The Dividend Cafe - The DC Today - Thursday, August 24, 2023

Episode Date: August 24, 2023

Today's Post - https://bahnsen.co/44urVw5 Nasdaq futures were up over 1% this morning with technology exuberance following NVidia’s big earnings beat last night (the stock itself was up 10% pre market). So why did the stock end up closing just flat? Valuations do matter. We talk about it often but excitement over AI or other shiny object parts of the market get priced in with lofty expectations almost always well ahead of any reasonable realities (aka buy the rumor sell the news). Down day in markets overall in a wide trading range on they day. The Dow was up over 220 points and closed down -373 points. The Nasdaq was up over 1% this morning and closed down -1.87%, and yields were higher across the curve. The Fed economic policy forum started today in Jackson Hole WY, with comments out tomorrow. We had jobless claims come in better than expected, and headline durable goods orders miss, and our August doldrums in markets continued so a few things to walk through in todays video podcast link below. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Welcome to the DC Today, your daily market synopsis of the Dividend Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. Good evening. Welcome to DC Today. It is Thursday, August 24th, and it's good to be with you all here today. And it's good to be with you all here today. Kind of a wide range today in markets. We had futures were actually up pretty nicely, especially on the NASDAQ. We were up about one and a half percent before the market opened. And it was largely to do with one of the largest chip makers out of the AI realm. And so earnings were across the board, just far better than expectations. And so markets were up, tech stocks were up.

There was sort of some momentum and some exuberance going into technology as we hit the open. And so markets were off to the races. We were up about 220 points on the Dow early morning. NASDAQ was up and we just gave that back throughout the rest of the day. I wrote it in there. But, you know, some of these sort of what we've talked about as shiny objects, where there's really exciting things out there, like artificial intelligence and how it will change the world potentially. And people usually buy into stocks really far ahead of any of that ever coming to fruition from an earnings standpoint. This particular company is actually starting to see those earnings come through, which is a good thing. But the stock has just priced so far to perfection at this point, there's not a whole lot that's going to support that type of valuation. And so valuations just

matter. And it was kind of a classic buy the rumor, sell the news on that particular company, which was up 10% to open and end up closing literally flat on the day. And then the overall market sold off as well. Like I said, we're up 220. We ended up closing down 373 on the Dow. NASDAQ was up a percent in the morning, closed down on the day about 1.8% on the day. And then yields were up across the board. Two-year was over 5% again. I think some of that could have been, there's the Fed symposium meeting in Jackson Hole started today. There was some comments from President Harker out that really weren't good or bad. They were pretty much in line. that are restrictive enough to kind of let it work through the economy and see how things shake out, see how far credit contracts so far. And he cited it a little bit, you know,

that credit has pulled back a bit, but not very much. We're talking about pretty, pretty small potatoes as far as an actual credit drawdown, all things considered equal. But he was sort of, Porridge is just right on interest rates and that he wasn't going to commit to saying when rates would be decreased again in the future. But it just felt to me like markets were pricing in what Powell's comments may or may not be tomorrow. And they were pricing in a more hawkish tone. And whether there's validity to that or not, I mean, you know, if markets are trying to get ahead of it by a day and that's why things sold off and rates moved up. If I were a betting man and I'm not other than fantasy football sometimes, I would take the opposite for the day tomorrow as he does come out with his comments in a speech, meaning that I think they'll be more benign than what may have been feared.

But we'll have to see. Some of the economic news out on the day, jobless claims, again, were a little better than expected. Fewer people filing, less people filing for unemployment. So we had jobless claims come in at negative 230,000 versus a 240 estimate. So still very strong labor market. Those are good things, not bad things. We had durable goods today disappoint a little bit. It was down 5.2% for July.

A negative 4% was expected. Pretty much all of that was from one sector, which was transportation. Without that, we were still positive. In fact, a little bit better than expected. So I didn't read too far into that. And we did see mortgage rates today move a bit higher, at least on the week. We were at 709 last week. We're at 723 now. So this is the highest mortgage rates we've seen since 2001. So the housing numbers haven't reflected this a whole lot yet, but as time goes on, it's inevitable. The difference now is that there's just a much greater amount of equity in homes. And so the other thing is that the amount of expenditure on consumers, on households, or overall just debt expense, historically, even with rates being higher, is not really that high. It's actually below

historical norms. Now, over time, I think that'll work through as loans run off, people have to refinance, businesses have to refinance, businesses have to refinance, loans come due. And so those rates get realized. But with more equity, with more cash out there, and technically with just more savings, some of these higher rates haven't worked their way through the economy as much as otherwise would have been realized in some other cycles. But all to say, we've had a pretty down August in markets and that continued on the day. We've got comments out tomorrow that I think will be market moving. There's not a lot of economic calendar tomorrow. There's some consumer sentiment that you'll see.

And we'll have Dividend Cafe in your inbox for tomorrow. I'll be with you next week, actually, the long form DC today on Monday, and then through the remainder of the week, as David is on vacation, I'm going to step in and have some good goodies for you throughout the week. But with that, I appreciate listening. I appreciate you reading as always reach out with questions. And I shall talk to you soon. Thank you. The Bonson Group is a group of investment professionals registered with Hightower Thank you. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

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