Monday Morning Edge Report - November 20, 2023

Microsoft Scoops Up Ousted OpenAI ex-CEO Sam Altman For Themselves

Author

Mark Roussin
November 20, 2023

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Market Talk ⏪

The Monday Morning Edge Report is designed to help investors of all different levels breakdown important stories/topics within the stock market. In this weekly report we will help you understand what is going on to help give you, the investor, an edge in the market.

Last week was driven by earnings as well as the latest CPI report that showed inflation continuing to come down, which has many believing the Fed is done hiking rates. We have seen the Fear & Greed Index flip from Fear levels to Greed levels since last week.

5 Stories Moving The Market:

  1. OpenAI CEO Sam Altman Ousted ⏩ Microsoft swoops in

  2. October CPI came in cooler than expected ⏩ Fed done hiking rates

  3. Target may have bottomed ⏩ The retailer reported strong results

  4. Retail Sales FALL in October ⏩ First MoM decline since March ‘23

  5. Nvidia headlines earnings this week ⏩ Reports on Tuesday 11/21

Late Friday last week news broke that the OpenAI board had ousted CEO Sam Altman, noting in their “review” that he was not “consistently candid in his communication with the board.” Ok great, so he sucks at communicating, but he is a brilliant mind and there has been no financial impact or wrongdoing, so why do this.

To me, this sounded more like a power trip on the side of the board members, board members who now themselves have been asked to resign. It was a mess Friday afternoon mere minutes before the close of the market, and when news broke, share of Microsoft Corporation (MSFT), which owns 49% of OpenAI saw its stock fall nearly 2% rather quickly.

Microsoft is the company that came to the rescue over the weekend when CEO Satya Nadella announced that Sam Altman would indeed be joining Microsoft to head their AI Research team along with his close colleague Greg Brockman and other former OpenAI employees as well. In the end what caused quite the stir ended up being a big win for Microsoft when all said and done.

On Tuesday November the October CPI report was released showing cooler than expected inflation, sending markets higher and US Treasuries lower as investors cheered the potential end to Fed interest rate hikes.

Economists were looking for YoY CPI of 3.3%, the report showed 3.2%. Economists were looking for YoY Core CPI of 4.1%, and instead we got 4.0%.

As I mentioned in the Edge Report last week, if we got a surprise to the downside, which we did, that we could expect a nice rally in the markets which is exactly how things played out. Inflation continues to come down, showing the Fed is close to pulling off the soft landing.

3. Target may have bottomed

Target has had a miserable year in 2023, dealing with inventory related issues, a weakening consumer and slowing retail sales, as well as political tensions that they got involved with earlier in the year. Prior to last week, shares of TGT were down nearly 30% on the year.

However, last week the retailer reported Q3 earnings that beat on both the top and bottom lines. In addition to strong performance there, the retailer also saw improved margins which tells investors they have got their supply chain and inventory related issues nearly figured out. Although sales still fell, it was the sign of a bottoming for the retailer, which investors cheered with the stock jumping more than 20% after reporting earnings.

4. Retail Sales FALL in October

In October, Retail Sales fell 0.1% Month over Month, the first decline in 7 months. This backs up a lot of talk around the weakening economy and the weakening consumer. In recent months we have seen savings rates fall, credit card debt rise, and now retail sales fall, all pointing to a weakening consumer.

Although inflation is coming back to reality, this does not put the US out of the woods regarding a potential economic slowdown and recession in 2024. Economists expect the slowdown to continue through the end of the year.

5. Nvidia headlines earnings this week

Earnings season is coming to a close, but we still will hear from Lowe’s and Nvidia this week. NVDA is the last mega cap stock to report, and given its move and popularity, it has the potential to move the market this week.

Given the Thanksgiving holiday on Thursday which will have the markets closed that day, there still could be some fireworks given Nvidia’s expected report.

Analysts are looking for normalized EPS of $3.39 for the quarter on revenues of $16.11 billion.

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Earnings on Deck 💰

Earnings season is beginning to slow but NVDA headlines this short week of earnings.

Here are the companies reporting earnings this week:

Analyst Upgrades/Downgrades 📝

In this section we will highlight any recent notable analyst upgrades or downgrades.

  • Stifel upgrades CrowdStrike to buy from hold

  • Jefferies initiates PepsiCo as buy

  • Jefferies initiates Procter & Gamble as buy

  • Jefferies initiates Colgate-Palmolive as buy

  • Edward Jones upgrades Oracle to buy from hold

  • Evercore ISI adds Adobe to the core ideas list

  • Barclays initiates American Express as overweight

  • Cantor Fitzgerald downgrades Bristol-Myers to hold from buy

  • Bank of America upgrades Generac to neutral from underperform

  • Mizuho upgrades Intel to buy from neutral

  • Wells Fargo upgrades Target to overweight from equal weight

  • TD Cowen downgrades Target to market perform from outperform

  • Bank of America downgrades Advance Auto Parts to underperform from neutral

Poll of the Week 📊

Economic Data This Week 📆

Monday

  • US leading economic indicators

Tuesday

  • Existing home sales

Wednesday

  • Initial Jobless Claims

  • Durable-goods orders

  • Durable-goods minus transportation

  • Consumer Sentiment

Thursday

  • HAPPY THANKSGIVING - Markets CLOSED

Friday

  • S&P flash US services PMI

  • S&P flash US manufacturing PMI

Other Resources 📺

If you have not done so yet, check out my growing YouTube community of ~39,000 like-minded investors where I publish weekly videos focused on building wealth through investing.

Here is the latest video I released: 3 Stocks To BUY, 1 Stock To SELL

Here is another video I put out last week: 2 ETFs To Buy & Hold FOREVER

Here are a few others of my latest videos:

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Happy Investing!

Mark

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