Macrosynthesis  

TLDR

• August ends positively for markets with September volatility in sight
• Nvidia's $16.6B profit fails to impress
• Mag 7 spend big on AI bets
• Mpox found in Iowa
• Harris ahead in polls despite humdrum media interview
• Short seller destroys the super in Super Micro Computer
• Dell beats earnings estimates

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Wild August Smooths Out

It was a wild month. Remember when nearly $6.5 trillion was wiped out from global stock markets leading up to August 7th? Markets seem to have forgotten. Since its low on August 5th, the Nasdaq has bounced nearly 12.5%. Almost 20 days later, many wondered if the market would crumble or continue to rally to new highs. It all hinged on one event—Nvidia's earnings.

Nvidia Earnings: A Story of Chips and Dips

Nvidia's CEO, Jensen Huang, couldn't fully ease Wall Street's worries as the company faces slower growth and a minor delay in launching its new chip, Blackwell. Despite beating second-quarter earnings and revenue expectations, Nvidia's third-quarter forecast didn’t exceed analysts’ estimates, leading to a nearly 7% drop in its stock price after hours. The slowdown in gross margins and data center sales raised questions , despite the company making $16.6B in profits that quarter, an increase of 168% year over year.

Magnificent Spending by the Mag 7

The Magnificent 7 companies significantly increased their capital expenditures in Q2 2024, reaching nearly $44 billion, a record high. This marked a 25% rise from the previous quarter and a 47% increase compared to Q2 2023, primarily driven by the AI boom. Major investments were funneled into Nvidia and other large chip makers.

Is Nvidia's Bull Run Ending?

Nvidia’s stock dropped post-earnings, but this didn’t rattle the market. Investors sought clear signals about AI's future but found mixed results instead. Nvidia's second-quarter earnings beat expectations, yet its third-quarter revenue forecast didn't impress. The stock's modest decline, less than the options market's anticipated 10% move, indicates the market wasn’t overly concerned. However, retail investors' purchases of Nvidia stock have hit $5.9 billion over the last month, which is the most recent record. Purchases have doubled in just 5 weeks, according to Vanda Research data.

Feds Get More Ammo for a Rate Cut

In July 2024, the U.S. core PCE price index, the Federal Reserve's preferred measure of underlying inflation, rose 0.2% month-over-month, matching both market expectations and June's increase. Year-over-year, core PCE prices rose by 2.6%, slightly below the forecasted 2.7%, supporting the case for potential rate cuts by the Federal Reserve.

DEI Backlash Ripples Through World's Largest Companies

Several prominent public companies, including Ford, Lowe's, Disney, Caterpillar, Walmart, Verizon, and CVS, have recently scaled back or revised their Diversity, Equity, and Inclusion (DEI) policies in response to mounting public and political pressure.

Mpox Continues Spreading With New Case Found in Iowa Prison

Mpox cases are popping up all around the world, one at a time. Today, one was identified in an Iowa prison. Cases have been reported in Sweden, Thailand, Philippines, Pakistan, Saudi Arabia and 14 African nations. Labcorp (LH) makes a PCR test to detect mpox and has U.S. clearance for a home collection kit doctors could order soon. Roche also makes one.

Harris Leads Trump in Polls, Fails to Impress in First Media Interview

Vice President Harris has a 50%-46% lead with all registered voters and a 52%-46% lead with likely voters, an Ipsos/ABC News poll taken Aug. 23-27 despite widespread criticism for failing to provide substantive answers to simple questions about her policies and policy reversals. In a CNN interview, Harris had a difficult time explaining why her position changed from being against fracking in 2019 to being pro-fracking today changed. When asked what policies she'd put in place on day 1 as President, she offered no policy and pivoted to the campaign's core message of bringing dignity to the office and helping the middle class. When pressed about how she'd tackle inflation, she offered her proposals of child tax credits and a $25,000 down payment assistance program to quell housing costs. This did not impress independents - a group she needs to win over, per the BBC.

Financial Stocks Outperformed Last Week; JPM up 3%

The S&P 500 sectors showed mixed performance, with Financials leading gains at +2.9%, followed by Industrials at +1.7%, Materials at +1.6%, Healthcare at +1.1%, Energy and Utilities both at +1%, and Consumer Staples at +0.8%. Real Estate saw a modest increase of +0.4%. In contrast, Information Technology and Telecom sectors declined by -1.5% and -0.7%, respectively, while Consumer Discretionary dipped slightly by -0.2%.

Earnings Season Winding Down Means Market Volatility Coming in September

This week, markets will focus on key economic reports. Tuesday's data is expected to show a rebound in July's construction spending, alongside a slight improvement in August's ISM Manufacturing index. Wednesday's Job Openings report will provide insights into labor market conditions. Thursday will feature the ADP Employment Survey, with an expected increase in job additions. The most anticipated report comes Friday, with projections for the August Employment Situation indicating a rise in nonfarm payrolls and a slight drop in the unemployment rate.

Seasonality Matters and September is a notoriously bad month for stocks.‍

Making it worse, the market often sells off at the onset of the Fed pivoting from a tightening to an easing cycle before going on to produce higher highs six months later. Similarly, value stocks outperform growth and momentum stocks leading up to a Fed pivot. So far, we're seeing this trend in place as value has outperformed quarter to date.  

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Gasoline

-6.51%  (1D Chg)

-14.69% (1M Chg)

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Uranium

-3.81% (1W Chg)

-6.16% (1M Chg)

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Steel

+4.71% (1W Chg)

+6.56% (1M Chg)

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Orange Juice

+8.57% (1D Chg)

+18.77% (1M Chg)

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Company News

LevelFields AI Alert Highlights This Week

In the latest events on LevelFields, Noah Holdings saw a 14% bounce in its share price after announcing a $50 million share buyback. AeroVironment (AVAV) experienced a 10% uptick following the announcement of a new billion-dollar contract. Verve Therapeutics (VERV) jumped 9.3% on Friday after a class action lawsuit was announced. Meanwhile, Super Micro Computer (SMCI) plummeted nearly 28% this week after Hindenburg Research released a short seller report against the company.

Super Micro Computer May not be that Super

A recent investigation into Super Micro Computer Inc., a Silicon Valley-based server maker, has uncovered serious allegations of accounting manipulation, including undisclosed related party transactions, sanctions evasion, and customer issues. Despite a previous $17.5 million SEC settlement for accounting violations, the company reportedly resumed improper practices shortly after. The investigation also revealed concerns about Super Micro's business dealings with related parties and compliance with U.S. export bans, particularly in relation to Russia.

CrowdStrike Beats but Disappoints with Forecast

‍CrowdStrike lowered its revenue and profit forecasts following a July outage caused by a faulty software update, impacting 8.5 million Windows devices and leading to flight cancellations. The incident delayed some deals, with challenges expected to persist for about a year. Despite these setbacks, CrowdStrike’s second-quarter revenue rose 32%, beating estimates, but shares traded mixed. However, CRWD ended up nearly 2.5% for the week.

Dell Beats Earnings Estimates, Stock Jumps

Dell Technologies reported better-than-expected second-quarter earnings, driven by a surge in AI server demand. Revenue rose 9% year-over-year to $25 billion, surpassing analyst forecasts. Server and networking revenue jumped 80% to a record $7.7 billion, with AI-optimized server demand increasing 23% sequentially. Dell’s infrastructure solutions group saw a 38% rise in revenue to $11.6 billion, though client solutions group revenue fell 4%. Dell finished the week up over 3%.

Travel Demand Boosts Trip.com

Trip.com’s U.S.-listed shares surged nearly 9% after reporting better-than-expected earnings, driven by strong demand for cross-border and holiday travel. The largest Chinese online travel service saw second-quarter revenue rise 14% year-over-year to RMB12.8 billion, boosted by increased sales in accommodation, transportation ticketing, package tours, and corporate travel.

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SMCI Stock Crash Was Very Predictable

Shares of server maker Super Micro Computer (SMCI) plummeted -22% in two days, following a short seller attack that took down many others before them. LevelFields' AI alert went out a few minutes after the scalding rebuke of SMCI's accounting practices rocked the stock.

How could you use AI stock alerts to find this bearish signal?

The Short Seller Scenario identifies these types of downside risks. On average, these reports have caused a -17% drop in the stock in the first day or two, following by a slow, painful bleed over the latter months as lawsuits and government investigations pile up. This can be seen in the scenario's table view, which shows the average price reaction over the following weeks and months.

How do you use AI to trade stocks using short seller events?

The best way is by buying stock option puts on the stock. Some of these puts increased 1,000% in value in just a day as shown below. It's also possible to short the stock, which involves borrowing shares and then replacing them at a lower cost via a margin account.

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• What Happened to Super Micro Stock?
• 3 Stocks Outperforming Nvidia
• CEO, CFO Pivot, Rapidly Buying Their Company's Stock

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Upcoming Earnings:

Monday: Market Closed
Tuesday: Hello Group (MOMO), Zscaler (ZS)
Wednesday: Dicks Sporting Goods (DKS), Dollar Tree (DT), Core & Mains (CNM), AeroVironment (AVAV), C3.ai (AI), Couchbase (BASE)
Thursday: Korn Ferry (KFY), Broadcom (AVGO), Smith & Wesson Brands (SWBI
Friday: Genesco (GCO), ABM Industries (ABM)