Archive for February, 2024

• Morning News: February, 29, 2024
  Eddy Elfenbein, February 29th, 2024 at 7:07 am

  Ukraine Sees Risk of Russia Breaking Through Defenses by Summer

  AI Is Already Changing How the US Wages War

  China Bans High-Frequency Trader as Quant Crackdown Expands

  Market Herding Is Everywhere, Not Just the US

  Canada’s TD Bank Posts Lower Profit on Higher Loan Loss Provisions

  Fed Officials Emphasize Data to Guide Pace of Interest-Rate Cuts

  Bitcoin ETFs Shake Up Crypto Market After Storming Wall Street

  Greg Coffey in Talks to Buy EMSO, Create $13 Billion Hedge Fund Firm

  Audit Deficiencies by Accounting Giants Grew in Latest Inspections, U.S. Regulator Says

  The Right Questions Can Make You Money

  Auto Insurance Spike Hampers the Inflation Fight

  FAA Gives Boeing 90 Days to Come Up With Quality-Control Plan

  Air Travel Is Extra Hard for Wheelchair Users. Here’s How the Government Wants to Fix It

  Oil Producers May Not Share Analysts’ Views of a Tighter Market

  Frackers Are Now Drilling for Clean Power

  Biden Calls Chinese Electric Vehicles a Security Threat

  Robotics Startups Hope the AI Era Means Their Time Has Come

  How the World’s Priciest Property Market Stumbled

  The American Southwest Is Finally Starting to Embrace Vertical Living

  Chemours Shares Slide Premarket as Execs on Leave Amid Probe

  Tech Layoffs Keep Coming. Why Is Head Count Barely Budging?

  Billionaire Claure Forges New Empire After WeWork Collapse

  Chocolate Makers Try a New Recipe: Less Chocolate

  Beiersdorf Guides for Sales Growth Ahead

  Birkenstock Posts Strong Earnings With Sandal Demand Growing

  Paramount’s Big Game Is Still a Sideshow

  Disney’s $8.5 Billion Reliance Merger Is a Streaming Wars Win in Sports-Obsessed India

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• Morning News: February 28, 2024
  Eddy Elfenbein, February 28th, 2024 at 7:02 am

  Another Chinese Property Giant Faces a Creditor Who Wants It Dismantled

  Hong Kong Takes Drastic Action to Avert Property Slump

  China Tells Quants to Phase Out Strategy Blamed for Turmoil

  Eurozone Confidence Keeps Struggling to Recover, Survey Shows

  The Fed Contrarian Who Saw the Soft Landing Coming

  Lorie Logan Makes Waves on Wall Street From Her Perch at the Dallas Fed

  The Big Bond Steepener Is Flopping as the Fed Delays Rate Cuts

  Flawed Valuations Threaten $1.7 Trillion Private Credit Boom

  Sam Bankman-Fried Makes His Last Stand

  How Much Wealth You Need to Join the Richest 1% Around the World

  A Tech Billionaire Is Quietly Buying Up Land In Hawaii. No One Knows Why

  Gen Alpha Are Ready to Spend – and They Want to Be Treated Like Adults

  US Home-Buying Demand Nears Worst Since 1995 With Rates Above 7%

  This Is Where New Migrants Are Going When They Reach the US

  How the Media Industry Keeps Losing the Future

  Baidu Posts Record Revenue Amid Search for New Growth Engines

  China’s Electric Vehicles Are Going to Hit Detroit Like a Wrecking Ball

  Apple’s Scrapped Car Project Means AI and Headset Bets Are More Urgent

  Elon Musk Hypes Tesla Roadster Again After Half Decade of Delay

  New F1 Team Names Bring Money, Marketing and Lots of Syllables

  How a Vermont Ski Area Roared Back From a Financial Scandal

  Surge Pricing for Burgers and Shakes? Wendy’s Will Give It a Whirl

  Going ‘California Sober’ May Be Bad for Your Heart

  Companies Were Big on CBD. Not Anymore

  Hollywood Is Banking on Dune: Part Two to Revive the Blockbuster Experience

  Levi’s Wants You to Rethink Your Denim Shopping

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• CWS Market Review – February 27, 2024
  Eddy Elfenbein, February 27th, 2024 at 7:18 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  LUNR Falls Back to Earth

  I feel terrible for the company Intuitive Machines (LUNR). This was the team that flew its craft, named Odysseus, to the moon and landed it on the lunar surface. This was the first time Americans had done so in over 50 years.

  There was, however, one small problem. Odysseus landed on its side. That wasn’t supposed to happen. In my opinion, who cares?! They effectively landed a Roomba on another planet. Dear lord, that’s amazing!

  So what if they got some minor details wrong? They got the first 99.999999% of the mission right. Odysseus is the first privately-built craft in history to make a soft landing on the moon.

  Star Wars R2d2 GIFfrom Star Wars GIFs

  Mind you, Odysseus is still working fine. It’s even been able to send back incredible photos. It’s just lying on its side. I mean, Odysseus is chillin’. Who cares?

  Well, the markets, apparently. On Monday, shares of Intuitive Machines plunged 35%. At one point today, LUNR was down another 20%. The market gods can be a cruel bunch.

  

  This is, however, an important lesson for investors. The stock market is not swayed by emotion. No matter how much you may wish for something to happen, the market simply doesn’t care. After all, shares of LUNR jumped 530% between the stock’s January low and its February high. The company had initially reported that the landing went well. Only when the evidence became clear did they say there was a problem.

  I’m on LUNR’s side. Not enough to be an investor, but certainly enough to be a fan. This is a good reminder that a near-term share-price move isn’t the end of the world. Or even the moon.

  Durable Goods Plunge the Most in Four Years

  This morning, the Commerce Department released the durable goods report for January, and it was pretty bleak.

  Last month, orders for durable goods fell by 6.1%. That was even below Wall Street’s already pessimistic forecast for a drop of 4.5%. This was the biggest drop in nearly four years, and that report came during the initial stages of Covid.

  When we say durable goods, we mean things that are intended to last more than three years. This data can be a good omen for future economic growth. People tend to buy durable goods when they’re optimistic. That’s why today’s report is so concerning.

  The data for December was revised lower to a drop of 0.3%. The initial report had been for it to remain unchanged. These reports may suggest that the economy is downshifting from robust growth towards the end of last year.

  

  A major factor for the lousy report is a 59% drop in in civilian aircraft orders. According to MarketWatch, “Boeing reported on its website that it had received only three orders for commercial aircraft in January, sharply down from 371 in December.”

  Overall transportation orders dropped 16.2% last month after slipping 0.6% in December. Orders for motor vehicles and parts fell 0.4%. Excluding transportation, durable goods orders fell 0.3% last month after dipping 0.1% in December.

  There were decreases in orders of primary and fabricated metals. Machinery orders were unchanged. But orders for computers and electronic products increased 1.4%, while those for electrical equipment, appliances and components rose 0.9%.

  Economists like to look at “core capital goods” which is non-defense capital goods minus aircraft orders. That’s considered to be a good proxy for business spending. For February, it edged up by 0.1%. For January, it was down by 0.6%.

  There’s been a lot of talk about “seasonality effects” or the impact of weather or the news of large-scale layoffs. For example, Google is laying off 12,000 employees after reporting a profit of $20 billion for Q4. Of course, that’s what a profit-making enterprise does. We’ll need to see more data, but the economy may be slowing down right now.

  Also this morning, the Conference Board said that its consumer confidence index fell to 106.7. Economists had been expecting 115. The number for January was revised lower to 110.9. This is another worrying sign.

  On Monday, the Commerce Department said that sales of new homes rose in January but by less than expected. Sales of single-family homes totaled 661,000 last month (that’s an annualized figure). Wall Street had been expecting 690,000. One bright spot is that it was a 1.5% increase over December.

  Meanwhile, the median sales price of new houses last month came in at $420,700, up from $413,100 in December. One problem impacting the housing market is that there’s relatively low supply. Since so many people locked in mortgages when rates were lower, they’re skittish about putting their homes on the market right now.

  I don’t think the economy is in serious trouble right now, but this week’s reports do concern me. We’ll need to see more reports before we can definitely say that the economy is in trouble. The odds of no rate cut coming in June are slowly getting higher.

  Tomorrow, the government will update its report on Q1 GDP growth. The initial report was quite good. On Thursday, we’ll get the PCE price data. This is the Fed’s preferred measure for inflation. Then on Friday, the ISM Manufacturing Index comes out.

  Amazon Joins the Dow

  Yesterday, Amazon (AMZN) joined the Dow Jones Industrial Average. This is Wall Street’s equivalent of being a “made man.”

  It’s a big deal. There are only 30 stocks in the index so when one goes in, another comes out. This time, it was Walgreens Boots Alliance (WBA) that got the boot. The company recently cut its dividend and I think that prompted the index keepers to make a move.

  The Dow doesn’t change its members very often. This was the first change to the Dow in nearly four years. Actually, the Dow has been getting slightly more active in recent years.

  The Dow didn’t make any changes to the index from 1939 to 1956 when it replaced Loew’s Theatres with International Paper. They made four more changes in 1959 but that was it until 1976. All told, the index went 37 years with only making four changes to its roster. Since its founding in 1897, the Dow has made about 130 changes.

  In 1939, the gatekeepers of the Dow removed IBM (IBM) from its index. That was a huge mistake. It was added back in 1979. Over those 40 years, IBM was a huge winner for investors. If the Dow folks had left it alone, the Dow’s level would be much higher today.

  I’m not a big fan of the Dow. My preference is to follow the S&P 500, and that’s usually what I reference when I’m speaking of the market as a whole. Investors see it that way as well. Among index funds, $5.75 trillion is indexed to the S&P, but only $87 billion is indexed to the Dow.

  The lack of tech stocks has hurt the Dow. In recent years, the S&P 500 (in blue) has significantly outperformed the Dow (in red).

  

  The S&P 500 is a larger index, but the other reason is that it’s weighted by market value while the Dow is weighted by price. To calculate the Dow, you simply add up all the prices and adjust it by a multiple.

  Before this week’s change, each $1 in the share price of a Dow member worked out to about 6.6 Dow points. Since Walgreens is around $20 per share, it was barely a blip in the index. It was, by far, the lowest-weighted stock in the index. Amazon is currently around $173 per share. Recall that Amazon split its stock 20-for-1 less than two years ago. (Google did a 20-for-1 a little bit after Amazon.)

  There’s also the issue of Walmart splitting its stock 3-for-1. Even though nothing changes, Walmart’s weighting in the Dow will drop by two-thirds. Price weighting simply makes little sense. I understand why it was used in 1896, but not today. The Dow is an anachronism. The best index to follow is the S&P 500.

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

  P.S. If you want more info on our ETF, you can check out the ETF’s website.

• Morning News: February 27, 2024
  Eddy Elfenbein, February 27th, 2024 at 7:06 am

  Japan’s Consumer Prices Grow at Slowest Pace in Nearly Two Years

  German Consumer Confidence Ticks Up Despite Gloomy Outlook

  Yellen Urges Israel to Restore Economic Ties to West Bank

  Yellen Calls for Way to Use Frozen Russian Assets to Aid Ukraine

  Biden Trade Chief Arrives at WTO Optimistic on Overhauling the Trade Forum

  An Emboldened F.T.C. Bolsters Biden’s Efforts to Address Inflation

  Fed Rate Cuts Are Likely to Be Slow — But Not Necessarily Steady

  Hawkish Fed Impedes Regional Banks’ Efforts to Shed CRE Risks

  Debt-Addicted Companies Look to Equity as Interest Costs Skyrocket

  Warren Buffett Says the Stock Market Is Increasingly ‘Casino-Like’—and Young Investors Need to Remember This ‘One Fact of Financial Life’ to Avoid the Mess

  Goldman Sachs Trades at a Discount. Here’s Why

  BlackRock Says ‘New Regime’ Calls for More Active Management

  Food Is Taking a Bite Out of Your Income. These Consumers Are Getting Creative

  Housing Costs Are Running Hot, but Is the Data Missing a Cooling Trend?

  Nvidia’s $70 Million Florida Supercomputer Hobbled by DeSantis Law

  US Rebates For Energy-Efficient Appliances Are Coming, Finally

  ZTE, China Network Maker Shares Rise After U.S. Allies Unveil 6G Principles

  China’s EV Champion Is Coming for Your Gas Powered Cars, Too

  Corner Offices Are Out; Collaboration Is In. Say Hello to the New Law Firm

  Warehouse Boom Fades, and the Hopes of a California Region Fade With It

  Chevron’s $53 Billion Deal for Hess in Jeopardy on Possible Exxon Challenge

  Behind the Kroger-Albertsons Deal, a Pragmatic CEO With His Biggest Bet

  Macy’s to Close 150 Namesake Stores, Grow Luxury Brands

  Stephen Curry Is Battling the Clock to Win Over Sneaker Fans

  Trump’s $540 Million Court Fine Tests His ‘King of Debt’ Title

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• Morning News: February 26, 2024
  Eddy Elfenbein, February 26th, 2024 at 7:03 am

  Bank of England Builds ‘Proactive Case’ to Regulate Non-Banks

  EU Adopts Euro Instant Payments Rules to Take on Visa, Mastercard

  What Happened When Saudi Arabia Took its Money and Influence to Miami

  Treasury Markets Are Losing Their Shock Absorber

  Stocks Take a Breather at Start of Data-Rich Week

  When High-Yield Savings Accounts Come With an Asterisk

  China’s Quant Clampdown Risks Damaging Fragile Markets for Years

  Jack Ma-Backed Ant Outbids Citadel Securities for Credit Suisse’s China JV

  Goldman, Morgan Stanley Backstop Riskiest Slices of CLOs

  Berkshire Set to Close In on $1 Trillion Valuation After Results

  Risk Models Behind World’s Best Hedge Fund Strategy Are Getting a Lot Harder to Crack

  Genesis Faces Unlikely Bankruptcy Foe: Its Own Parent Company

  Cathie Wood Sells Into Nvidia Frenzy Again, Cuts TSMC Stake

  AI Is Exploding Data Center Energy Use. A Google-Created Technique May Help

  Top Global Energy Traders Face Multi-Billion Cash Quandary

  Can a Tech Giant Be Woke?

  AT&T Will Give $5 to Customers Hit By Cellphone Network Outage

  Intuitive Machines Sinks on Concerns Lander Tipped on Moon

  Tech Splits Ad Companies’ Fortunes in Two

  BYD’s New $233,450 EV Supercar to Rival Ferrari, Lamborghini

  Li Auto Forecasts Softer Sales After Posting Surge in Quarterly Revenue, Profit

  Norfolk Southern Seeks to Thwart Activist With New Board Picks

  Temu’s U.S. Entry Is an Orange Flag for Etsy

  Adidas Is Dropping a New Batch of Controversial Yeezy Shoes on Digital Channels

  Cigarettes Are Losing Their Hold on the Nicotine Fix

  Giving Big, a California Couple Gets Gratitude and Scrutiny

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• Morning News: February 23, 2024
  Eddy Elfenbein, February 23rd, 2024 at 7:02 am

  Oil Market Gets a Russian Lesson: Sell on the Sound of Cannons

  Venezuela Calls in Oil Debt It Once Traded Away for Literal Beans

  China’s Central Bank Tries to Catch Markets Off Guard With Surprise Easing

  China Home Prices Slide, Increasing Pressure on Beijing

  France Will Cut Spending as It Sees a Weaker Economy Ahead

  German Business Sentiment Brightens Slightly, Despite Signs of Recession

  ECB Can Afford Less Restrictive Stance From Summer, Simkus Says

  U.S. to Impose Sanctions on More Than 500 Russian Targets

  The Political Failure of Bidenomics

  Top Fed Officials Bolster Case for Patient Stance on Rate Cuts

  Wave of Cash Seen Washing Into Credit as Investors Seek Duration

  Global Equity Funds See Outflows Amid Inflation Concerns

  Record World Stocks Leave Bonds in Gloom

  Fidelity Manager Dumps Nearly All Treasuries on Growth Optimism

  What Companies Need to Know When Accounting for Leap Day

  Student Loan Borrowers in Texas Get Biggest Share of Biden’s $1.2 Billion Forgiveness Plan

  Nvidia Set to Top $2 Trillion Valuation in First for Chipmakers

  Allianz Boosts Shareholder Returns After Profit Nearly Doubles

  Deutsche Telekom Expects Adjusted Earnings Growth to Pick Up

  Grab Targets Organic Growth, AI Tools in Path to Profitability

  Are You Bleeding Money on Car Insurance? So Are Insurers

  Vice’s New Owners Prepare to Slash What’s Left of Its Work Force

  It’s a Great Deal, Before the ‘Drip Pricing’

  When Science Class Is in a Former Macy’s

  Émigrés Are Creating an Alternative China, One Bookstore at a Time

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• Morning News: February 22, 2024
  Eddy Elfenbein, February 22nd, 2024 at 7:04 am

  Iran-Backed Houthis Prepare for Long Battle With US in Red Sea

  New Freighters Could Ease Red Sea Cargo Disruptions

  Japan Shares Open New Chapter as Nikkei Reclaims Its 1989 Peak

  Quant Models Went Haywire as Chinese Stocks Crashed and Rallied

  Leaked Files Show the Secret World of China’s Hackers for Hire

  Mexican Economy Stalled as High Interest Rates Damp Demand

  Why Huge European Central Bank Losses Matter

  Many Americans Believe the Economy Is Rigged

  T-Bills Without Tax Bills? This Fund Says It Cracked the Code

  Warburg Pincus Hands Cash Back to Investors as Rivals Struggle

  Goldman Sachs’s Chief Economist Has Nailed Big Calls. Here’s His Next One

  KKR’s CRE Deal Pipeline Heats Up Amid ‘Year of Transactions’

  Tech M&A Raises Fears Over Software Pricing, Bundling for CIOs

  How Capital One’s $35 Million Discover Merger Could Affect Consumers

  Nvidia To Top Meta Record With Nearly $250 Billion Value Jump

  Nvidia Is a Must-Buy. Or Is It?

  Lenovo Snaps Revenue Declines, Bets On AI-Powered Tech

  The New Hot Climate Investment Is Heat Itself

  Home Sales Likely Rebounded in January After Last Year’s Sharp Decline

  Why Car Insurance Rates Are Soaring

  Instagram’s Uneasy Rise as a News Site

  One Business Decision Made the World’s Losing Battle With Malaria Even Tougher

  Nestlé Warns on Sales Growth as Inflation Continues to Bite

  Shoppers Want Uggs and Hokas. The Brands Are Boosting Growth for Their Owner

  A Billionaire Bought a Chunk of Manchester United. Now He Has to Fix It.

  A24’s Risky Hollywood Moment

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• Morning News: February 21, 2024
  Eddy Elfenbein, February 21st, 2024 at 7:04 am

  China Tightens Grip on Stocks With Net Sale Ban at Open, Close

  HSBC’s Profit Sinks on $3 Billion Charge at Chinese Bank

  US Citizens Become Collateral Damage in Global Sanctions Fight

  TSX Seen Reaching Record High In 2025 If Rate Cuts Begin

  Are We in a Productivity Boom? For Clues, Look to 1994

  Wall Street Brokers Are Coming for the Hot Retail-Options Trade

  Nvidia’s High-Stakes Earnings Moment Has Entire Market on Edge

  Capital One’s $35 Billion Discover Deal Hinges on Playing Consumer Champion

  Health Care AI Startup Raises $60 Million From General Catalyst, Thrive, GV

  Amazon Is Joining the Dow Jones Industrial Average

  CVC Adds to Fundraising Spree With $6.8 Billion Asia Fund

  Private Equity Payouts at Major Firms Plummet 49% in Two Years

  US Mortgage Rates Jump Above 7% for First Time Since December

  It’s Been 30 Years Since Food Ate Up This Much of Your Income

  Will Food Prices Stop Rising Quickly? Many Companies Say Yes.

  Biden Cancels $1.2 Billion of Federal Student Loans

  Biden’s EV Dreams Are a Nightmare for Tesla and the US Car Industry

  Volkswagen Leans on Electric Vehicles and Nostalgia to Grow in U.S.

  Thailand, Indonesia Ramp Up Incentives to Boost EV Demand

  As Hybrids Become More Popular, Their Green Benefits Are Questioned

  Unhappy Fliers Cost Brazil’s Airlines Millions With Easy-to-Win Lawsuits

  Glencore Earnings Plummet From Record Highs as Energy Prices Subside

  BAE Systems Forecasts Another Year of Sales Growth Amid Geopolitical Tensions

  Rio Tinto Annual Net Profit Down 19%, Dividend Pared on Commodity-Price Fall

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• CWS Market Review – February 20, 2024
  Eddy Elfenbein, February 20th, 2024 at 6:10 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  Lyft Soars 67% on Typo

  After the close of trading last Tuesday, the ride-sharing company, Lyft (LYFT), released its quarterly earnings report. In it, the company said that it expects its profit margin to improve by 500 basis points.

  Wow! In after-hours trading, the stock soared as much as 67%.

  There was, however, one teeny-tiny problem: they meant to say 50 basis points, not 500.

  A spokesperson for the company attributed the correction to a clerical error.

  Oh!

  Cue Emily Litella, “nevermind.”

  The shares quickly fell back to Earth. This is a good reminder that the market is made up of people, and it’s subject to all the faults and foibles people have.

  We have lots of fancy models that try to explain a process that can be highly irrational, or simply misinformed.

  This is also a good reason why I’m leery of stop orders, especially for long-term investors. You can easily be stopped out of a good stock for a bad reason.

  By the way, Lyft really did have a great quarter, and the stock is up, but much of the good news has been lost due to an embarrassing typo. It’s amazing how one wrong key stroke can duck things up.

  

  Could the Fed Resume Hiking Rates?

  In recent issues, I’ve talked about the market’s change of heart regarding what the Fed will do with interest rates. Not that long ago, the market thought the Fed would be cutting interest rates by now. Lately, it looks like the Fed won’t be cutting rates at its meetings in March or May. In fact, the June meeting may soon look doubtful.

  What’s going on? Into all this jumps former Treasury Secretary Lawrence Summers who said the Fed may even raise interest rates. Specifically, Summers said, “There’s a meaningful chance—maybe it’s 15%—that the next move is going to be upwards in rates, not downwards.”

  I’m not fully in Summers’s court just yet, but it’s an interesting take. Summers said that Wall Street economists had been expecting that plunging housing costs would hold back overall inflation, but that hasn’t happened.

  Economists like to look at the “core rate” of inflation which excludes food and energy prices. There’s also the “super core rate” which is the cost of services except energy and housing. The super core rate has been getting a lot of attention lately.

  This is important because it makes us focus on the issue of how much inflation is driven by wages, which is another way of asking, how much of inflation does the Fed control?

  What happened is that during Covid, employees finally held the upper hand. It was a tight labor market and wages started to improve. Those increases were largely passed along in the form of higher prices for services, and not so much for goods.

  I’m borrowing this example from the WSJ but it explains the phenomenon well. Let’s compare haircuts and televisions. The former is a service that’s driven by wages. The latter is a good and less dependent on wages.

  The prices for haircuts are rising while TV prices are falling. It’s like two separate economies but it’s really showing us how much prices are influenced by wages. The January CPI report showed that super core prices rose by 0.85%. Summers is making the point that the prices that most concern the Fed are far from under control.

  Walmart Beats the Street

  Last week’s retail sales report came in below expectations. This morning, we got another retail sales report but this time, it wasn’t from the government, Instead, Walmart (WMT) released its earnings report.

  The company is so big that its earnings report is effectively a report on Americans’ spending behavior. Walmart said that its quarterly revenue increased by 6% to $173.39 billion. That works out to about $1.3 million every minute.

  Today’s report was for the key holiday spending months of November, December and January. For the quarter, Walmart earned $1.80 per share which was 15 cents higher than Wall Street’s consensus. The shares jumped a little over 3% in today’s trading.

  Walmart had held up well during the recent (and perhaps, still ongoing) bout of inflation. As any shopper knows, Walmart is relentless in its quest to keep prices as low as possible. Last quarter, Walmart was helped by soaring e-commerce revenue. Global e-commerce sales rose 23%.

  

  Going forward, Walmart said it expects sales growth of 4% to 5% for its fiscal Q1 (ending April 30), and earnings of $1.48 to $1.56 per share. For the year, Walmart expects earnings of $6.70 to $7.12 per share. That means the stock is going for about 25-26 times earnings. In my opinion, that’s too high.

  While other companies have been holding back, Walmart has been expanding and upgrading its locations. The company said that it will raise the average income for store managers to $128,000 per year.

  Shares of Walmart will split 3-for-1 after the market closes on Friday. This will be the retailer’s first stock split in 25 years. In the 25 years prior to that, Walmart split its stock nine times, all of them were 2-for-1.

  According to the largest retailer on the planet, shoppers are plenty active.

  Capital One Buys Discover for $35 Billion

  “What’s in your wallet?” Apparently, Discover Financial Services.

  A major acquisition was announced today in the credit card space. Capital One Financial (COF) said it’s buying Discover Financial Services (DFS) for $35 billion. The deal is all cash.

  Here’s how the deal works. Discover shareholders will get 1.0192 shares of COF for each DFS share they own. That’s a nice 26% premium for Discover based on Friday’s close.

  Once the deal is done, Capital One shareholders will own 60% of the company, while Discover shareholders will own the other 40%. The companies expect the deal to close later this year or early in 2025.

  There’s still the issue of getting regulatory approval. The government doesn’t look too kindly on mergers of industry leaders, especially in industries that aren’t wildly popular with consumers.

  When deals like this are announced, the market likes to poke around at what might be next. This time, I’m skeptical because there doesn’t appear to be an obvious candidate. Also, I suspect that getting the Feds to sign off on this deal may be harder than they think.

  The big earnings report for tomorrow will come after the close when Nvidia (NVDA) reports its earnings. Nvidia has become the most prominent AI trade. The company recently surpassed Alphabet (GOOG) and Amazon (AMZN) in total market value.

  I guess you can say that expectations are high as the shares have soared 450% over the last 16 months. Also, Nvidia has crushed its last three earnings reports. The company has exceeded expectations by (in order) 18%, 29% and 19%. Nvidia has really become the marquee name of the Magnificent 7 gang.

  For tomorrow, Wall Street expects earnings of $4.63 per share. Between you and me, I think that really means at least $5 per share. Wall Street is expecting Nvidia’s sales to rise by 240%. Of course, a large amount of those sales are going to Microsoft, Google and Amazon. Last quarter, Nvidia’s gross margin was 75%.

  This is a good case of expectations being so high that almost any number will be a disappointment. Nvidia closed down today by 4.3%.

  

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

  P.S. If you want more info on our ETF, you can check out the ETF’s website.

• Morning News: February 20, 2024
  Eddy Elfenbein, February 20th, 2024 at 7:01 am

  Chinese Banks Slash a Key Lending Rate as Economy Falters

  China Freezes Accounts of Quant Fund After It Dumped Stocks

  Spicy Food and Dental Implants: Low Prices Lure Hong Kongers to China

  German Property Lender PBB and the Crisis-Hit US Market

  Markets Start to Speculate If the Next Fed Move Is Up, Not Down

  Bill Ackman Rockets Up Best-Paid Hedge Fund List by Doing Very Little

  Pursuing ‘American Dynamism,’ Andreessen Horowitz Ups Its Game in DC

  Two Rothschild Bank Clans Fight Over Clients, Power and the Family Name

  US Supreme Court Weighs Bid to Challenge Debit Card ‘Swipe Fee’ Rule

  Capital One to Buy Discover for $35 Billion in Year’s Biggest Deal

  Unpacking the Washington Math for a Big Payment Deal

  Walmart Gains on Strong Results, Deal to Buy TV Maker Vizio

  Home Depot Beats Earnings, Sales Estimates Even As Consumers Take On Smaller Home Improvement Projects

  TikTok Is Subject of E.U. Inquiry Over ‘Addictive Design’

  Inside the Funding Frenzy at Anthropic, One of A.I.’s Hottest Start-Ups

  Air Liquide Net Profit Rises But Misses Expectations

  Super Micro Short Sellers Notch $1.2 Billion as Shares Tumble

  InterContinental Hotels to Return Up to $1 Billion to Shareholders

  Bayer Cuts Dividend by 95% as It Wrestles With Roundup Woes

  Gene Therapy Makers Struggle to Find Patients for Miracle Cures

  Fresenius Medical Care Net Profit Rises on Cost Savings

  Ozempic Hype House Backfires in WeightWatchers Brand Misstep

  How an $18 Big Mac Meal Became a Symbol for Economic Anxiety — and What That Means for Democrats

  Culinary Hubs Put a Twist on Home Cooking

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