March 5, 2024, Newsletter

Dear Friends,

Tangents:
March 5,1981: The world’s first home computer is launched.  The British ZX81 sold over 1.5 million units.
2004: Martha Stewart was convicted of obstructing justice and lying to the government about why she’d unloaded her Imclone Systems Inc. stock just before the price plummeted. Go to article >>
1770: Boston Massacre.

Solar maximum may already be upon us — but we won’t know for sure until the sun’s explosive peak is over
A solar physicist who accurately predicted that the sun’s explosive peak would arrive sooner, and be more powerful, than originally forecast tells Live Science that it may have already begun. However, we won’t know for sure until long after it has finished. Read More.

390 million-year-old fossilized forest is the oldest ever discovered
Researchers have discovered a fossil forest with small, palm-like trees and arthropod tracks dating back to the Middle Devonian. Read More.

Astronomers find heaviest black hole pair in the universe, and they’ve been trapped in an endless duel for 3 billion years
Two supermassive black holes spotted circling inside a remote “fossil” galaxy are the heaviest, and the closest, black hole binary ever found. Read More.

Scientists release genetically modified mosquitoes to fight dengue in Brazil
Scientists in Brazil are releasing genetically modified mosquitoes into the environment to combat soaring cases of dengue fever in the country.
Full Story: Live Science (3/5)

Taylor Swift is related to famed poet Emily Dickinson
Her forthcoming album “The Tortured Poets Department” suddenly makes sense.

How to watch the 10 Oscar movies nominated for best picture
Heaven forbid you are unschooled for the post-Oscars discourse!

Jeff Bezos dethrones Elon Musk to become the richest person on Earth again
Just wait a couple of months and they’ll switch again (and again, and again).

Jason Kelce, Travis Kelce’s brother, announces his NFL retirement
There’s probably a Taylor Swift lyric out there for this.

“That’s right, the Supreme Court ruled that states cannot keep Trump off their ballots, which means that the Supreme Court remains the only place where Trump can win the popular vote.” — SETH MEYERS

“Yes, the Supreme Court knows you can’t just let states decide who goes on their ballots,” Colbert said. “States are too busy deciding that life begins in the freezer section, next to the pearl onions.” — STEPHEN COLBERT

“Let that be a lesson to all you out there who might be thinking about subverting the Constitution in a presidential election. You go, boy!” — JON STEWART

“Speaking of former President Trump, today the Supreme Court unanimously ruled that Colorado is not allowed to remove him from the 2024 ballot. Then out of habit, Trump immediately appealed the decision. He’s like, ‘This is a witch — oh, wait a minute, OK.’” — JIMMY FALLON

“Donald Trump had two rallies this weekend, one in Virginia and one in North Carolina. But the two speeches had one unifying theme: His brain is broke.” — STEPHEN COLBERT
PHOTOS OF THE DAY

Manila, Philippines
French urban climber Alain Robert, known as the French Spider-Man, climbs the GT Capital building. Robert climbed the 47 floors of the building. The police later arrested him
Photograph: Francis R Malasig/EPA

New York, US
Members of Figure Skating in Harlem perform at the Central Park rink for a gala show
Photograph: Charly Triballeau/AFP/Getty Images

​​​​​​​Bengaluru, India
Great cormorants rest as the sun sets at Sankey Tank Lake in Karnataka
Photograph: Idrees Mohammed/AFP/Getty Images
Market Closes for March 5^th, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1923, Montana’s Old-Age Pension Law—the first state law providing retirement pensions and that stood up to constitutional challenges—was enacted, setting a key precedent for the creation of Social Security a decade later.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite declined slightly to 21,525.93 in Toronto.
Shopify Inc. contributed the most to the index decline, decreasing 2.9%.
Lithium Americas Corp. had the largest drop, falling 8.6%.
Today, 130 of 225 shares fell, while 93 rose; 6 of 11 sectors were lower, led by information technology stocks.
Insights
* This quarter, the index rose 2.7%
* The index advanced 4.6% in the past 52 weeks. The MSCI AC Americas Index gained 25% in the same period
* The S&P/TSX Composite is at its 52-week high and 15.2% above its low on Oct. 27, 2023
* The S&P/TSX Composite is up 1% in the past 5 days and rose 3.1% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 17.8 on a trailing basis and 14.7 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.1% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.41t
* 30-day price volatility fell to 11.80% compared with 11.87% in the previous session and the average of 10.87% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Information Technology | -52.9310| -2.8| 0/10
Communication Services | -6.9420| -0.9| 1/4
Real Estate | -3.9598| -0.8| 4/17
Consumer Staples | -0.6862| -0.1| 4/7
Health Care | -0.5782| -0.9| 0/4
Utilities | -0.0243| 0.0| 6/9
Industrials | 0.6326| 0.0| 7/19
Consumer Discretionary | 2.7239| 0.4| 7/6
Materials | 5.5237| 0.2| 25/27
Energy | 24.2899| 0.6| 26/13
Financials | 26.8065| 0.4| 13/14
================================================================
| | |Volume VS| YTD
|Index Points| | 20D AVG | Change
Top Contributors | Move |% Change | (%) | (%)
================================================================
Shopify | -25.1700| -2.9| -28.1| -3.2
Constellation Software | -12.3100| -2.4| -12.2| 12.7
Descartes Systems | -4.3590| -6.0| 91.4| 3.6
Franco-Nevada | 5.9980| 3.0| 79.2| 4.3
Canadian Natural Resources | 9.2320| 1.3| 298.3| 11.7
RBC | 11.8500| 0.9| -62.9| -0.7
US
By Rita Nazareth
(Bloomberg) — Stocks came under pressure as a trio of tech heavyweights fell, with traders wading through mixed economic data in the run-up to Jerome Powell’s testimony to Congress.
Equities lost traction after a rally that has spurred concern about sky-high valuations — especially in megacaps, leaving the group vulnerable to big moves in the face of bad news.
Apple Inc.’s iPhone woes in China deepened while Advanced Micro Devices Inc. hit a US roadblock in selling an artificial-intelligence chip to the Asian nation.
And Tesla Inc. extended its rout as China shipments slumped.
Bullish positioning in US technology stocks is at the highest in three years — raising the risk of a pullback, according to Citigroup Inc.’s Chris Montagu.
Long positioning in Nasdaq 100 futures is “extremely extended,” he said.
“Trees don’t grow to the sky,” said Kenny Polcari at SlateStone Wealth. “What is starting to concern some investors is whether or not some of these tech companies that have gotten stretched can in fact live up to the ‘lofty valuations’ that investors have placed on them.”
Wall Street also weighed data showing the US service sector cooled — even as orders and business activity picked up.
Caution prevailed, with Powell heading to Capitol Hill for his semiannual testimony before Congress, where the Federal Reserve chief is expected to reiterate the lack of urgency to cut rates.
The S&P 500 dropped 1%, while the Nasdaq 100 slipped almost twice as much.
Tesla extended a two-day selloff to 11%, while Apple suffered its fifth straight loss.
Nvidia Corp. rose.
Treasury 10-year yields fell six basis points to 4.15%.
Bitcoin slid after a record-setting run that topped $69,000.
Gold also hit an all-time high.
The “Magnificent Seven” — comprising Apple, Microsoft Corp., Nvidia, Amazon.com Inc., Meta Platforms Inc., Alphabet Inc. and Tesla — have powered the S&P 500 to all-time peaks this year, partly fueled by the AI frenzy.
The rally has left strategists scrambling to lift their 2024 targets — while raising questions on whether tech is seeing a boom or a bubble.
To JPMorgan Chase & Co.’s Marko Kolanovic, the dramatic rally in US equities and Bitcoin signals accumulating froth — conditions that typically precede a bubble when asset prices rise at an unsustainable pace. Meanwhile, David Kostin at Goldman Sachs Group Inc. is among those who argue big tech’s lofty valuations are supported by fundamentals.
The so-called Magnificent Seven saw its average earnings per share rise 55% in the fourth quarter compared to a year ago, according to data compiled by Bloomberg.
Most of that group helped drive the Nasdaq 100 to its fourth consecutive monthly gain.
“The AI craze is a modern gold rush, and the tech ‘picks and shovels companies’ are seeing earnings explode as companies buy chips and cloud space to fuel the boom,” said Tom Essaye, founder of The Sevens Report. “But if AI doesn’t result in increased profitability for the rest of the S&P 500 over the coming years, then demand for AI chips will evaporate as will AI-related cloud demand.”
With generative AI set to be the growth theme of the decade, UBS’s Chief Investment Office continues to believe that US tech stocks should make up a substantial portion of investors’ equity allocations. However, the firm says investors with excessive exposure should consider broadening tech exposure to capture the next growth opportunities.
“While we see further room for the current tech rally to run, we think investors should review and optimize their exposure to technology to protect against potential declines and benefit from opportunities beyond big tech,” said Solita Marcelli at UBS Global Wealth Management.
“Although we see pockets of speculation and the tech sector could be due for a breather, we don’t see a bubble,” said Keith Lerner at Truist Advisory Services. “Valuations are rich on most metrics, but with tech, comparative earnings momentum tends to be a more important near-term driver. And profit trends remain strong and are at new highs.”
The three-year outperformance of the tech sector to the S&P 500 is just above 30%, Lerner said.
This is roughly in line with the 30-year average and far from the peak of just above 250% seen in March 2000, he added.
“Comparisons to the dot-com bubble should be expected given the concentration of gains in the tech sector and proliferation of excitement around a new technology,” said Ross Mayfield at Baird. “But from 1996 to 1999, the average three-year trailing return was 96%. We are not yet close to those levels. There’s room to run.”
Valuations, earnings trends and market sentiment all refute speculation that an AI-driven tech bubble has reemerged in US large caps, according to Bloomberg Intelligence strategists led by Gina Martin Adams.
“Our theme universe of AI stocks shows sales generally supporting price gains, with multiples in the middle of their five-year range,” they wrote.
“Unless fundamental shortfalls emerge, high-market-cap concentration for mega-cap tech and strong returns for AI may not present material risk to the S&P 500.”
The largest five companies in the S&P 500 trade at less than half the multiples of the “Four Horsemen” — Intel Corp., Cisco Systems Inc., Microsoft and Dell Technologies Inc. — in March 2000, which surpassed 80 times on a forward price-to-earnings basis, according to BI.
Additionally, valuations appear to be relatively contained across accelerating technology themes — such as AI, future of finance, cloud and robotics — with most baskets trading at or beneath five-year average price-to-sales multiples, they said.
“While we stand by our argument that US stocks are not in a bubble, the confluence of a prospective Fed easing cycle and an attention-grabbing new technology does raise the risk that one might form later this year and into 2025,” said Nicholas Colas at Data Trek Research.
“The easiest way to sidestep this problem would be for the Fed to delay rate cuts as long as possible.”
While stock prices are not part of the Fed’s official mandate, Colas says he’s wondering whether Powell will try to dampen the market’s recent enthusiasm by delivering a more hawkish than expected message this week.
“The AI frenzy combined with expectations for rate cuts in 2024 renewed ‘bubbly’ investor behavior,” according to the GMO Asset Allocation team. “If the projected Fed cuts fail to occur or growth companies fail to deliver on aggressive expectations, growth investors will likely wind up disappointed.”

Corporate Highlights:
* CrowdStrike Holdings Inc. gave a forecast for revenue and profit in the current quarter that topped analysts’ estimates, signaling strong customer demand for the company’s expanding suite of cybersecurity offerings.
* Nordstrom Inc. is forecasting muted revenue and comparable sales growth this year as sluggish demand at its high-end namesake stores offsets an improving outlook at its off-price Rack stores.
* Target Corp.’s fourth-quarter profit beat estimates, as the retailer continued its improvements in inventory management and said its decline in traffic slowed.
* Walt Disney Co. Chief Executive Officer Bob Iger is “extremely confident” that the company will meet its goal of showing a profit in its streaming TV businesses in the fourth quarter of this fiscal year.
* A Citigroup Inc. reorganization aimed at streamlining the bank and making it more competitive with its peers has gone swifter than expected, Chief Executive Officer Jane Fraser said, as she set out positive guidance for the year ahead.
* New York Community Bancorp climbed after the stock tumbled 43% in prior two sessions after a pair of rating downgrades.
* Zillow Group Inc. fell after short seller Spruce Point Capital Management said it was betting against the stock and highlighted challenges facing the company, including antitrust litigation targeting broker commissions in the US housing industry.

Key Events This Week:
* Canada rate decision, Wednesday
* Eurozone retail sales, Wednesday
* US ADP employment, JOLTS job openings, Wednesday
* Fed Chair Jerome Powell testifies before the House Financial Services Committee, Wednesday
* Fed issues Beige Book, Wednesday
* Fed’s Neel Kashkari (Minneapolis) and Mary Daly (San Francisco) speak, Wednesday
* China trade, forex reserves, Thursday
* European Central Bank’s rate decision, Thursday
* US initial jobless claims, trade, Thursday
* President Joe Biden delivers the State of the Union address, Thursday
* Fed Chair Jerome Powell testifies before the Senate Banking Committee, Thursday
* Cleveland Fed President Loretta Mester speaks, Thursday
* Eurozone GDP, Friday
* US nonfarm payrolls, unemployment, Friday
* New York Fed President John Williams speaks, Friday
* ECB Governing Council member Robert Holzmann speaks, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 fell 1% as of 4 p.m. New York time
* The Nasdaq 100 fell 1.8%
* The Dow Jones Industrial Average fell 1%
* The MSCI World index fell 0.8%
Currencies
* The Bloomberg Dollar Spot Index was little changed
* The euro was little changed at $1.0858
* The British pound rose 0.1% to $1.2705
* The Japanese yen rose 0.4% to 149.92 per dollar
Cryptocurrencies
* Bitcoin fell 7.9% to $62,170.83
* Ether fell 4.7% to $3,415.67
Bonds
* The yield on 10-year Treasuries declined six basis points to 4.15%
* Germany’s 10-year yield declined seven basis points to 2.32%
* Britain’s 10-year yield declined 11 basis points to 4.01%
Commodities
* West Texas Intermediate crude fell 0.7% to $78.16 a barrel
* Spot gold rose 0.7% to $2,129.88 an ounce

This story was produced with the assistance of Bloomberg Automation.
–With assistance from Denitsa Tsekova, Sagarika Jaisinghani, Alexandra Semenova and Yvonne Yue Li.
Have a lovely evening.

Be magnificent.
As ever,

Carolann
Never throughout history has a man who lived a life of ease left a name worth remembering. –Theodore Roosevelt, 1858-1919.

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7

Tel: 778.430.5808
(C): 250.881.0801
Toll Free: 1.877.430.5895
Fax: 778.430.5828
www.carolannsteinhoff.com