Data Deluge, Amazon Tops Walmart, My 8% Rule Explained, Tariff Ruling?

A Dream

Ah! What is not a dream by day

To him whose eyes are cast

On things around him with a ray

Turned back upon the past?

That holy dream - that holy dream,

While all the world were chiding,

Hath cheered me as a lovely beam

A lonely spirit guiding

- Edgar Allen Poe (1827)

Good Morning!

We've made it. At least I think we have. It's Friday. US equity index futures are trying to trade in the green overnight. You can stick that feather in your cap and call it macaroni if you like. We'll see what the deal is when the bell rings. That deal, coming into Friday trade, is that the S&P 500 is up 0.38% for the first three trading days of this holiday-shortened week. Securing a positive week would put an end to a two-week losing streak for this nation's broadest large cap equity index.

The condition is more dire for the Nasdaq Composite. That index is up a more impressive 0.6% for the week, but is pressed up against a five-week losing streak. What could possibly go wrong? That said, there's a lot of wood to cut as the sun is still a few hours from rising. The day ahead will be thick with newly released macroeconomic data-points.

First up will be the Bureau of Economic Analysis' December data for personal income and spending as well as the personal consumption expenditure price index numbers for that same month. We're also due to see the BEA's first estimate for Q4 gross domestic product as well as for the full year 2025. A short while later, S&P Global will release its February Flash PMIs for both the U.S. manufacturing and service sectors. Finally, the University of Michigan will revise its February survey results for both consumer sentiment and inflation expectations. That survey often moves markets more than traders are mentally prepared for, so buckle your helmet, kids.

Such a Deal?

The Financial Times is reporting that Nvidia  (NVDA)  is close to closing a deal for a $30 billion investment into OpenAI. This deal, which could be finalized as soon as this weekend, would replace the longer-term $100 billion commitment that the two companies agreed to last year. The still private OpenAI is already valued at a minimum of $730 billion, and will invest this new money into Nvidia hardware.

Under the terms of the deal that was never finalized, Nvidia would have invested 10 separate increments of $10 billion into OpenAI over a number of years and Open AI would have purchased millions of processors from Nvidia in turn. That deal never progressed past the "memorandum of understanding" stage.

Is this a sign of a decreased commitment by Nvidia whereas OpenAI is concerned? I don't think that I would say that. $30 billion is a whole lot of dough. It may just be that in a world and industry that is evolving so quickly that a multi-year, $100 billion commitment would be reckless and Nvidia CEO Jensen Huang probably realized that. Better to pay up over the short-term and keep longer-term options open.

Giant Amazon

On Thursday morning, Walmart  (WMT)  reported fiscal fourth quarter financial results. For the full fiscal year ended Jan. 31, Walmart generated $713.2 billion in revenue. Earlier this month, Amazon  (AMZN)  reported fourth quarter and full year numbers. Amazon's fiscal year ends with the calendar year, so the two companies' years are a month off. Regardless, for the just completed full year, Amazon generated $716.9 billion in revenue.

Hence, in terms of revenue generation, Amazon is now America's largest company. Walmart had held that title until now, since 2009 after trading the title back and forth for a number of years prior to that with Exxon Mobil  (XOM) . However, Nvidia is the largest U.S. company by market capitalization followed by Apple  (AAPL)  and Alphabet  (GOOGL) .

Speaking of Oil

Crude prices were up again on Thursday. I now see Brent trading close to $72 a barrel and the sweet stuff trading above $66 per barrel. Crude prices are soaring, you may have noticed increased prices at the pump, I have. Word is that Pres. Trump is considering an initial strike into Iran in what would be an attempt to force the regime there to negotiate in earnest as the president seeks a deal that would limit or terminate Iran's offensive nuclear capabilities.

On Thursday, the president stated that he would make a decision on Iran within 10 days. In the meantime, the U.S. military has amassed forces in the CENTCOM (Central Command - Middle East) region, reaching a level for offensive capacity not seen since the early days of the invasion of Iraq in 2003.

Marketplace

Most major U.S. equity indexes closed lower on Thursday, but not significantly so. The S&P 500 gave up 0.28%, while the Nasdaq Composite gave back 0.31%. If there was some strength it could have been in the small caps. The Russell 2000 did gain 0.24%, but the S&P 600 gave up 0.18%, so that story doesn't really hold much water. The banks and the transports were hit harder than the rest of the market.

As far as breadth is concerned, four of the 11 S&P sector SPDR exchange-traded funds ended the day in the win column. Utilities  (XLU)  were out in front, but followed by two cyclical sectors, the industrials  (XLI)  and for obvious reasons, energy  (XLE) . The financials  (XLF)  and discretionaries  (XLY)  led the losers.

Speaking of losers, overall, losers beat winners by just a smidgen at both the NYSE and the Nasdaq Market Site on Thursday. Interestingly though, advancing volume took a 56.1% share of composite Nasdaq-listed trade and a 51% share of composite NYSE-listed trade. Therefore, there is no key "takeaway" here. Aggregate trading volume expanded by a rough 1% on a day-over-day basis across NYSE-listings, but contracted by 9.4% across Nasdaq-listings. What does that mean? Simple. Thursday's pressure on stock prices had no teeth.

Heads Up!

No promises. A long-awaited Supreme Court decision on the legality of Pres. Trump's authority to impose tariffs on imports from other nations could come as soon as this morning. A roll back or some kind of limitation imposed upon the International Emergency Economic Powers Act could result in the reduction of the effective U.S. tariff rate significantly across several consumer-related categories and would be a catalyst toward improved profit margins for a number of impacted corporations. That's the positive.

The negative would be the boost that these tariffs have afforded the federal government from a fiscal perspective. The proverbial fiscal boot has been removed from the proverbial fiscal neck for the U.S. government. Removing the tariffs would hurt the government's ability to service its overwhelming debt load and refunding tariffs already collected would almost certainly put the federal government in the position of having to cut back on public entitlements.

The 8% Rule

I received on Thursday, an email from a reader who is new to managing their own money asking about my 8% rule. Quite simply, back during the go-go days of the "dot com" bubble, I got caught in a long position in CMGI, the internet incubator. Anyone else remember that one? The firm that I worked for at the time, Credit Suisse First Boston, was the Wall Street "it firm" as far as that era was concerned.

Sure, Goldman Sachs  (GS) , Morgan Stanley  (MS)  and Solomon Brothers were always among the top investment bankers, but in the late 1990s and early 2000s, First Boston was the undisputed king of tech-centric investment banking on Wall Street and your author was smack-dab in the middle of it.

I was on First Boston's NYSE team that handled the initial public offerings that listed there and handled all of the overflow business in NYSE-listed stocks that mutual funds and hedge funds would throw our way, literally at any commission just to get in on all of the hot Nasdaq-listed IPOs that we had developed in-house.

Long story short, due to our obvious conflicts of interest, we had a strict 60-day holding period on all equity positions for our personal accounts. I was long CMGI at an average of $151 and 9/16 when that bubble started to crack. By the time my 60-days were up, CMG was trading with a $4 handle. I would have had more fun putting that cash in a barrel and burning it. I decided there and then to never take a loss of more than 8% on any equity position unless it happened overseas, while I was asleep.

That really did not matter all that much while I worked for other Wall Street firms, but mattered great once I founded my first independent Wall Street trading operation in 2014 and then once I founded my current family office in 2016. Ten years later, I have outperformed the S&P 500 every single year save one and have at least tripled the S&P 500's performance three times, so my methods do have a defensible track record.

The deal is this, for the new kids who have not been with me since I started writing for the clients of the firms that I worked for way back in the day or since 2016 when Jim Cramer asked me to write professionally for what was then Real Money Pro, every position must have a target price and a panic point. These levels must be respected. Always. That's a core discipline.

One does not have to necessarily liquidate at these levels, but one has to act. It is OK to average down on a losing position where one has conviction to get the loss under 8%, but that can only be done twice at the most. After that, one must check the ego and take the hit. Those concerned about spikes or parabolic moves can use a mental stop and track the upward move at an 8% discount, thus never risking the taking of a loss.

Others could get to the point where through the taking of profits at target prices, they are playing with nothing but house money in their runners. My longs in Palantir Technologies  (PLTR) , Rocket Labs  (RKLB)  and SoFi Technologies  (SOFI)  are all just house money at this point. The principal has been removed, preventing any possibility for an overall loss on those positions.

Are there any exceptions to the 8% rule? Of course. I do not subject stocks that trade for less than $10 per share to the same standards I do other stocks for obvious reasons. Once those stocks graduate to the next levels, such as the three names mentioned above, then they are indeed subject to my rules of trading discipline. That said, if one has not been asleep at the wheel, there would not be much principal at risk at that point anyway.

Economics 

(All Times Eastern)

08:30 - Personal Income (Dec): Expecting 0.3% m/m, Last 0.3% m/m.

08:30 - Consumer Spending (Dec): Expecting 0.4% m/m, Last 0.5% m/m.

08:30 - PCE Price Index (Dec): Expecting 0.3% m/m, Last 0.2% m/m

08:30 - Core PCE Price Index (Dec): Expecting 0.3% m/m, Last 0.2% m/m.

08:30 - PCE Price Index (Dec): Expecting 2.8% y/y, Last 2.8% y/y.

08:30 - Core PCE Price Index (Dec): Expecting 2.9% y/y, Last 2.8% y/y.

08:30 - GDP Growth Rate (Q4-adv): Expecting 2.9% q/q, Last 4.4% q/q, SAAR.

09:45 - S&P Global Manufacturing PMI (Feb-Flash): Expecting 52.3, Last 52.4.

09:45 - S&P Global Services PMI (Feb-Flash): Expecting 52.9, Last 52.7.

10:00 - U of M Consumer Sentiment (Feb-F): Flashed 57.3.

10:00 - U of M One-Year Inflation Expectations (Feb-F): Flashed 3.5%.

10:00 - U of M Five-Year Inflation Expectations (Feb-F): Flashed 3.4%.

1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 551.

1:00 - Baker Hughes Oil Rig Count (Weekly): Last 409.

The Fed 

(All Times Eastern)

10:00 - Speaker: Atlanta Fed Pres. Raphael Bostic.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open:  (BCPC)  (1.29)

At the time of publication, Guilfoyle was long NVDA, GOOGL, PLTR, RKLB, SOFI equity.