Pre-Market Plan [9/12]
Good Morning -
What an incredible session the market had yesterday. Yesterday was the largest intraday swing in terms of absolute point movement for the S&P 500 in all of 2024. It all came down to Investors concluding that - for now - there is no imminent deflation. I discussed yesterday that I absolutely did NOT want to see a too-cool/too-soft CPI number. In-Line is good. Even a bit hotter is okay.
Deflation is poisonous for the business environment, and I’ve been discussing how that is a top risk for markets. It results in weaker pricing power, lower profit margins, and ultimately, lower stock market valuations.
There were also a couple powerful catalysts that sparked a large rally in Semiconductors. NVDA Jensen Huang discussed at the Goldman Sachs Communacopia + Technology conference that AI demand for their chips was so strong that “for every dollar a cloud service provider spends with Nvidia, it translates to $5 worth of rentals.”
That observation on the perceived Return on Investment for Big Tech names revitalized a bid in Semiconductor industry as one of the biggest questions that investors have been thinking about has been: Will the FANG Companies get the ROI on their AI CapEx spend that is now in the tune of the billions.
This morning from my focus list, Micron (MU) received a downgrade from BNP Paribas to a price target of $67 from their previous target of $140. Raymond James also lowered MU’s target to $125, down from $160. MU plays an important role in the Semiconductor SOXX ETF, and I rate MU as one of the most underloved/undervalued names in the SOXX. The company has a chance to turnaround bearish sentiment on September 25th. I can only comment on the long-term potential (>9 months) of Micron because in the short-term anything (<2 months) can happen: my model points to MU going higher.
In today’s Daily Plan for members, I’ll cover recently released PPI data and Unemployment claims and what that means for the holistic picture ahead of FOMC next week.
Have a great day, folks!
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