The first two weeks of September trading have taken a toll on investors. Last week was a strong one as stocks rebounded after favorable updates on inflation and a host of companies at various analyst conferences. September is known as the worst month of the year for stocks. While all three Wall Street benchmarks are still slightly lower for the month, last week’s rally pushed the S&P Short Range Oscillator back into an overbought market condition. The wild cards this week are the latest Federal Reserve meeting and earnings from economy-sensitive stocks. The S&P 500 rallied 4% this past week, nearly reversing all of the previous week’s horrific decline. It was a similar story for the Dow, which gained 2.6%, and the Nasdaq, which advanced nearly 6% last week. In the past week, they lost approximately 3% and 5.8%, respectively. Jim Cramer said Friday, “I like what we’re doing because we’re stuck with large caps,” especially Nvidia. He added that the Club’s portfolio is well positioned for the future. Shares of Nvidia rose 16% last week. The stock almost returned to levels seen before its big slide after last month’s earnings failed to meet lofty expectations. Investors jumped on the rally that was fueled by CEO Jensen Huang’s bullish comments at the Goldman Sachs Communacopia + Technology Conference and during an interview on CNBC after a White House meeting on artificial intelligence energy infrastructure. Jim also said on Friday that Nvidia shares are now getting something of a “finish”, with investors’ confidence in the company’s ability to continue to deliver strong results boosted not only by Huang, but also by a double dose of growth. of Oracle’s opinion. A major buyer of Nvidia chips, Oracle last Monday beat quarterly results and raised guidance. Then, two days later, at an analyst meeting that coincided with the Oracle CloudWorld conference in Las Vegas, the database software and cloud giant raised its revenue outlook for fiscal 2026. Perhaps even more than early in the AI data center refresh cycle is us, Oracle sees fiscal 2029 revenue surpassing $104 billion. It’s clear that there’s massive pent-up demand for the kind of AI solutions that simply wouldn’t be possible without Nvidia, and that shows no signs of letting up. Lisa Su, CEO of Club Advanced Micro Devices, also spoke at last week’s Goldman Sachs conference, providing mostly online updates on the state of the business. The MI325 is still expected to hit the market in the fourth quarter. She still thinks a $400 billion accelerated total addressable market (TAM) from AI by 2027 is reasonable. Su also said, “We are at the beginning of a multi-year AI PC cycle.” She added that while 2024 is just the beginning of the cycle, “it’s the most significant innovation to come to the PC market in the last 10 years.” This certainly plays right into our investment thesis for Best Buy where people go to learn, interact and buy personal computers. Apple last week unveiled the AI-enabled iPhone 16 at its Glowtime product launch event. Jim countered with mixed reviews about the new device, citing the range of capabilities of the new iPhone 16 from artificial intelligence to longer battery life and better cameras. “All of these things will be incremental, enough to eventually convince millions” over time to upgrade their devices, he added. No portfolio company reported earnings last week (and none will report this week either). However, several companies provided updates, including Honeywell. CEO Vimal Kapur at a Morgan Stanley conference hinted at what might be next — and Starbucks, with new CEO Brian Niccol publishing an open letter discussing the four key areas he’s focused on in the first 100 days. Wells Fargo reiterated the guidance at the Barclays Global Financial Services Conference. But Club Bank owner Morgan Stanley said mergers and acquisitions and proceeds from initial public offerings will be below the trend line for the rest of the year, before picking up in 2025. On the economic front, last Wednesday brought the release of the consumer price index in August. On a year-over-year basis, the headline reading was a point below expectations, while the core index was broadly in line with estimates. While we didn’t like the slight increase we saw in the housing cost inflation rate and the release initially brought the market down, investors ultimately bucked it. Perhaps, they took comfort in the idea that we will still get an interest rate cut at the Fed meeting on September 17-18. The Fed Hour The Fed is the big market event this week. A cut is a foregone conclusion. The only question is how big a cut we will have. The market’s odds, according to the CME FedWatch Tool, are 50/50 — split down the middle on whether central bank policymakers will cut by a quarter of a percentage point (25 basis points) or half a point (50 basis points). The current range for the fed funds overnight bank loan rate, which everyone refers to when we talk about falling interest rates, is 5.25% to 5.5%. Whether the Fed moves to 25 or 50 basis points, we think it’s important that central bank chief Jerome Powell speaks at his post-meeting news conference Wednesday afternoon with confidence and reassures investors that he and his colleagues will remain nimble and will continue to adjust policy as needed. based on further economic updates. Although data dependence remains key, we think the market will also welcome any sign that the Fed is willing to factor in a forecast a little more than we’ve seen in the past given that inflation has indeed been trending higher. low, as desired, and we know there is a lag between policy updates and when that change is felt in the economy. During the first day of the Fed meeting on Tuesday, August retail sales and August industrial production and capacity utilization reports were released. Retail sales are huge because they provide information on how consumers are doing and where they are spending their money. It also gives us an idea of what to expect when companies start reporting third-quarter earnings in the coming weeks. Private consumption drives roughly two-thirds of the U.S. economy, so a resilient consumer is key to avoiding a recession—or at least, a hard economic downturn. Industrial production and capacity utilization data will provide insight into the state of the manufacturing, mining, and electric and gas utilities industries. August housing starts and building permit results come out Wednesday morning, just hours before the Fed announces its interest rate decision. August existing home sales are out Thursday. The cost of housing has been a major issue keeping inflation higher for longer. Remember, we saw a slight increase in the housing cost inflation rate, year over year, in the August CPI report. So we will monitor the housing supply situation as this will be key to breaking housing cost inflation. Earnings In the absence of club names, there are some big company earnings to watch this week, including FedEx and Lennar. They’re out after Thursday’s closing bell. The results from distribution giant FexEx will provide a look at the state of business and consumer activity given its broad reach and multiple touchpoints across different industries and across different demographics and geographies. As one of America’s largest homebuilders, with DR Horton, Lennar can provide deep insight into the state of the housing market and hopefully give us some thoughts on where affordability goes from here. Affordability has been a major issue pressing American consumers. Since supply is key to increasing affordability, it will be important to hear what management has to say on the conference call about what they are seeing and how they are thinking about new projects as the Fed begins to cut rates. Doug Yearley, CEO of homebuilder Toll Brothers, told CNBC last week “If we have three [Fed] cuts in the fall … we should have a 30 year fixed mortgage, no points in the 5 years, and take care. … “The market needs to rise.” That forecast played into the continued buying of Home Depot stock last week. Here’s our takeaway from last Wednesday’s trade alert: “If Yearley is correct, then it won’t be long until mortgage rates are in a sweet spot where housing turnover really starts to pick up. We we want to build our Home Depot position before that happens, which is why we started the position [on Sept. 4].” Week Ahead Tuesday, September 17 8:30 AM ET: Retail Sales 8:30 AM ET: Industrial Production and Capacity Utilization Wednesday, September 18 8:30 AM ET: Housing and Building Permits Begin 2 PM ET: Fed Rate Decision Before the Bell: General Mills (GIS) After the Bell: Steelcase (SCS) Thursday, September 19 8:30 AM ET: Initial Jobless Claims 10:00 AM ET: Existing Home Sales Before the Bell: Darden Restaurants (DRI ), FactSet ( FDS ), Cracker Barrel ( CBRL ) After the bell: FedEx ( FDX ), Lennar ( LEN ) (See here for a complete list of stocks in the Jim Cramer Charitable Trust.) 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People walk outside the New York Stock Exchange (NYSE) on September 13, 2024, in New York City.
Spencer Platt | Getty Images
The first two weeks of September trading have taken a toll on investors.
