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- The Weekly Wrap-Up - February 24th, 2024
The Weekly Wrap-Up - February 24th, 2024
Nvidia saves the day!
CMG Venture & Mark Roussin
February 24, 2024
Good morning investors!
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This report is designed to help investors of all skill levels break down important stories/topics within the stock market. And best of all, we cut through all of the BS and give you exactly what you need to know in easy to digest, bite sized pieces of content.
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Market Talk
The market was down to start the week but Nvidia saved the day with its strong earnings report. After the company’s quarterly results, the market turned things around with the S&P even making new all-time highs.
Economic charts source: Liz Ann Sonders
👉 EARNINGS EDGE: When it comes to earnings season there’s never a dull day here at the Investor’s Edge. Nvidia blew away analyst estimates for earnings and revenue but the key takeaway from the report was…upgrade to VIP to read the full Earnings Edge.
5 Stories Moving the Market
These are some of the biggest stories from the past week that had an influence on market action.
Nvidia adds record $277 billion in stock market value in single day
Data source: Bloomberg
Nvidia experienced a historic one-day surge in stock market value, adding $277 billion on Thursday, the largest in Wall Street's history.
This remarkable gain followed the chipmaker's quarterly report, which exceeded expectations and fueled optimism about artificial intelligence. The stock soared over 16%, closing at a record-high and boosting Nvidia's market capitalization to $1.96 trillion.
Nvidia’s one-day increase surpassed Meta Platforms' previous record of $196 billion just 20 days earlier on February 2.
Nvidia now stands as the third-most valuable U.S. company, surpassing Amazon and Alphabet after jockeying with the two tech powerhouses in recent weeks.
Nvidia’s shares cooled a bit on Friday after briefly topping $2 trillion in market cap but the stock still ended the week up 17%.
Fed officials expressed caution about lowering rates too quickly, FOMC minutes show
Federal Reserve officials indicated a reluctance to cut interest rates and expressed a balanced view on inflation, according to the FOMC minutes from their last meeting.
While they decided to maintain the key overnight borrowing rate and acknowledged the likelihood that the policy rate was at its peak for the current tightening cycle, the Fed emphasized that a reduction in the federal funds rate would only be considered when there is increased confidence in inflation moving sustainably toward the 2% target.
Recent data has shown higher-than-expected inflation, with consumer and producer prices running hotter than expected in January and remaining above the Fed's 2% target.
Meanwhile, the labor market has continued to grow rapidly, adding 353,000 nonfarm payroll positions in January, and first-quarter economic data suggests a GDP growth of 2.9%.
Capital One to acquire Discover Financial Services in $35.3 billion all-stock deal
Capital One Financial is set to acquire Discover Financial Services in a significant all-stock deal valued at $35.3 billion.
According to the agreement, Discover shareholders will receive 1.0192 Capital One shares for each Discover share, representing a 26% premium based on Discover's closing price of $110.49 on February 16. The deal is expected to close in late 2024 or early 2025, resulting in Capital One shareholders holding 60% and Discover shareholders owning 40% of the combined company.
The merger includes a $1.38 billion breakup fee if Discover opts for another buyer, but no such fee if U.S. regulators intervene. While Discover cannot actively seek alternative offers, it can consider proposals from other interested parties before the transaction is put to a shareholder vote.
The Capital One-Discover merger stands as one of the largest deals announced this year, alongside Synopsys' $35 billion acquisition of Ansys in January and Diamondback Energy's $26 billion deal to purchase Endeavor Energy on February 12.
Walmart to buy TV maker Vizio for $2.3 billion
Walmart has announced a $2.3 billion cash deal to acquire TV maker Vizio at $11.50 per share, aiming to strengthen its high-profit advertising business.
While Walmart and Sam's Club have been significant Vizio device retailers, the acquisition is driven by the potential to enhance the ad business through Vizio's SmartCast Operating System. This system enables users to stream free ad-supported content on their TVs.
As Walmart tries to compete with Amazon’s growing ad segment, the company is focused on expanding its media business, Walmart Connect, as it offers higher profit margins compared to traditional retail categories like groceries or clothing.
The advertising sales for this segment saw a notable 22% growth in the fourth quarter.
Amazon to replace Walgreens in Dow Industrial Average next week
Amazon is set to replace Walgreens Boots Alliance in the Dow Jones Industrial Average, according to an announcement from S&P Dow Jones Indices.
The change, effective before the market opens on February 26, is seen as reflective of the evolving nature of the American economy and aims to increase consumer retail exposure and expand representation in other business areas within the DJIA.
This move comes three years after Salesforce joined the index, along with Amgen and Honeywell International. Walgreens had been a Dow component since 2018, replacing General Electric, which had been part of the index since its inception in 1896.
Facts about the Dow Jones Industrial Average:
The Dow Jones Industrial Average (DJIA) is a stock market index that measures the performance of 30 large, publicly traded companies listed on the New York Stock Exchange (NYSE) and the NASDAQ. It is one of the most widely followed and cited stock market indices in the world.
The index was launched in 1896 by Charles Dow. Since then, the index has been closely tied to the economy. A strong performing Dow usually indicates a strong economy. Therefore, as the economy changes, the companies within the index change with it.
The index is not weighted by the total market capitalization of its components (as is the case with some other indices like the S&P 500), but rather by the actual stock prices. This means that the stocks with higher prices have a greater impact on the index's movements. The DJIA is calculated by adding up the prices of all 30 stocks and dividing the sum by a divisor that is adjusted for stock splits, dividends, and other corporate actions to ensure continuity over time.
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IE+ Posts of the Week
We continue to push out more and more content every week to give investors that edge. Here are the posts Investor’s Edge+ subscribers received this week.
Edge Report
Mondays are for the investors. Every Monday morning we share exactly what we’re watching in the week ahead, how we’re positioning, and even get a sneak peek into our systems and models. This week we offered our view on upcoming earnings and shared an options strategy for a potential pullback in Nvidia ahead of earnings. See the full report here:
Stock Deep Dive - Pepsico
Our Deep Dive focused on Pepsico this week. We not only broke down the financials of the second largest food and beverage company in the world, but we also shared our valuation models and price targets for 2024. You can see the full analysis here:
Earnings Recap
Every week during earnings season we share a recap of the quarterly reports from stocks that we cover. You can see this week’s earnings recaps here:
The Week Ahead
There’s a lot on the calendar next week but all eyes will be on the PCE report.
Earnings Reports
Earnings season may be coming to an end, but the work never stops for us here at The Investor’s Edge. We will be covering the quarterly reports from Berkshire Hathaway, Salesforce, Lowe’s, American Tower, Autozone, Domino’s Pizza and Celsius.
Source: Earnings Whispers
Economic Reports
After the recent CPI and PPI reports, next week’s PCE report will have huge implications as investors look for further signs of inflation picking back up. The GDP report, PMI data and housing numbers are also on the docket but will play a smaller role in market movement.
Source: Trading Economics
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Mark & Chris
The Investor’s Edge
Disclosure
This is not investing advice. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.
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