Nvidia, Meta Team Up, AMD Charts Double Top, Pepsi Short Sweetens

So it begins ... Ash Wednesday. For Christians, the Lenten season has started. Whether one believes what I believe or not is an affair of their own. I may even try to evangelize you in private, but not here. You know where to reach me if one wishes to talk about it. Opposition is welcome. Disrespect is not. I will leave this quick intro with a quote attributed to Augustine of Hippo (354-430) that I think can help both in life and in surviving these markets, regardless of one's religious affiliation. It concerns redemption and never surrendering. Some on Wall Street need to see this.

“There is no saint without a past, no sinner without a future.”

Big Tech News

On Tuesday, Nvidia  (NVDA)  announced a multi-year partnership with Meta Platforms  (META)  that will leave the latter using many of the former's products to boost and develop its AI-focused infrastructure. Both stocks traded higher overnight in response to these headlines. 

The deal will involve the use of Nvidia's Grace and soon to be available Vera CPUs as well as Blackwell and also when available, Rubin graphics processing units, or GPUs. Other Nvidia networks will also be used to boost efficiency and integrate research with scale at an industrial level. The apparent near exclusivity of this news would be considered something of mild disappointment for both Advanced Micro Devices  (AMD)  and Broadcom  (AVGO) .

Positive Developments

The New York Fed published its regional manufacturing sector survey for February on Tuesday morning. The headline print landed at 7.1, down slightly from 7.7 for January, but also slightly better than expected. February was a second consecutive month of expansion for New York State-based manufacturing and fourth month of expansion in five. Very interesting, New orders were steady, while unfilled orders soared. Those would be the two most important components of the survey.

Within the report, while prices both paid and received, unfortunately remained hot, the number of employees moved from contraction into expansion as did the average workweek. The change in those two metrics, if broader than being isolated to New York, would be huge. The arguably more important (at least in the world of manufacturing) Philadelphia Fed Manufacturing Survey, also regional in nature, will be released on Thursday morning.

Elsewhere, the Cleveland Fed published their Survey of Firm's Inflation Expectations, or SoFIE, for January. This survey is conducted quarterly and dropped unexpectedly to 3.1% from 3.3% in October. This was the lowest expected rate of inflation posted by Cleveland in this survey since April 2021.

Treasuries Sell Off Slightly

Overnight Monday into Tuesday, the yield paid by the U.S. Ten-Year Note bottomed under 4.03%. During the regular trading session, that yield moved up to 4.06% and this morning I have seen it above 4.07%. As mentioned in this column 24 hours ago, stocks and bonds have been stealing the flow of capital from each other throughout this AI-inspired mini-crisis. Ultimately, though ... lower yields mean lower interest rates and lower short-term interest rates support both demand for labor as well as risk asset prices.

There has been some mild profit-taking across the space as equities, in general, have appeared to find some stability, albeit on reduced trading volumes over the past two sessions. I would expect this "flight to safety" to persist at least until there is more certainty concerning the outcome of the attempted negotiation between the Trump administration and the regime in Iran. Should Iran force a military confrontation, the U.S. Ten-Year could apex close to a yield of 3.75%. Without acts of kinetic warfare, I see resistance at the 4% level holding for now.

Equities

Calling Tuesday an "up" day would be something of a stretch. The session's performance was truly mixed. While the Nasdaq Composite and S&P 500 "soared" to gains of 0.14% and 0.1% respectively, the Russell 2000 closed as close to flat as possible in the decimalized, electronic age. The Nasdaq 100 suffered a loss of 0.13% as the Philadelphia Semiconductor Index gave up a whole 0.02%.

It should be noted that all of this "treading" of water came courtesy of a midday rally that got equities to those levels. It should also be noted that the Dow Transports rallied for a gain of 0.99% courtesy of a rally across the airlines that had Southwest Airlines  (LUV) , United Airlines  (UAL)  and American Airlines  (AAL)  up by 6.2%, 4.3% and 3.8% respectively. The banks also had a nice day.

Breadth

Just three of the 11 S&P sector SPDR ETFs managed a green close on Tuesday, led by the cyclicals for a change as the economic data was encouraging. The financials  (XLF)  finished out in front, with the industrials  (XLI)  in third place. For the first time in a little while, a defensive type sector, the staples  (XLP)  finished in last place.

Winners beat losers by just a smidgen at the NYSE, while that smidgen was turned around in the losers' favor at the Nasdaq on Tuesday. Advancing volume took a 47.2% share of composite Nasdaq-listed trade and a mere 40.9% share of composite NYSE-listed activity. How important was the Tuesday session in the grand scheme of things? Not very. Aggregate trade contracted by 5.2% on a day over day basis across NYSE-listings, by 3.9% across Nasdaq-listings and across the membership of the S&P 500 as well.

AMD Notes...

We have discussed AMD's double top pattern of bearish reversal with the downside $184 pivot. The stock is trading lower on the Nvidia  (NVDA) /Meta  (META)  news this morning. Take a look... ​

Should support be found at or above pivot on this renewed pressure, that ​double top will become a basing period of consolidation, which is not an overtly bearish pattern...

PEP Notes

It took a little while, but our PepsiCo  (PEP)  short is finally in the green. ​I currently have a net basis of $163.41:​

The indicators are finally turning against this company, which from a fundamental viewpoint, in my opinion, is an ongoing train wreck. My goal for the short position is the 50-day simple moving average at $150, but if this thing reverses and heads back above my cost, I am so out of here.

Economics 

(All Times Eastern)

07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.21%.

07:00 - MBA Mortgage Applications (Weekly): Last -0.3% w/w.

08:30 - Housing Starts (Nov & Dec): Last 1.25M SAAR.

08:30 - Building Permits (Nov & Dec): Last 1.41M SAAR.

08:30 - Durable Goods Orders (Dec): Expecting -1.9% m/m, Last 5.3% m/m.

08:30 - ex-Transportation (Dec): Expecting 0.3% m/m, Last 0.5% m/m.

08:30 - ex-Defense (Dec): Expecting -4.3% m/m, Last 6.6% m/m.

08:30 - Core Capital Goods (Dec): Expecting 0.5% m/m, Last 0.7% m/m.

08:55 - Redbook (Weekly): Last 6.5% y/y.

09:15 - Industrial Production (Jan): Expecting 0.4% m/m, Last 0.4% m/m.

09:15 - Capacity Utilization (Jan): Expecting 76.5%, Last 76.3%.

1:00 p.m. - Twenty-Year Bond Auction: $16B.

1:00 - Net Long-Term TIC Flows (Dec): Last $220.2B.

14:30 - API Oil Inventories (Weekly): Last +13.4M.

The Fed 

(All Times Eastern)

1:00 p.m. - Speaker: Reserve Board Gov. Michelle Bowman.

2:00 - FOMC Minutes.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open:  (MCO)  (3.44),  (WING)  (.83)

After the Close:  (BKNG)  (48.67),  (CVNA)  (1.16),  (DASH)  (1.29),  (NDSN)  (2.37)

At the time of publication, Guilfoyle was long NVDA, AMD equity. Short PEP equity.