A Referendum on the Market

Nvidia beats expectations... A referendum on the market... Some stocks matter more at certain times... More earnings reports... Walmart buys a TV maker... Fed watch... Setting up for more disappointment... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Nvidia beats expectations... A referendum on the market... Some stocks matter more at certain times... More earnings reports... Walmart buys a TV maker... Fed watch... Setting up for more disappointment... --------------------------------------------------------------- The latest on 'market darling' Nvidia... I (Corey McLaughlin) don't usually do this, but I want to start today's Digest with an after-hours earnings report. Chipmaker Nvidia (NVDA) just announced its latest quarterly financials... In short, the results were strong. The company reported revenue of $22.1 billion in the fourth quarter and earnings of $5.16 per share, above Wall Street expectations of $20.4 billion in revenue and earnings of $4.20 per share. Nvidia also projected revenue of $24 billion in the current quarter, and company co-founder and CEO Jensen Huang said "demand is surging worldwide across companies, industries, and nations" for its chips and artificial intelligence ("AI")-related products and services. As we go to press this evening, the market's knee-jerk reaction to this "beat" and outlook in after-hours trading was to push Nvidia shares more than 7% higher. Other chip- and AI-related stocks got a bump too. Early returns suggest a turning point... Going into the earnings report, Nvidia shares were down roughly 9% since their most recent (all-time) high on February 14. The major U.S. stock indexes have also seen weakness over the same span, including today. This should strike anyone who has been following our Ten Stock Trader editor Greg Diamond's work as interesting, to say the least. [For months]( Greg had been saying that February 14 would be an important turning point for the markets. And the behavior of Nvidia's share price could give us a clue which direction the overall market may go from here... But before we get to that, you might think we're overstating the importance of a single quarterly earnings report. Yes, there's a mosaic of information to think about outside of one report from one company... but let's consider why Nvidia's financials are worth a closer look today. First, the AI buzz in the market over the past year has been loud and influential. You could argue it has been the catalyst for a 20%-plus move higher in the benchmark S&P 500 Index and a 30%-plus gain in the tech-heavy Nasdaq Composite Index over the past 12 months. And Nvidia, a chipmaker Stansberry Venture Technology editor Dave Lashmet recommended way back in 2016 before it was a household name (check our Hall of Fame spot at the bottom of this e-mail), has become the biggest ticker symbol associated with AI. Plus, before its recent pullback, Nvidia was the third-largest publicly traded U.S. company by market cap, passing Alphabet (GOOGL) and Amazon (AMZN). Nvidia shares are up about 490% since their October 2022 low. Why Nvidia matters in the short term... Some stocks can matter more to the markets – in both price action and sentiment. Practically, when a stock like Nvidia weighs heavier in the S&P 500 Index, as it does, it influences what's referred to in the mainstream as the "market" or "U.S. stocks." Apart from that, when a stock like Nvidia is part of a popular sector or trend, any positive or negative reporting can be amplified… and color things in other parts of the market as well. As we'll also talk about later in today's Digest, ongoing economic data and Federal Reserve speculation may matter more for the market over the next few months. But for today and perhaps the next few weeks, the reaction to Nvidia's quarterly results could influence the short-term direction of the market and sentiment around U.S. stocks. I look at this earnings report as a referendum on the AI buzz and, by extension, the entire stock market. Market commentator Josh Brown, who spoke at our annual Stansberry Research conference last October in Las Vegas, described the scenario well [earlier this week in his new blog](... You're hearing it from a long-term investor: I think the biggest risk for the Nasdaq right now is a great report from NVDA that only results in a single-digit pop in the price. If that's all we get, psychologically we'll be in trouble. The air will come out of everything tech-related in response. In this particular moment, I believe the reaction to Nvidia's quarter [this] week will tell us whether or not we've topped out for the time being. I think it's more important than any inflation reading, economic data point or Fed speech. Now, Josh didn't say anything about if Nvidia shares rose after a great report, but the same idea applies. If shares continue to move higher, we could see more air coming into AI and tech-related stocks in the short term. But we'll watch the action over the next few days. Elsewhere in earnings reports... A few other notable quarterly reports also published this week... They tell a story of an economy that isn't in a recession, and we have another example of how earnings season can quickly go wrong for a company... Yesterday, Walmart (WMT) – the nation's largest retailer (and grocery-store chain) – announced overall positive earnings. First off, it beat Wall Street earnings estimates for the fourth quarter. The retail giant reported that online sales grew 23% compared with the same period a year ago, same-store sales grew 4%, and quarterly revenue grew 6%. On top of all that, Walmart also announced that it's raising its dividend by 9% this year, its largest annual increase in more than 10 years – something a long-term, compounding-minded investor loves to hear. CEO Doug McMillon also sounded more optimistic about the economy overall than he did three months ago. In a CNBC interview after Walmart's earnings report, he backed away from his prediction last quarter that the company would soon be staring down a deflationary environment. McMillon said... The possibility overall [of deflation] still remains, but prices are more stable than where they were three months ago. Plus, Walmart made headlines by announcing that it is buying smart-TV maker Vizio (VZIO) in a $2.3 billion deal. The purchase is intended to boost Walmart's ability to serve up advertising and grow its subscription Walmart+ membership business to create a kind of rival to Amazon, which owns the third-largest ad platform in the U.S. and has more than 230 million Prime members worldwide. Vizio has more than 18 million active accounts using its smart-TV operating system, and Walmart could offer ads through the TVs. It could also offer other brands advertising space to its massive customer base. And it could leverage TV viewership data to create high-margin revenue streams outside its retail business. Similarly, home retailer Home Depot (HD) announced fourth-quarter 2023 sales numbers that beat expectations yesterday. While the company is continuing to see a slowdown from the pandemic boom, it said customers have returned to more typical spending patterns. So Home Depot expects sales to grow by 1% in 2024. The company also raised its quarterly dividend by 7.7%. Home Depot shares drifted slightly higher yesterday and today on the news. But it wasn't all good news... Cybersecurity giant Palo Alto Networks (PANW) saw its shares plummet 28% today, from all-time highs, after it said that it's starting to see "spending fatigue" from clients and trimmed its full-year revenue forecast by about $200 million. Fed watch... Meanwhile, the Federal Reserve published the minutes of its January meeting this afternoon. The words reflected what Fed Chair Jerome Powell said at a press conference (and later on 60 Minutes) following the Fed's meeting... that the Fed wants "greater confidence" that the annual inflation rate is moving toward 2% before cutting interest rates. The minutes state that members of the policy-setting Federal Open Market Committee "judged that some of the recent improvement in inflation reflected idiosyncratic movements in a few series," meaning that recent price-growth decreases could be attributed to certain one-off behavior in parts of the economy and might not indicate a long-term trend. High(er) inflation numbers... The minutes come on the heels of another government report that suggests high(er) inflation is sticking around for longer... On Friday, Uncle Sam reported that producer prices in the U.S. came in hotter than expected. The producer price index ("PPI") for January rose 0.3% month over month, significantly higher than the expected 0.1%. PPI climbed 0.9% annually compared with the initial 0.6% estimate. The rises were fueled by increases in the services sector, which jumped 0.6% and marked the largest increase since July 2023. Additionally, prices paid to producers for goods declined for the fourth consecutive month, falling 0.2%. Core PPI, which excludes volatile sectors like food and energy, climbed higher than expected, up 0.5% from December. Core PPI rose on an annual basis as well, increasing 2% year over year. This data echoes Mr. Market's current expectation that the Fed will hold rates steady in its upcoming March meeting. The CME Group's FedWatch Tool now has 93.5% odds of a continued Fed "pause." That's a sizable increase from last week's 65% odds following the release of [persistent consumer price index ("CPI") numbers](. As we explained last week, the Fed will have a few more pieces of the puzzle to analyze before making its next policy decisions on March 20. The committee will have access to fresh unemployment data, the Personal Consumption Expenditures report, and another CPI report. But it's becoming increasingly clear that the Federal Reserve will maintain the current rate until it observes "more good data" that suggests the annual inflation rate is on pace for 2%. It's not yet. As we've been saying, the high inflation story is not done yet. A setup for some more possible disappointment... Bond yields have risen over the past few weeks, as more and more investors have realized higher-than-expected inflation. For example, the 10-year Treasury today yielded around 4.3% compared with 3.9% at the start of the month, a 40-basis-point difference... As Stansberry Research analyst Mike Barrett wrote in Select Value Opportunities today (available to Stansberry Alliance members [here]( this is setting the stage for some more potential disappointment in the stock market. As Mike put it, stocks have limited upside unless interest rates decline... Never forget this rule... When stock prices rise, as they've done for 14 of the past 16 weeks (through February 16), so do the expectations baked into those prices. And the higher the expectations, the greater the potential for disappointment. If interest rates are now poised to climb in the weeks and months ahead, rather than decline, stock investors will downgrade their rosy outlooks for revenue growth and profit margins... This will likely push stock prices lower. As Mike pointed out, earnings season is now coming to an end. The next one won't start again until mid-April. That means investors and traders will rely on upcoming economic reports and the ensuing Fed speculation they generate to make decisions, instead of the quarterly financials of Nvidia or anyone else. And if the reality of higher inflation and a continued Fed "pause" becomes more entrenched in the market, the major U.S. indexes could be due for a breather – or pullback – until the story changes. Stansberry's Credit Opportunities editor Mike DiBiase joins Dan Ferris and me on this week's Stansberry Investor Hour to talk about the opportunity in buying corporate bonds... and why every investor should know about it... [Click here to listen]( to this episode right now. For more free video content, [subscribe to our Stansberry Research YouTube channel](... and don't forget to follow us on [Facebook]( [Instagram]( [LinkedIn]( and [X, the platform formerly known as Twitter](. --------------------------------------------------------------- Recommended Links: [See by MIDNIGHT: 'We Smell Blood in the Water']( Forensic accountant Joel Litman and Dr. David Eifrig just teamed up for the first time ever to discuss the most overlooked stock market opportunity for 2024. Wall Street sharks like Goldman Sachs and JPMorgan Chase are already circling the same thing in anticipation. It's not artificial intelligence, tech, or anything you've likely ever considered. Instead, it stems from a well-hidden crisis affecting 1 in 3 U.S. stocks – a situation most investors are completely missing. Until midnight tonight, [get the full story here](. --------------------------------------------------------------- [Why Banks Are Collapsing Again]( 2024 has barely begun and we're ALREADY seeing echoes of the 2023 banking crisis everywhere. New York Community Bancorp's stock dropped almost 40%, and the SPDR S&P Regional Banking Fund saw its largest single-day drop since the banking crisis of 2023. If you have any money stashed away in a U.S. savings account, individual retirement account, or 401(k) right now, [do NOT make another move in the markets until you see this](. --------------------------------------------------------------- New 52-week highs (as of 2/20/24): ABB (ABBNY), Abbott Laboratories (ABT), Berkshire Hathaway (BRK-B), CBOE Global Markets (CBOE), Costco Wholesale (COST), iShares MSCI Emerging Markets ex China Fund (EMXC), Franklin FTSE Japan Fund (FLJP), Linde (LIN), Sprouts Farmers Market (SFM), Travelers (TRV), Waste Management (WM), and Walmart (WMT). In today's mailbag, a subscriber argues against buying into China, an idea we talked about [in yesterday's edition](... and we have feedback on Ten Stock Trader editor Greg Diamond's new Diamond's Edge market analysis videos. These free, short videos are published first each week in the Digest and are available for subscribers to watch at StansberryResearch.com [here](... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "There is no doubt that China is a 'bargain' currently. But we've seen this movie before. The fundamental rule is that China is a 'command and control' situation and you have seen the runup and the instant drop when the government takes control of the economy, country, or market. When we send them our dollars, we are feeding a philosophical and military enemy. In addition, it is certain to become an economic basket case as they reap the reward of having a one-child policy for 40 years. How do you build an economy off of a shrinking population? Look at the demographics of the past three years if you want to see the future." – Stansberry Alliance member John D. "Hey Greg. I'm not sure how long Diamond's Edge has been active but again love the technical analysis and the time you put into your information for us subscribers. "I'm doing so much better because I'm able to trade in line with your analysis and overall information. Thank you." – Subscriber Marc D. All the best, Corey McLaughlin with Tyler Jarman Baltimore, Maryland February 21, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,339.2% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,278.5% Stansberry's Investment Advisory Porter wstETH Wrapped Staked Ethereum 02/21/20 1,173.5% Stansberry Innovations Report Wade ADP Automatic Data Processing 10/09/08 910.9% Extreme Value Ferris WRB W.R. Berkley 03/16/12 747.1% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 621.9% Retirement Millionaire Doc HSY Hershey 12/07/07 475.1% Stansberry's Investment Advisory Porter BTC/USD Bitcoin 01/16/20 463.4% Stansberry Innovations Report Wade AFG American Financial 10/12/12 433.9% Stansberry's Investment Advisory Porter PANW Palo Alto Networks 04/16/20 380.4% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Stansberry Innovations Report Engel/Wade 2 Retirement Millionaire Doc 1 Extreme Value Ferris --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,291.2% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,150.8% Crypto Capital Wade POLYX/USD Polymesh 05/19/20 1,055.1% Crypto Capital Wade MATIC/USD Polygon 02/25/21 899.1% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. 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