What a difference a day makes!
For no particular reason, the markets reversed after lunch and we finished the day not-so-bad but that quickly turned to GOOD after hours as the S&P jumped 40 points – back to just under 5,100 (5,120 on the /ES futures) as both MSFT and GOOG/L knocked it out of the park with earnings.
On the whole, the S&P 500 is still up 5.8% for the year, though still off the highs and the Nasdaq is up 3.8%, the Dow is up 1.1% and the Russell, which we are still worried about, it down 2.3% as we close out month 4 of 2024.
Adding to the fire of the recovery, GOOG/L (which is counted twice in the indexes) beat nicely with Cloud Revenues up 28.5% and they have so much money floating around that cloud that they are paying out an 0.20 dividend (on a $175 stock?) AND they are buying back $70Bn of their own shares at 25x earnings. To me, this indicates they can’t think of anything better to do to grow the company and you know I hate buybacks but, whatever – the net effect is they are up 11.5% this morning.
MSFT also rocked it in the clouds with Azure Revenues up 31% and that sent that $3Tn stock up 4.5% and MSFT is now clearly the World’s largest company again – and I don’t think AAPL’s earnings are going to change that. Unlike GOOG, MSFT has plenty of better things to do with money than give it back to their shareholders – I like that!
Other nice beats came from INTC (who dropped on guidance – as usual), TEAM, SAM, EXPO, GILD, KLAC, RMD, SKX and SNAP, who are up almost 30% with raised guidance and a 10% jump in Daily Active Users (DAU) to 431M people.
So the short story is companies like INTC and META (who we just added to our Long-Term Portfolio in yesterday’s Live Member Chat Room), who spend money to build for the future are punished by companies like GOOG/L, who spend money buying back their own stock are rewarded. Clearly stock market incentives are completely F’d up but I guess we’ll have to play the hands as they are dealt…
8:30 Update: Personal Income is up 0.5% and that was expected but Personal Spending is up a blazing 0.8% – 33% more than 0.6% expected so Consumers are still willing to go deeper and deeper into debt to keep up their lifestyles. Yay, I guess… PCE Prices are flat at 0.3% – same as February – so we made it through a 10% rise in oil and gasoline prices without fueling further inflation – that’s a good thing!
As Steve on CNBC just said: “The stag is not there in the StagFlation” so there’s not enough evidence in this data to be gloomy in our outlooks – though we’re still waiting for Consumer Sentiment numbers at 10. Clearly there’s still wage pressure but, if the employees are spending 33% more than you pay them – that’s not a bad deal for our Corporate Masters, is it?
Bottom line is we made it through another week with the S&P over 5,000 and we’ve added 5 green boxes to our bounce chart and, if we manage to hold those strong bounce lines into the close – this will be considered a pretty good week on the whole.
And this is why we hedge. Rather than gut-wrenching panic during the downturn, our Members were relaxed and looking for new opportunities – taking advantage of sell-offs like META that we disagreed with to ADD to our long positions, rather than liquidating them for no reason. Our Long-Term Portfolio made it through the week (so far) at $1,059,303 and that’s UP $71,417 from our April 16th Review and up 111.9% from our start on May 16th last year as we took advantage of last week’s dip and are now reaping the benefits of the bounce.
Have a great weekend,
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- Phil
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