Wall Street Whispers: Your Weekly Financial Briefing & Part 7 of "Credit Alchemy" Series

Hey Chakkani Fam! Welcome to Your Weekly Financial Briefing! We've got bite sized market moves, big tech bets, and whispers of change from all over the world. Grab a cup of joe (or your preferred drink) and let's dive:

Bears & Bulls: Markets Notes & Numbers

• S&P 500: 5,277.51+42.03 (+0.80%)

• NASDAQ: 16,735.01 -2.06 (-0.01%)

• Dow Jones: 38,686.32 +574.84 (+1.51%)

• 10-Year Treasury Yield: 4.502 (-0.052)

• Bitcoin: $67,518 -1,261.62 (-1.83%)

  All data as of last trading day's market close time read more…

Market Bites::

1. Market Summary: Indexes React to Inflation and Earnings Reports: In a mixed week for U.S. markets, the S&P 500 and Nasdaq broke their five-week winning streaks, while the Dow rallied. Here are the key takeaways:

1. Inflation and Interest Rates:

   • Investors grappled with an inflation report, speculating on when the Federal Reserve might cut interest rates.

   • The U.S. annual PCE inflation rose 2.7% year-on-year in April.

   • Traders of futures tied to the Fed policy rate now predict roughly even odds of a rate cut in September and increased chances of a second rate cut in December.

2. Tech Sector and Dell’s Plunge:

   • The technology sector dipped, impacting the overall market.

   • Dell’s shares plummeted after it forecasted lower current-quarter profit due to higher costs related to building servers for heavy AI workloads.

3. Consumer Spending and Strain:

   • The U.S. personal consumption expenditures (PCE) price index increased by 0.3% last month, matching March’s gain.

   • Consumer spending slowed more than expected, indicating strain among consumers.

4. Market Indices:

   • The S&P 500 gained 44.53 points (0.85%) to close at 5,280.01 points.

   • The Nasdaq Composite lost 2.06 points (0.01%) and closed at 16,735.02.

   • The Dow Jones Industrial Average rose by 595.78 points (1.56%) to reach 38,707.26.

5. Tech and Chip Stocks:

   • Tech and chip stocks retreated due to rising Treasury yields.

   • Zscaler, a security solutions provider, saw gains after forecasting fourth-quarter results above estimates.

   • Gap, the apparel maker, surged as its turnaround strategy showed positive signs with better-than-expected first-quarter results.

6. Trump Media & Technology Group:

   • The company fell after former President Donald Trump was convicted by a New York jury for falsifying documents.

2. Nvidia Surges: Set to Overtake Apple as Second-Most Valuable Company: Nvidia, the tech giant riding the AI wave, is poised to surpass Apple and claim the title of the world’s second-most valuable company. Here’s why:

1. AI Dominance:

   • Nvidia’s high-end chips power virtually all artificial intelligence applications, including OpenAI’s ChatGPT.

   • Over the past year, Nvidia’s stock has nearly tripled in value, reaching an impressive $2.68 trillion.

2. Apple’s Decline:

   • Apple, once the dominant force, has ceded its No. 1 spot to Microsoft.

   • Weak iPhone demand and fierce competition in China have impacted Apple’s growth.

   • Apple’s current valuation stands at $2.92 trillion.

3. Nvidia’s Explosive Growth:

   • Nvidia’s innovation journey has been remarkable:

     • It started with gaming demand.

     • Then it rode the crypto wave.

     • Now, AI adoption has fueled its explosive growth.

   • The company’s heavy weighting on the S&P 500 and Nasdaq has driven U.S. stocks to record highs.

4. Fastest Trillion-to-Trillion Leap:

   • In 2024, Nvidia became the fastest company to grow from $1 trillion to $2 trillion.

   • It outpaced giants like Amazon, Google-parent Alphabet, and Saudi Aramco.

5. Consistent Performance:

   • Nvidia consistently exceeds Wall Street’s expectations for revenue and profit.

   • Demand for its graphic processors far outstrips supply as Big Tech integrates AI applications.

6. Market Impact:

   • Despite its rapid rise, Nvidia’s forward earnings valuation remains attractive.

   • Trading at 37 times forward earnings (compared to 48 times a year ago), it remains a compelling investment.

   • The GraniteShares 2x Long NVDA Daily ETF, tracking Nvidia’s performance, has hit record net assets.

7. Bullish Outlook:

   • Options traders are bullish, with a surge in Nvidia call options.

   • The stock’s history-making streak continues, reflecting investor confidence.

Nvidia’s ascent underscores the transformative power of AI and its impact on market dynamics.

3. U.S. Refiners Boost Fuel Output Past 90% Capacity for Summer Driving Season: U.S. crude oil refiners are gearing up for a high-octane summer. Here’s the rundown:

1. Operating at Full Throttle:

   • Refiners plan to operate above 90% of their combined processing capacity for the remainder of the quarter.

   • Recent overhauls have paved the way for increased production.

2. Spring Prices and Utilization:

   • Strong spring production levels have kept retail gasoline prices in check, similar to last year.

   • The nationwide average price for regular gasoline hovers around $3.56 per gallon, just below the year-ago level.

3. Q2 Forecast:

   • Analysts estimate that around 90% utilization would be a fair forecast for Q2 2024.

   • Refineries completed overhauls in April and have ramped up production in May.

4. Industry Comparison:

   • The 90% target falls short of the industry’s 93% capacity achieved in Q2 2023.

5. Profitability Outlook:

   • Despite lower utilization, profitability looks promising as we head into summer.

   • Low product inventories contribute to the positive outlook.

6. Leading Refiners:

   • Marathon Petroleum Corp plans to run its refineries at 94% capacity during Q2, up from 82% during heavy maintenance in Q1.

   • Valero Energy Corp, the second-largest U.S. refiner, aims for 95% utilization.

7. Quarterly Expectations:

   • Energy experts anticipate refiners to operate between 90% and 95% for the balance of the quarter.

Buckle up—the summer driving season is revving up! 🚗💨

4. Trump Media Stock Tumbles Amid Guilty Verdict: In a dramatic turn of events, Trump Media & Technology Group (DJT.O) shares plummeted approximately 5% during volatile trading on Friday. The cause? A New York jury found former U.S. president Donald Trump guilty of falsifying documents to conceal a hush money payment to a porn star. The stock initially surged but quickly reversed course, capturing the attention of individual traders on Reddit’s WallStreetBets forum. Notably, the majority of the company’s 621,000 shareholders are retail investors. Art Hogan, chief market strategist at B. Riley Wealth, aptly described the situation: “It’s a meme stock that has no fundamentals.” Meanwhile, Trump’s political aspirations remain intertwined with TMTG, the parent company of his social media platform, Truth Social, which also doubles as a betting ground for his supporters. As the first U.S. president to be convicted of a crime, Trump’s net worth—largely tied to his TMTG stake—stands at a staggering $5.7 billion. However, with TMTG’s valuation reaching an astronomical $9.2 billion (equivalent to 2,200 times its 2023 revenue of $4.1 million), the stock’s true worth remains a perplexing enigma .

5. India’s Power Grid Defies Heatwave: Technical Skill and Stability Shine: In the scorching heat of May, India’s electricity grid has demonstrated remarkable resilience, maintaining stability despite record-breaking temperatures. This technical prowess has averted embarrassing blackouts during the crucial election period.

Key Points:

• Heatwave Intensity: Daily temperatures in the New Delhi suburb of Palam have soared to an unprecedented seasonal average of 35.1°C (95°F) this May, surpassing last year’s 30.1°C and the long-term average of 33.3°C.

• Peak Load Records: Despite the sweltering conditions, the grid managed to handle a record peak load of 246 million kilowatts on May 29, followed by an even higher 250 million kilowatts on May 30. These figures shattered the previous record set in September 2023 (240 million kilowatts).

• Stability Triumphs: Remarkably, the transmission system remained unusually stable throughout the heatwave, outperforming periods with lower demand. Transmission frequency dipped below the minimum acceptable target of 49.9 cycles per second (Hertz) for only 2.3% of the time in the first 30 days of May.

• Historic Performance: This marks the grid’s best monthly performance in over two years, despite the immense strain caused by the heatwave. By contrast, both May 2023 and May 2022 saw frequency fall below target 9.8% of the time.

• Risk Mitigation: In the past, coal shortages led to power generator failures, prolonged under-frequency, and uncontrolled blackouts. To prevent a recurrence, the government prioritized coal movements and stockpiled inventories at power plants.

• Strategic Scheduling: Grid controllers ensured reliability by scheduling abundant generation, creating an extra reserve margin. Surprisingly, India experienced above-target frequency on 22 out of 30 days this month—a departure from the norm where booming demand often leads to under-frequency.

• Balancing Act: While systematic over-frequency consumes extra fuel, it pays off in terms of enhanced reliability and reduced blackout risk.

6. Pending Home Sales Slump Amid Rising Mortgage Rates: In a notable twist, pending home sales in April hit their slowest pace since April 2020, signaling a cooling real estate market. The National Association of Realtors reported a 7.7% drop in signed sales contracts on existing homes compared to March. These pending sales serve as a forward-looking indicator, reflecting potential closed sales one to two months later. Surprisingly, they were 7.4% lower than the same period last year.

The culprit? Escalating mortgage rates. The average rate on the 30-year fixed mortgage surged from around 6.9% at the end of March to a hefty 7.5% by April’s close. This abrupt increase had a significant impact on buyer behavior, especially given the backdrop of climbing home prices and limited supply, which intensified competition.

Lawrence Yun, chief economist for the NAR, acknowledged the challenge: “The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market.” However, there’s a glimmer of hope—the Federal Reserve’s anticipated rate cut later this year could improve affordability and boost supply.

Sales dipped across the entire country, but the Midwest and West felt the brunt. The Midwest, known for its affordable markets, and the West, home to some of the nation’s priciest areas, both experienced declines. Yet, Yun suggests that regions facing measurable home price drops might offer second chances for buyers if job growth continues.

Interestingly, sellers responded to the sluggish April sales pace by cutting prices. Redfin’s report revealed that 6.4% of sellers adjusted their asking prices—the highest level since 2022. Additionally, the median asking price dipped for the first time in six months.

As we head into summer, active inventory in April surged by 30% compared to the same month in 2023, hinting at a potentially more active market. But the key to revitalizing real estate lies in lower mortgage rates, which could entice both buyers and sellers back into the game.

7. Unrivaled: A New Era for Women’s Basketball: In a groundbreaking move, Unrivaled, the pro women’s basketball league founded by WNBA stars Breanna Stewart and Napheesa Collier, has secured an impressive lineup of investors from the sports and media world. As interest in women’s professional leagues continues to rise, Unrivaled aims to revolutionize the game and elevate player compensation.

Key Points:

• Star-Studded Backing: Unrivaled’s investor roster reads like a who’s who in the industry. Former ESPN president John Skipper, ex-Turner president David Levy, and former Warner Bros. CEO Ann Sarnoff lead the charge. Athletes such as NBA All-Star Carmelo Anthony and soccer icon Alex Morgan (via her venture capital firm) have also thrown their support behind the league.

• Equity for Athletes: Unrivaled isn’t just about financial backing; it’s about empowering players. Athletes will receive equity in the league, ensuring they have a stake in its success.

• Historic Salaries: Unrivaled boldly promises the highest average salary in women’s pro sports league history. By offering competitive compensation, the league aims to attract top talent and elevate the status of women’s basketball.

• Game-Changing Format: Set to launch in January, Unrivaled will operate during the months leading up to the WNBA season. Its innovative format provides athletes with an additional playing option during the U.S. offseason.

• Filling the Gap: Unrivaled extends the professional basketball calendar, bridging the gap for players. No longer limited to overseas opportunities, athletes now have a compelling alternative within their home country.

• Changing the Narrative: For years, going overseas was the default offseason choice for players. Unrivaled disrupts this tradition, offering a fresh narrative and a new path for women’s basketball.

Get ready for Unrivaled—a league that combines star power, equity, and historic salaries to redefine women’s basketball.

8. Dell Faces Investor Disappointment Despite AI Server Revenue Surge: Dell Technologies Inc. experienced its most significant stock decline since its return to the public market in 2018. The reason? Despite achieving its first revenue increase since 2022, Dell failed to meet investors’ lofty expectations for its AI server business.

Key Points:

• Revenue Boost: Dell’s sales rose by 6.3% to reach $22.2 billion in the period ending May 3. This exceeded analysts’ average estimate of $21.6 billion. The company’s profit, excluding certain items, amounted to $1.27 per share, slightly surpassing the projected average of $1.23.

• AI Server Surge: Dell’s powerful servers, designed to handle artificial intelligence tasks, saw remarkable growth. Revenue from these servers more than doubled from the previous quarter, reaching $1.7 billion. Additionally, the backlog for these machines increased by over 30% quarter-over-quarter, totaling $3.8 billion.

• High Expectations: The excitement surrounding AI demand for Dell’s servers had set the bar high for the company’s quarterly results. However, the stock plummeted 18% to $139.56—the largest single-day decline since Dell’s return to the public market in December 2018.

• Disappointing Q1 Results: Analyst Toni Sacconaghi noted that Dell’s Q1 2025 results fell short of very high expectations. Adjusted operating margin decline raised concerns that AI servers were being sold at near-zero margins.

• Continued AI Momentum: Dell remains optimistic about sustained AI demand throughout the year. Chief Financial Officer Yvonne McGill emphasized this during a conference call following the results.

• Revenue Outlook: Dell revised its revenue outlook for the fiscal year ending in February 2025. The projected range is $93.5 billion to $97.5 billion—an 8% increase at the midpoint, surpassing analysts’ average estimate of a 7% gain. Adjusted profit is expected to be around $7.65 per share, compared to the $7.70 average estimate.

• PC Business: Dell’s better-known business of selling personal computers generated $12 billion in revenue, remaining relatively stable year-over-year. Surprisingly, sales of business PCs increased by 3% to $10.2 billion, defying expectations of a 2% drop.

• PC Market Recovery: After a historic decline, the PC market showed signs of recovery. In Q1, shipments increased by 1.5%, marking the first growth since the end of 2021. PC-makers are hopeful that the launch of machines equipped with new versions of Microsoft Corp.'s Windows software and AI-capable hardware will further accelerate growth in 2024.

Despite the setback, Dell’s AI journey continues, and the company remains a key player in the evolving landscape of technology.

9. Fed’s Inflation Stance Remains Steady Despite Mixed Data: The Federal Reserve’s unwavering commitment to maintaining higher interest rates for an extended period appears unshaken, even in the face of fresh inflation data. Let’s delve into the details:

• Core Inflation: The core Personal Consumption Expenditures (PCE) index, which excludes volatile food and energy prices, held steady at 2.8% over the prior year in April. This aligns with expectations and reflects continued price stickiness.

• Month-Over-Month Progress: Although the year-over-year figure remained unchanged, the month-over-month increase in April showed a slight improvement, clocking in at 0.2%. Notably, this was the slowest increase for the index so far in 2024.

• Mixed Signals: Ryan Wang, an HSBC US economist, aptly described the situation as a mix. While the Fed may find solace in the easing month-over-month trend, the flat year-over-year figure doesn’t signal significant progress in disinflation.

• Caution Remains: Despite the data, numerous Fed officials continue to exercise caution. New York Fed President John Williams acknowledges that rate cuts will happen eventually but doesn’t feel any urgency.

• Data Threshold: Fed Chair Jerome Powell emphasizes the need for more than a quarter’s worth of data to assess whether inflation is consistently moving toward the central bank’s 2% goal.

• Fed’s Dilemma: Fed Governor Chris Waller seeks several months of data, implying that confidence in rate cuts will require more than three inflation reports.

• Rate Cut Expectations: Investors have scaled back hopes for a rate cut this year. The odds of a potential first rate cut in September have decreased to nearly 50%, with November also in play.

• Economists’ Views: While some anticipate a 2024 rate cut in September, others foresee two cuts in July and November due to easing inflation and softening labor market conditions.

• Fed’s Current Stance: The benchmark interest rate remains at a 23-year high, ranging from 5.25% to 5.50%.

• Neel Kashkari’s Perspective: Minneapolis Fed President Neel Kashkari doesn’t rule out an interest rate hike. However, the Fed may maintain rates for an extended period until convinced that inflation is sustainably returning to the 2% target.

In this delicate balancing act, the Fed continues to navigate economic uncertainties while keeping a watchful eye on inflation dynamics.

10. US Government Bonds Rally Amid Benign Inflation Data: US government bonds experienced a rally, adding to their monthly gains, following the release of benign inflation data. Here are the key points:

• Stable Inflation: The Fed’s preferred measure of consumer price trends remained steady in April at 2.7% year-on-year. This data supports predictions that the Federal Reserve will cut interest rates at least once this year.

• Market Response: Treasury yields across various maturities declined by at least five basis points, reaching the lowest levels of the week. Traders slightly increased wagers on a quarter-point Fed rate cut as early as September.

• Month-End Rebalancing: Passive investment funds, aiming to mimic index performance, contributed to the market’s support due to month-end index rebalancing.

• Two-Year Yields: Yields on two-year notes, which are more sensitive to changes in Fed policy, fell below 4.87%, the lowest level in over a week. Earlier this week, two-year Treasury yields approached 5%, reflecting ebbing expectations for rate cuts.

• Fed’s Outlook: While overnight index swaps contracts fully price in a quarter-point rate cut in December, the odds of a move as soon as September have increased to around 50%.

• Bond Index Rebalancing: Auctions held during the month contributed to an estimated 0.10-year increase in the duration of the Treasury index. Despite being larger than the monthly average, this increase is smaller than typical over the past decade.

• 10-Year Note Yield: The 10-year note’s yield fell below 4.5% after peaking above 4.63% earlier in the week. Soft economic data and comments from Fed officials influenced its fluctuations.

As the Fed carefully navigates economic conditions, the bond market remains responsive to inflation dynamics and rate-cut expectations.

Phew, that's a lot to unpack! Remember, this is just a snapshot of the complex and ever-evolving financial landscape. So, stay informed, diversify your investments, and don't forget to have a little fun along the way!

Bonus Tip: Want to dig deeper into any of these stories? Let me know in the comments below, and I'll be happy to share some additional resources!

And there you have it, folks! Remember, folks, the financial world is like a game of Monopoly—sometimes you’re the banker, sometimes you’re stuck in jail, and occasionally you land on Boardwalk and buy a hotel. Happy investing! 📈💰

 P.S. Did we miss anything major? Hit us up via an email with your hot takes and financial insights!

Credit Utilization: The Goldilocks Principle

Finding the Perfect Balance for Healthy Credit

Introduction

Welcome to the seventh chapter of our credit saga! Today, we’re diving into the delicate world of credit utilization. Think of it as the Goldilocks principle—too much or too little can upset the balance. Let’s explore how to keep it “just right.” 🌟

1. What Is Credit Utilization?

• The Basics: Credit utilization is the percentage of your available credit that you’re using.

• Sweet Spot: Aim for a utilization rate below 30%.

• Why It Matters: Lenders peek at this number—it reflects your credit responsibility.

2. The Low Utilization Trap

• Myth: “Zero Utilization Is Best!”

  • The Tale: Keep your balances at zero.

  • The Truth: While low utilization is good, zero can backfire.

  • Why? No activity = no credit history. Lenders want to see responsible use.

  

3. The High Utilization Quicksand

Myth: “Max Out Your Cards!”

• The Tale: Charge everything! Live large!

• The Truth: High utilization hurts your score.

• Why? It signals financial stress and risk.

4. The Goldilocks Rule

• Just Right: Keep your utilization around 10%-30%.

• Action Steps:

  • Pay Balances: Regularly pay down credit card balances.

  • Spread the Love: Use multiple cards lightly.

  • Monitor: Check your utilization regularly.

  

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Conclusion

Congratulations! You’ve mastered the art of credit utilization. Remember, it’s not about avoiding credit—it’s about using it wisely. Stay tuned for our next episode: “Hard vs. Soft Inquiries: The Detective’s Guide.” 🔍

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So, there you have it! With a little guidance and the right tools, you'll be a master in understanding (and hopefully master it) financial concepts in no time. Go forth, plant your seeds, and watch your wealth garden flourish!

This is the next part in this comprehensive series on “Credit Alchemy: Transforming Your Worth into Wealth” ( we want to get you ready for the next step in your life, whatever it may be).

If you liked this, check out other series including, a 9 part extensive series on “All Things Tax Related” and 5 Part series on Investing and all our previous articles here.

So, whether you are crawling and sprinting, let's do this together!

Until next time, wishing a very happy wealthness (you see what we did there 😃) to you!

📚 Bonus Resources:

1. Investopedia: Investopedia provides comprehensive information on creditworthiness, including factors that impact it, how to check your credit report, and steps to enhance your creditworthiness. Remember that your creditworthiness affects loan approvals, interest rates, and more.

2. The Balance: The Balance explains creditworthiness and emphasizes the importance of monitoring your credit score. You can access your credit score for free through services like Credit Karma, Credit Sesame, or WalletHub.

3. SuperMoney: SuperMoney offers practical steps for managing creditworthiness. You can obtain a free annual credit report from AnnualCreditReport.com or use free credit monitoring services like Credit Karma or Credit Sesame.

Remember to stay informed, check your credit score regularly, and make timely payments to maintain a strong credit profile. 🌟📊💳

Your Wealth Journey Awaits!

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