Chip shot by regulators misses the green

Stocks had a mixed close yesterday as earnings winners rallied but the tech-heavy S&P and Nasdaq were weighed down by Government-regulated chip manufacturers which fell yesterday. Someone’s got to pay the price for geopolitical bickering, and tech investors are in the crosshairs at the moment.

Retail therapy. I get it. Who doesn’t love coming home after a long hard day of work and seeing an assortment of Amazon boxes piled on their porch, flashing those big blue smiles. My neighbor’s dog actually thinks the Amazon delivery person is part of the family and greets her with kisses every time she pulls up. I know this… you know this. So, I ask you, are you surprised that retail sales figures continue to stun despite the Fed’s best efforts to squelch our predilection to shop?

The thing is that old habits are hard to break. When my wife and I first started living together, she would give me an envelope of cash once a week and that, LITERALLY, was all I had. My credit card was strictly off limits, as was my ATM card… which was called a MAC card back then (I love nostalgia ). Cash was king. By doing that, we were able to do what many people today think of as “old school.” We were able to save money. Weird, right? Save money? I got my first big Wall Street bonus. The next morning, there were a few more Rolexes on the trading floor and at least 2 shiny new Mercedes Benz S-Classes parked illegally in front of the building. My wife and I celebrated with a dinner at our favorite restaurant China Star, and our bill was $20-something… paid in cash. Now, I don’t want to paint the picture that I am some thrifty cheapskate that hordes all my money (that, I am surely not), but I want to underscore what many, many people, and probably you as well, did back in those days. BUT all that has changed… for all of us.

There were the roaring 90’s and then naughty aughties, not to mention the steamy teenies. The stock market was up, and money was cheap. Credit was easy, despite the 2008/2009 setback. Ask any random person on the street “what’s in your wallet?” If it’s not that Capital One card from the commercial, it is someone else’s. Let me be clear, there is nothing wrong with using credit cards, AS LONG AS YOU HAVE THE MONEY, or at least a realistic plan to pay it off. The dark side of those cards is that people often lose track of their spending. When I had my envelope, I knew when I had to decline a night out with friends. Take a look at the following chart of Consumer Credit since my first Wall Street Bonus. You will see how it grew steadily and peaked just before the Great Recession / Global Financial Crisis (GFC), not before rising on cheap Fed money only to peak before COVID struck. Credit went down as many were flush with Fed stimulus dollars. Consumer spending had to shift in the early pandemic when travel and leisure were restricted, but it didn’t take long for consumers to find another outlet to fulfill their need to spend. Online shopping. No cash accepted. In some cases, you don’t even need to click a button, just simply stare at your computer or smartphone. So simple, right? Suddenly in 1Q2020, the world began to open up. It was time to travel to exotic places and buy a new car to commute back to the office. Credit, credit, more credit. Prices were rising, but everything is affordable when you are not constrained by the cash envelope. You see where this is going? But wait, there is a new twist. If you are using your credit card more and more and you are sporting a sizable balance, you are surely feeling the pain of higher interest rates. But, why worry, just click “complete order,” and wait for those packages to arrive tomorrow.

WHAT’S GOTTEN INTO THE MARKET THIS MORNING

United Airlines Holdings Inc (UAL) shares are lower by -5.31% in the premarket despite announcing that it beat Q3 EPS and Revenue estimates. Its Q4 guidance, however, was less than analysts were expecting. The company highlighted its expected EPS impairments in Q4 related to its flight ban to Tel Aviv, which were significant. Potential average analyst target upside: +53.6%.

NVIDIA Corp (NVDA) shares are lower by -1.27% on high volume in the premarket. This, after falling yesterday by -4.68% in response to US Government restrictions on selling chips to China. Dividend yield: 0.03%. Potential average analyst target upside: +48.3%.

Also, this morning: US Bancorp, Proctor & Gamble, M&T Bank, and Nasdaq beat on EPS and Revenues, while Elevance Health, Citizens Financial, and Northern Trust came up short.

YESTERDAY’S MARKETS

NEXT UP

• Housing Starts (Sept) may have grown by +7.8% after slipping by -11.3% in August.
• Building Permits (Sept) are expected to have fallen by -4.7% after climbing by a revised +6.8% in the prior month.
• The Fed Beige Book will be released this afternoon detailing anecdotal economic information from the various Federal Reserve regional banks.
• Fed speakers today: Waller, Williams, Bowman, Barkin, Harker, and Cook.
• After the closing bell earnings: Netflix, Zions Bancorp, PPG Industries, Tesla, Steel Dynamics, SL Green, Lam Research, Alcoa, Crown Castle, Equifax, and Las Vegas Sands.