Wall Street Breakfast

Fed's Powell worried about too little and too late

Fed chief says 'elevated inflation is not the only risk.' (0:16) Mounjaro tops Ozempic in study. (3:32) Warren Buffett value indicator tops dot-com levels. (4:47)

Show Notes
Nvidia, Micron, others in focus as KeyBanc boosts targets after chip checks
Federal Reserve considers tweaking GSIB surcharge for U.S.'s biggest banks

Episode transcripts: seekingalpha.com/wsb
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Duration:: 5m
Broadcast on:: 09 Jul 2024
Audio Format:: mp3

Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action news and analysis. Good afternoon. Today is Tuesday, July 9th, and I'm your host, Kim Khan. Our top story so far. Federal Reserve Chairman Jay Powell continued to try and walk the monetary policy tightrope as he testified before the Senate Banking Committee. In day one of what used to be Humphrey Hawkins' testimony, Powell reiterated that rate decisions are being made meeting by meeting. He noted progress towards the Fed's 2% inflation goal, but said more data is needed to confirm its on a sustainable path. He also warned about weakening the economy too much. In light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face. Reducing policy restraint too late, or too little, could unduly weaken economic activity and employment. In considering adjustments to the target range of the federal funds rate, the Committee will continue its practice of carefully assessing incoming data and their implications for the evolving outlook, the balance of risks, and the appropriate path of monetary policy," Powell said. The markets were non-committal, although bonds seemed to focus a little more on the hawkish comments. The 10-year treasury yield rose back above 4.3%. In equities, the major averages were mixed around the unchanged line. As far as the September FOMC meeting is concerned, odds of a quarter-point cut remained around 70%. Powell will be back for another Q&A before the House Financial Services Committee on Wednesday. In addition, the Fed is reportedly weighing a rule change that could reduce the amount of money the U.S.'s eight largest banks are required to set aside to bolster their reserves to weather a major downturn. The move would save the banks billions of dollars altogether and not to win for the industry by easing capital requirements. Reuters says the change applies to how the regulator calculates an extra layer of their capital imposed at the U.S.'s Global Systemically Important Banks, or GSIBs, for their GSIB surcharge, which was introduced in 2015 in reaction to the 2008 financial crisis. Among active stocks today, key buying capital markets set a recent supply chain check into the semiconductor industry was mixed. Analysts John Vinn raised estimates on NVIDIA and boosted its price target on the stock to 180 from 130. That's another price target hike for NVIDIA. It also raised its price targets for Micron, Marvell, and monolithic power systems. But he cut estimates for on-semiconductor and lattice semiconductor with the analog space unable to sustain the improvement in bookings that were seen last quarter to, in large part, to the ongoing correction in the automotive space. Argus raised its price target on Microsoft to $526 from 475, citing its investments in generative AI, both internally and externally. As Joseph Bonner says, Microsoft has managed to put itself near the center of the generative AI platform transformation with only hardware, supplier, and NVIDIA with a greater claim. We expect Microsoft to continue to pursue long-term growth through its JNI and cloud investments, and it may just hold the premier position in business software technology. And Piper Sandler upgraded Bank of America to neutral from underweight on the view that large banks will see net interest income bottom in Q2 2024, then head higher for a sustained period. Analyst R. Scott Seifers says, "With BAC's NII likely to trough this quarter and then begin a more powerful inflection upward, we no longer see a compelling reason to single out the name for underperformance." In other news of note, a new study found that patients taking Eli Lili's Monjaro lost significantly more weight than those taking Novo Nordisk Ozempic. The study, published in the JAMA Internal Medicine website, analyzed the electronic health records of roughly 41,000 or BISA overweight patients who took the drugs. It found that the mean loss in body weight at three months of use was 5.9% for Monjaro users versus 3.6% for ozempic users. At six months of use, the mean loss was 10.1% for Monjaro users compared to 5.8% for ozempic. The mean body weight loss at 12 months was 15.3% for Monjaro versus 8.3% for those using ozempic. The risk of gastrointestinal adverse events was similar for both drugs. And Samsung will launch a new health tracking feature that the Apple Watch does not yet have at the Galaxy Unpacked event. Bloomberg says the new Galaxy Watch models will track the user's advanced Glycation End Products or AGE's index that could provide an indicator of metabolic health and biological age. An Ultra version aimed to compete with the $799 Apple Watch Ultra 2 is anticipated to be unveiled besides the new foldable phones and a Galaxy Ring health tracker. And in the Wall Street research corner, the Warren Buffett indicator reached its highest level in history above peaks during the dot com bubble, the global financial crisis, and the recent 2022 bear market. The Buffett indicator compares the total market capitalization of all US publicly traded stocks represented by the Wilshire 5000 index to US GDP. The Oracle of Omaha called it the best single measure of valuation. As of July 5, the ratio topped 196%, which is notably higher than the 138.4% during the dot com bubble peak. It's also higher than the one at 6.9% hit back in October 2007 during the real estate and financial crisis. The ratio provides insight into how the stock market is valued relative to the overall economy, which in turn helps investors gauge overall sentiment and potential investment opportunities. That's all for today's Wall Street lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at seekingoffa.com/wsp. And for a wealth of coverage on stocks and ETFs, go to seekingoffa.com/subscriptions. (upbeat music)