage (higher prices needed to encourage replanting of trees); it's amazing that an easter egg can demonstrate so much about inflation, profit margins, consumer sentiment and climate change.
Bloomberg - The Bittersweet Truth Behind Surging Chocolate Prices
The Telegraph - Why your Easter egg will be smaller and more expensive this year
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