It’s NASDAQ Monday as Growth Tech Drives Market, Semiconductor Equipment Surges +4.27%

MARKETS TODAY August 14^th, 2023 (Vica Partners)

Overnight/US Premarket, Asian markets finished lower, Hong Kong’s Hang Seng lost 1.58%, Japan’s Nikkei 225 down 1.27% and China’s Shanghai Composite off 0.34%. S&P futures opened trading at 0.13% below fair value.

European markets finished mixed, Germany’s DAX gained 0.46% and France’s CAC 40 up 0.12%. London’s FTSE 100 down 0.23%.

Today US Markets finished higher, the NASDAQ gained 1.05%, the S&P 500 up 0.58% and the DOW up 0.07%. 6 of 11 S&P 500 sectors advancing: Information Technology +1.85% outperforms/ Utilities -0.83% lags. On the upside, NYSE Fang+, Mega and Large Cap Growth, iShares Semiconductor ETF ^SOXX, Industries: Semiconductor & Semiconductor Equipment, Construction & Engineering, Broadline Retail. US Treasuries, Bitcoin, USD Index.

In US economic news, the NY Fed’s Survey of Consumer Expectations improved to 3.5% from 3.8% last month. Tuesday is busy release day!

Takeaways

• This week is options expiration/4500 is a key ^GSPC resistance level
• NASDAQ leads majors +1.05%,
• NYSE Fang+ up +1.73%
• 6 of 11 S&P 500 sectors advancing: Information Technology +1.85% outperforms/ Utilities -0.83% lags.
• Industries: Semiconductor & Semiconductor Equipment +4.27%, Construction & Engineering +1.68%, Broadline Retail+1.53%, Water Utilities +1.39%
• Mega and Large Cap Growth80% both lead Factor performance
• iShares Semiconductor ETF ^SOXX +2.88%
• Treasury yields up across the curve
• Bitcoin, USD Index gain
• Com (MNDY) with solid earnings beat

Pro Tip: Safe Haven Demand shows the difference between Treasury bond and stock returns over the past 20 trading days.  The current rating indicates market increased volatility.

Sectors/ Commodities/ Treasuries  

Key Indexes (5d, 20d, 50d, 100d, 200d)

S&P Sectors

• 6 of 11 S&P 500 sectors advancing: Information Technology +1.85% outperforms/ Utilities -0.83% lags.
• Industries: Semiconductor & Semiconductor Equipment +4.27%, Construction & Engineering +1.68%, Broadline Retail+53%, Water Utilities +1.39%, Interactive Media & Services +1.38%, Software +1.21%
• *1 Month Leaders: Energy +10.06%, Communication Services +5.37%, Health Care +4.15%
• *YTD Leaders: Communication Services +41.09%, Information Technology +35.58%, Consumer Discretionary +33.12%
• *S&P 500 +16.27% *indicates as of Aug-11-2023

Factors

US Treasuries

Earnings

Q2 ’23 Top Line Top Line

• Q1 ’23 Actual: 79% of companies beat analyst estimates by an average of 6.5%
• Q2 Forecast: S&P 500 EPS was expected to decline <7.2%>/ Fiscal year 2023 EPS flat YoY

Q2 Actual (TBA)

Notable Earnings Today  

• +Beat: Xp (XP), Monday.Com (MNDY), Embraer ADR (ERJ), JinkoSolar (JKS), Navitas Semiconductor (NVTS)
• – Miss: Roivant Sciences (ROIV), Rumble (RUM), Central Puerto (CEPU)

Economic Data

US

• The New York Federal Reserve Consumer Inflation Expectations survey for July, Consumers expect inflation to be at 3.5% over the next year, down 0.3 percentage point from the June 2023 reading.

Vica Partner Guidance August ’23, (updated 8-14)

• Q3+/4 highlighting: Industries; Energy Equipment & Services, Oil, Gas & Consumable Fuels, Interactive Media & Services, Construction Materials, Media, Broadline Retail, Health Care Providers & Services, Containers & Packaging, Office REITs, Ground Transportation, Communications Equipment, Machinery Biotechnology, Pharmaceuticals, Capital Markets, Construction & Engineering, Building Products, Machinery.

• Mid Term: Slight regression on Semiconductor & Semiconductor. Specialized REITs have upside. Undervaluation for Chinese Mega Cap Tech. Japan equities still a better value than. Energy is where smart money is hedging.
• Cautionary: Current shorter term “hard” shift from Growth to Value. Industries: Independent Power and Renewable Electricity Producers, Automobiles, Automobile Components, Consumer Finance, Passenger Airlines, Hotel & Resort REITs. Global mining on China deflation. Credit default swap (CDS) to pick-up through Q4/Q1.  >20 Year Treasuries price erosion.  Global mining on China deflation.
• Longer Term: NASDAQ 100^NDX/FANG+ ^NYFANG companies will continue to outperform “BIG allows you to invest at scale”. TOP Sector outperform includes AI and Semiconductor Equipment, Key Material like Lithium. Forward looking CAGR growth below:
• Company: we continue to emphasize longer term business strength *quality and strength of balance sheet for all investments. * Strong Mega Cap longer support – NVIDIA (NVDA), Meta Platforms (META), Microsoft (MSFT), Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), Tesla (TSLA), Taiwan Semi (TSM), ASML Holding NV (ASML).

• BIG Picture: Market bottoms are made on bad news and with deflationary signals the current market rally should come as no surprise. The combination of current Fed tightening, higher oil prices and a strong dollar should have given us a final bottom in ’23?

1. Our biggest concern with the current rally is that the Government is not as effective as Free Markets in managing capital. Stock repurchases are just another way to deploy Capital.  Consider that about 63% of the typical business cost is labor. I wholeheartedly trust the Free Market to better spend on CAPEX, R&D, and other.
2. As for Bonds as an alternative investment for Stocks, a >10-year bond should have a return that exceeds nominal GDP, assuming inflation remains above >3%.
3. The argument for Fed further tightening has its pundits. Raising rates to counter jobs (1.6 jobs available for every job seeker) in a rapidly changing economy will NOT moderate on demands.
4. The Fed would benefit by rethinking its 2% inflation target and adjusting it to 3%. This would account for more accurate wages, energy transitions and account for expanding services in BIG tech. In addition, add more protection from deflation.

News

Company News/ Other

• Esmark Bids for U.S. Steel, Setting Up Potential Battle for Steelmaker – WSJ
• Mercedes Targets Luxury Buyers in Malaysian All-Electric Push – Bloomberg

Energy/ Materials

• Iran-US Diplomatic Thaw May Rattle Oil Markets – Bloomberg

Real Estate

• The Luxury Home Market Confronts Its New Reality: Not Enough Buyers and Sellers – WSJ

Central Banks/Inflation/Labor Market

• After Pulling Inflation Down, Gasoline and Food Threaten to Nudge It Up – WSJ
• Near-Term Inflation Outlook at Lowest Since 2021 in Fed Survey – Bloomberg

Asia/ China 

• China’s private-sector crisis: everything you need to know about the mess and what Beijing is doing to clean it up – South China Morning Post