Equities rally 

Stocks rose a bit in Europe early doors – London is mainly going sideways though. The US rallied again on Wednesday and most Asian markets were in the green. The dollar has stabilised somewhat after paring its earlier CPI-induced gains as Treasury yields gave back some ground to allow the bulls to dial up the risk.  

Today’s data dump includes the U.S. retail sales, Empire State manufacturing index, Philadelphia Fed manufacturing index, weekly unemployment claims and industrial production figures. This morning we’ve already had some data to chew on… 

Recessions all round as UK, Japan show negative GDP growth 

UK slips into technical recession – markets upped bets the Bank of England will be cutting rates sooner than later. The fact that inflation held steady at an almost acceptable 4% gives the doves seeking to ease policy more credibility.  

GDP fell by 0.3% in the final quarter, adding to the 0.1% decline in the third. Sterling slipped against the dollar but didn’t quite nudge yesterday morning’s post-CPI lows.  

Japan’s economy also tipped into a recession – at least on a technical basis. This sent JGB yields down and push out bets for the Bank of Japan to tighten monetary policy soon.   

Recession, recession everywhere, ne’er any drop to think. Who cares whether the national GDP is up or down when GDP per capita is terminal – down 0.7% in 2023. Too few people are shouldering too much of the burden and we keep adding to the burden. The loss of per capita income is ALL that matters. 

US faces renewed inflation pressures 

The U.S., meanwhile, is facing persistent inflation pressures. However, not if you are Chicago Fed president Goolsbee, who says it’s “totally clear that inflation is coming down”. He doesn’t support waiting until inflation hits 2% to start cutting, which the market should acknowledge is a sign that the Federal Reserve won’t wait forever.  

Maybe it’s 1929 again? As hedge fund manager Kevin Smith noted on Twitter:  

“The technical setup [of the S&P 500] compared to 1929 combined with the valuation and market cap concentration similarities should be top of mind”. 

It’s just the Magnificent Seven. As per The Kobeissi Letter’s tweet on Feb. 13: 

“If you remove the Magnificent 7 from the S&P 500, the index is barely up 5% over the last year. In other words, if you bought all S&P 500 stocks other than tech last year at this time, you're almost breaking even. The top 10 stocks in the S&P 500 now account for a record 35% of the ENTIRE index”. 

A house of cards? 

The S&P 500 is up about 20% in the last year, but only 5% if you exclude those stocks. As long as they fight the market, all should be fine. When they go, the foundational leverage upon which this house of cards is built crumbles. 

So, back to Nvidia – why, you may ask? Well, because the whole market is hinging on this stock — it’s the fulcrum for the entire AI bubble. And its earnings are due next week. Yesterday, its stock rose to surpass Google-parent Alphabet as the third most valuable company in the U.S..  

Here’s an amusing observation from Twitter: “On July 12th, 2023, NVDA announced a $50M investment in RXRX sending its stock from $6.78 to $14.67 overnight. This evening, NVDA filed its first ever 13-F, disclosing the exact same $50M investment. RXRX is up 15% in after-hours trading on the ‘news’. Greatest market ever!” (not so much about Nvidia as the tulip-like nature of the market). 

At the time of writing, Nvidia shares were trading around $740.90 (up 0.26%) in premarket on Thursday. The Nvidia share price has rocketed up close to 50% year-to-date, and risen by an eye-watering 235% on a 12-month basis.  

On other big hitters in the Magnificent Seven 

Amazon founder Jeff Bezos sold another $2bn worth of AMZN shares, taking the total to $4bn in the past week. Zuckerberg has been doing something similar with Meta.  

Here’s Morgan Stanley on Tesla: “Just back from easily the most bearish of our TSLA bull bear lunches… but for admittedly understandable reasons. Some doubted if sales grow at all this year. Most see consensus falling and AI ‘off-the-table’ for now.”  

Tesla has seen some rough few months to start the year, with TSLA stock falling by close to 24% year-to-date. Multiple analysts have downgraded their Tesla price targets, such as Morgan Stanley’s Adam Jonas, and the Tesla earnings call in late January did little to reassure investors, with the company’s stock tanking after its fourth-quarter results were released. 

Meanwhile, Apple is battling to hold its 200-day line. Berkshire Hathaway has cut its stake in the iPhone maker.