It’s Nvidia Week

*Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

DJIA

• 52-wk: +29.91%
• YTD: +11.74%
• Weekly: ±2.68%

S&P 500

• 52-wk: +41.06%
• YTD: +21.77%
• Weekly: ±0.96%

NASDAQ

• 52-wk: +46.47%
• YTD: +23.36%
• Weekly: +0.16%

SPDR S&P Retail ETF

• 52-wk: +30.37%
• YTD: +4.40%
• Weekly: -3.35%

Weekly Market Recap

The major US stock indices had a mixed performance last week, with the S&P 500 falling 0.1%, the Nasdaq 100 sliding 0.2%, and the DOW remaining mostly flat amid fluctuating economic signals.

US CPI data matched October forecasts; headline was up 0.2%, while core rose 0.3%. US initial jobless claims fell to their lowest since May, decreasing by 4,000 to 217,000, driven by healthy labor demand despite recent storms and worker strikes.
Treasury yields saw a modest decline, with the 10-year yield falling by three basis points to 4.42%, suggesting higher odds for a December Fed rate cut.

Bitcoin and other cryptocurrencies experienced notable movements, with Bitcoin notching a new record of +$93,400 on Wednesday.

Geopolitical tensions in the Middle East add complexity to the global oil supply chain, resulting in fluctuations with potential impacts on energy markets as investors weigh the risks associated with the Strait of Hormuz.

Trump Bump and Global Market Reactions

The 'Trump Bump' phenomenon has persisted since the election, positively impacting domestic-focused equities and cryptocurrency. Since Trump's re-election, Bitcoin has surged to an all-time high of over $93,000, amid expectations of favorable crypto regulation and a push to make the US a top crypto hub.

Geopolitical Events: Tariffs

The geopolitical landscape remains tense, as Iran’s increased involvement in oil production presents potential risks to global supplies. Approximately 20% of the world's oil trade flows through the Strait of Hormuz, a crucial passage in the Middle East, making any disruption a significant global concern for energy and price volatility.

GICS Sector Performance

Communication Services (XLC) was the top performing sector over the last week and has been a top-performer over the last month. Post-election, the Consumer Discretionary (XLY) sector has experienced an uptick of more than 4% as we approach Black Friday next week.

Value vs. Growth
While growth stocks continued to outperform value stocks, small caps have outperformed large caps over the last month, boosted by investor confidence post-election.

The US dollar continued to strengthen over the last week, with the US Dollar Index (DXY) up nearly 2%. Over the last month, the USD has substantially outperformed all other major currencies.

It is historically the best quarter for stocks, the long-awaited rate-cutting cycle is underway, personal incomes are near all-time highs, and the economy keeps growing.

How Investors Should Feel About the Election:

The U.S. presidential election is over. With 50.3% of the popular vote going to President-elect Trump and 48.1% cast for Vice President Harris, the fact remains that the country is roughly split along party lines. That means many readers likely feel excited about the result of the election, while many feel disappointed.

Bottom Line for Investors:

In Mitch Zacks view, the stock market’s rally in the days following the election was less about pricing-in exorbitant earnings and economic growth in the future, and more about the removal of uncertainty. As I’ve written many times before, stocks don’t like uncertainty, and the fact that the election result was clear and decisive removed this potential negative.

In the coming months, there will be ample time to assess what policy changes are being enacted and what their impact on the economy could be. But it’s too early for that now, and in my view, making investment decisions or positioning a portfolio based on what could happen is a sentiment trap.

At the end of the day, investors must remember that the U.S. and global economy are extremely complex, with many different forces and trends determining the direction of the business cycle. Politics is just one piece of it.

Nvidia stock was edging down early on Friday with the chip maker’s shares still stuck just below record highs ahead of its coming earnings.

Nvidia shares were down 2.5% at $143.06 in morning trading. The stock rose 0.3% on Thursday.

The drop didn’t look to be anything specific to Nvidia, which was moving down broadly in line with the tech-heavy Nasdaq Composite as rising bond yields weighed on equities.

Among other chip makers, Advanced Micro Devices was down 2% and Broadcom was falling 1.6%.

Nvidia continues to hover near recent record highs as large technology companies invest in a fleet of AI data centers which are expected to be powered by Nvidia’s hardware.

The next test for the stock is the company’s quarterly earnings report on Wednesday. Nvidia is expected to post adjusted earnings of 71 cents a share on revenue of $33.09 billion for the October quarter, according to FactSet.

“We believe Nvidia will likely at least modestly exceed the pattern of ‘just’ beating forecasts by ~$2 billion, as we anticipate strength in Q3 [third quarter] AI spend by hyperscale customers as well as continued solid growth at non-hyperscale accounts will boost fiscal third-quarter sales,” Wedbush analyst Daniel Ives wrote in a research note.

Ives raised his target price on Nvidia stock to $160 from $138 and kept an Outperform rating.

Could See Their Best Gains in Years. Thanks, Spirit.

Airline investors should pack their bags. The news of the past couple of weeks promises to send them on a long and profitable trip. One company, though, looks like it will be left on the tarmac. Spirit Airlines said last week that it is looking to restructure its debt, which would wipe out existing shareholders, though it says customers won’t be affected. It’s a significant setback for the industry’s biggest disrupter over the past decade.

Adding to its troubles, Spirit Airlines has officially filed for bankruptcy, marking a critical turn in its financial struggles. According to recent reports, Spirit cited rising fuel costs, intense competition, and regulatory setbacks as key factors driving its decision. While the company has emphasized that operations will continue without disruptions to customers, its future remains uncertain, and shareholders are unlikely to recover their investments.

Other players could head in the opposite direction. Spirit’s woes—and the election of Donald Trump—should give the rest of the stocks in the industry some of their best tailwinds in years.

Airline stocks have already soared on Trump’s victory, in the hopes that consumer spending will respond to pro-growth policies such as lower taxes. They should also benefit from a change in regulation. Trump is less likely to share the Biden administration’s concerns about monopoly power.

The airline industry has been one of the biggest beneficiaries of consolidation over the past couple of decades. Fewer players in the industry will mean the existing airlines have more power to push prices higher and build market share on lucrative routes. A spate of airline mergers in the early 2010s gave Delta Air Lines, United Airlines Holdings, and American Airlines Group substantial market power. Delta, United, JetBlue Airways, and Southwest Airlines more than doubled from late 2012 to late 2014, and American Airlines soared after emerging from bankruptcy in 2013.

“This is the best industry setup for the U.S. airlines in a decade,” wrote analyst Conor Cunningham of Melius Research, who argues that the stocks may be poised to double again.

The NYSE Arca Airline Index has risen 2.8% since the close on Nov. 5, the day of the election. But that performance is dragged down by Spirit. The airline industry’s most important players are up much more than that. Delta has risen 11%, United is up 14%, and American is up 8%.

Spirit, which accounts for about 4% of U.S. capacity, was undone by regulatory setbacks and business problems. A judge blocked its proposed merger with JetBlue earlier this year after the Justice Department challenged it. A potential merger with Frontier Group Holdings has also fallen apart, according to The Wall Street Journal. And some of Spirit’s no-frills pricing innovations have been adopted by competitors, making it harder for it to stand out.

If budget airlines can no longer disrupt the industry, that should allow the other players to have more control over the direction of capacity and prices.

Cunningham now expects the number of available seats on airlines to decline, enhancing their pricing power. Capacity could rise by 3% next year, down from his prior expectation of 6.2%.

Last week was the largest red week since September 3. Will investors buy the dip?

This week, my key focus is on Nvidia’s earnings, set to be released after the market closes on Wednesday.

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