Nvidia, anointed the third largest stock on the planet by investors, helped power the S&P 500 to a new record high on Thursday. The tech titan lived up to their earnings hype and then some, posting a whopping 265% year-over-year rise in revenue driven by its booming AI business. The results added $277 billion to the stock market’s value on Thursday, making it the biggest one-day haul ever by a U.S. company. It also broadly fueled investor enthusiasm for stocks, pushing the Dow Jones Industrial Average to a new record high and boosted demand for big tech peers, Microsoft, Meta, and Amazon. The latter were each up more than 2% on the day. Thursday’s rally erased three straight losing sessions for the S&P 500 following last week’s consumer and producer price reports, which had weighed on investor sentiment due to their implications for rates. The news kept bond markets volatile, sending the 10-year U.S. Treasury yield to 4.25% by Friday, up sharply from late January’s 3.81%. This week’s round of data showed the economy maintaining its momentum into Q1, driven by the manufacturing, services, and housing sectors. Bulls capped the week off in style, sending the S&P 500 to a new high of 5,088.80, up 1.66% for the week.
Green Shoots for Manufacturing
February PMI data continued to point to an expanding economy and green shoots for the long struggling manufacturing sector. S&P Global’s Flash U.S. Manufacturing PMI climbed to 51.5 in February, up from 50.7 the prior month. That was a 17-month high for the index. Numbers above 50 signal expansion while numbers below indicate contraction. The index was fueled by output growth and quicker increases in new orders and employment. On the services side, Flash PMI fell to 51.3 in February from 52.5 in January. A slower increase in demand led to an easing in overall services activity during the month. Despite slower business conditions, companies continued to increase their headcount in what is still proving to be a tight labor market. Overall, the flash surveys indicate a healthy demand for goods and services which should help maintain economic momentum.
Existing Home Sales Kicked Off 2024 on a High Note
Existing home sales rose 3.10% in January to a seasonally adjusted annual rate of 4 million. That was ahead of analysts’ estimates of 3.96 million. Inventory edged higher to 1.01 million units, the equivalent of three months’ supply. Despite the increase, the housing market remains incredibly tight. Historically, six to seven months’ supply is considered a healthy balance between supply and demand. With the pickings being slim, prices continued to march higher. The median sales price jumped 5.10% from a year ago to a fresh record of $379,100. Multiple offers have now become the norm on mid-priced homes and many homes are still being sold within 30 days. Cash is also king as 32% of all deals were made by cash buyers. That’s up from 29% in both December and one year ago. Cash buyers look set to dominate the market for the time being as the Fed maintains its higher for longer policy stance, making it difficult for mortgage borrowers to compete with all cash offers.
Final Thoughts
It is a perfect Friday afternoon in Dallas today – 72 degrees and not a cloud in the sky. Investors are sharing that same euphoric feeling these days, having been rewarded by a strong earnings season and a renewed enthusiasm over an accelerating AI revolution. With 90% of the S&P 500 constituents having now reported for Q4, earnings have grown 7.5% according to Bloomberg. That is a solid performance, and it signifies an acceleration over Q3’s results. Investors have taken notice – and not just domestically. Japan’s Nikkei has emerged from its 35-year slumber, closing at its highest level since 1989 this week. The Nikkei is up 17% YTD and 44% over the last year – managing to beat the tech heavy NASDAQ. Even stodgy old Europe is showing some spunk with the Stoxx 600 closing at an all-time high this week. Apparently, there’s not a worry in the world these days that a Nvidia AI chip can’t augment into investors’ Barbieland perfection. Founded in 1993, it took Nvidia 24 years as a public company to reach a $1 trillion dollar valuation and just 8 months to double that, as noted by the Wall Street Journal. Don’t get us wrong, unlike dot.com era web companies, Nvidia is producing something that is both tangible and extremely valuable. So valuable in fact, that Nvidia’s chips are delivered to customers in armored cars, and companies possessing Nvidia chips are now touting them for the purposes of recruiting top programmer talent away from competitors. While an AI revolution may indeed be accelerating, so too are the number of competitors entering the space including AMD, Intel, Microsoft, Amazon and Google, which means the AI race won’t be a one trick pony for long. True competition remains some way off, however, resulting in investors elevating Nvidia’s valuation to stratospheric levels. While Nvidia’s earnings may have sparked an AI high, rates will surely be back in focus as we approach March’s upcoming Fed meeting and the federal funding deadlines thereafter. In the meantime, as we await the inevitable rise of AI-generated market commentaries that will crowd out independent and critical thought, let’s enjoy the week’s win and soak up some sun before it gets too warm. Fingers crossed, maybe one day, even the weather will be dictated by an AI algorithm. Until then, happy investing, and may your portfolio be as sunny as today’s weather in Dallas!
The Week Ahead
Stock market bulls look to close out February with more record highs. Economic news will be relatively light with durable goods and personal income and spending being the highlights of the week.
Loud Budgeting for Financial Wellness
Loud budgeting is a trend that has been gaining in popularity on social media. It means being open and loudly transparent about living at or below your means and being candid about focusing your spending on what you truly value and what you can afford. It’s not just being financially responsible. It is normalizing talking about money, something that has typically been deemed taboo, and being able to discuss financial goals and limitations with friends and family without embarrassment.
Many financial advisors are optimistic about the healthy conversations this trend is inspiring around avoiding overspending and impulsive purchases while embracing budgeting. It’s helping reduce money pressures in social circles because individuals are sharing the financial goals they are working toward and what they can afford on activities such as going out to eat at restaurants or travel and other experiences. Within families, it’s spurring conversations about financial literacy that many parents may not have had with their children. On social media, there has even been a de-influencer movement that urges users to resist the allure of consumerism by emphasizing mindful spending and authenticity over the pursuit of materialism.
Loud budgeting can also help provide accountability for achieving financial wellness, similar to how a gym buddy or workout partner might help someone achieve fitness goals. Additionally, speaking openly about finances can inspire others to examine their own money habits and spend wisely as well.
Examples of loud budgeting put into practice might include telling friends you are saving up to attend a friend’s wedding out of town and asking if you can choose a less expensive restaurant for dinner or plan a potluck at someone’s home instead of going out.
The term loud budgeting was coined by comedian Lukas Battle who introduced it when social media users were posting their “ins and outs” for 2024. In his post, Battle shared a joke announcing loud budgeting as a new concept for the year ahead and that it’s “the opposite of quiet luxury.” Quiet luxury is the 2023 trend that focuses on spending large sums of money on understated luxury goods to give the appearance of wealth with an “old money” aesthetic. Battle explains that loud budgeting is not necessarily saying you can’t spend, but rather it is about saying that you don’t want to spend. He encourages saving and only spending money where you truly want to or can afford to. His video has received more than 1.5 million views.
In a recent interview, Battle shared that he hopes the terminology can be used to remove the awkwardness when talking about money. He added, “Having financial autonomy and being confident and kind of being transparent about your money situation can be just as cool as flexing it and trying to buy all these expensive items.”
Personal finance experts hope this money-conscious trend continues and that more individuals embrace the principles of loud budgeting, including mindfulness and responsibility, to take control of their finances for long-term financial wellbeing.