To The Moon

Last Week's Recap

The US Market - The SPX closed above $5,000 and BTC breached the $48,000 level

• The S&P 500 hitting 5,000 for the first time and all three major averages notched their fifth straight winning week, as a solid earnings season on the artificial intelligence secular growth story.

• The Nasdaq briefly traded above 16,000 on Friday, but returned below the key points. However, the tech-heavy indexes closed at its best levels in over two years. The Dow Jones held just below its all-time highs while the Russell 2000 rebounded back above key 2,000 levels.

• December’s revised inflation data also helped market sentiment. The headline CPI reading in lower than first reported. Core inflation figures, excluding food and energy, were the same.

• Since 1968, the last nine times the broader index reached a new milestone, it was higher by 10.4% on average 12 months afterward. In fact, the S&P 500 was positive 78% of instances. Adam Turnquist, chief technical strategist at LPL Financial said the S&P 500 “may take a few tries to hold above this level” when it breaches 5,000. The broader index was last trading at around 5,018.

• Bitcoin marched higher to end the week, with its price breaching the $48,000 level at one point for the first time since spot bitcoin exchange-traded funds began trading.

The US Sectors & Stocks - AI-related earnings fueled the technology sector

• AI-related earnings fueled the technology sector as the bigger winner. The S&P 500 wouldn't be notching fresh highs this year without the performance coming from the technology sector. As investors receive continued confirmation of the strength of this AI investment cycle they want to participate in the potential growth, driving stock prices higher. Semiconductor stocks outperformed with the VanEck Semiconductor ETF (SMH) higher by 6.6% during the trading week.

• Top holding Nvidia (NVDA) closed at all-time highs of $721.33, crossing $700 per share for the first time this week. The AI chipmaker, which has a 24% weighting in the ETF, advanced 9% for the week.

• Chipmaker Onsemi (ON) beat Wall Street estimates for fourth-quarter revenue and profit, helped by resilient demand for its silicon carbide chips, sending the company's shares up around 14% last week. However, the company forecast first-quarter revenue and profit below consensus, analysts described their outlooks as better than feared

• Power-chip maker Monolithic Power Systems (MPWR) rose 18% after the company disclosed it acquired fabless semiconductor startup Axign and raised its quarterly dividend.

• Chip designer Arm Holdings (ARM) delivered better-than-expected December-quarter results and guidance, sending its shares up nearly 50% on the news.

• Warren Buffett’s Berkshire Hathaway A shares (BRK.A) hit a record high of $600,531last week, reaching a new milestone and in the process moving closer to becoming the first U.S. company outside technology to achieve $1 trillion in market value.

• Eli Lilly (LLY) jumped more than 10% after it beat Wall Street's fourth-quarter expectations. Guidance for 2024 was also promising. High points included diabetes drug Mounjaro and weight-loss drug Zepbound, which delivered more than double what analysts expected at $175.8 million in sales.

• Palantir Technologies (PLTR) rallied over 40% last week after the company’s fourth-quarter results and AI opportunity resulted in analysts rerating their estimates and price targets. It also provided investors with a rosy outlook for both revenue and earnings growth.

• Cloudflare (NET) rallied around 20% on Friday, after the company posted stronger than expected fourth-quarter results and guidance. Cloudflare’s earnings boosted the broader cloud sector, with the WisdomTree Cloud Computing Fund ETF (WCLD) last up nearly 5%.

• Affirm Holdings (AFRM) rallied ahead of the quarterly results but were falling sharply Friday, slashing big weekly gains. The buy-now-pay-later company reported a smaller-than-expected loss while revenue jumped 48% to $591.1 million, the third straight quarter of accelerating growth.

• Snap (SNAP) and Pinterest (PINS) tumbled following their earnings. SNAP reported a 43% decline in EPS in Q4 and fell short of Q4 revenue. PINS earnings nearly doubled, just topping consensus. But revenue rose 12%, missing views. Both of them guided weak outlooks.

• Spotify Technology (SPOT) jumped 8% after the music streaming leader added 10 million premium subscribers in the fourth quarter to 236 million, slightly more than expected.

• Roblox (RBLX) surged a 9% higher after the video game platform beat Q4 estimates and guided higher than views for Q1 and 2024.

• Uber Technologies (UBER) said Q4 earnings surged 127% to 66 cents per share, buoyed by investment gains, crushing views for 16 cents. Revenue climbed 15% to $9.9 billion, slightly topping estimates. Gross bookings grew 22% to $37.6 billion, edging past views.

• Disney (DIS) soared more than 11% on earnings and bullish views. Disney+ subscribers fell slightly after a price hike, but still beat views. The entertainment giant raised its full-year earnings target. Disney said it's buying a $1.5 billion stake in "Fornite" developer Epic Games, pending regulatory approval. Disney+ secured the streaming rights to "Taylor Swift: The Eras Tour."

The Week Ahead

Macro Factors - January's CPI on focus

• Wall Street gets more inflation data this week, January’s consumer price index is due out Tuesday, with prices anticipated to have risen 0.2% for the month, and increased 2.9% on a year-over-year basis, according to a Dow Jones consensus estimate. That would be about in line, or lower, from readings of 0.2% and 3.4% the prior month.

• On a "core" basis, which strips out the food and energy prices, inflation is expected have risen 3.7% year-over-year, a slowdown from the 3.9% increase seen in December. Monthly core price increases are expected to clock in at 0.3%, unchanged from the month prior.

• The Census Bureau reports January's retail sales data on Thursday. Economists forecast a 0.2% month-over-month decline in consumer spending, following a 0.6% increase in December. Excluding autos, retail sales are seen edging up 0.1%, three-tenths of a percentage point less than in December.

• SignatureFD’s Welch expects the bull market will continue in 2024, and predicts any market weakness will be “benign.” He recommends traders add to small cap stocks, which he expects will outperform later in the year.

• On the other hand, Jason Hunter, head of technical strategy at JPMorgan, told to CNBC last Thursday, “It certainly isn’t a broad breadth and broadening rally at this point,” he added. “In our view, it’s something that makes it look like the trend is getting long in the tooth and setting up at least for a near-term pullback.”

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Earnings

• Thus far, roughly two-thirds of S&P 500 companies have reported fourth-quarter earnings, and the results are showing signs of strength after a lackluster start to the season. FactSet data shows S&P 500 earnings are tracking to have risen 2.8% in the fourth quarter, which would be a second straight quarter of earnings growth, and some expect that positive momentum will remain intact in the week ahead.

• Coinbase (COIN) earnings will highlight the week.Numbers from a few $100 billion-plus market-cap companies are on the schedule, including Coca-Cola (KO), Cisco (CSCO) and Applied Materials (AMAT).