Market Update – May 28th, 2024

Author: Joe Maas, Synergy Asset Management

Tuesday, May 28th, 2024

Financial Markets

Last week was quieter, with all eyes on Nvidia’s earnings, housing data, and durable goods orders. By the close on Friday, May 24th, the Nasdaq Composite had risen by 1.35%, the S&P 500 remained flat, and the Dow Jones Industrial Average fell by 0.19% for the week. In the bond market, the Barclays Aggregate Bond Index dropped by 2.32% over the week.

Market News

Existing Home Sales. April existing home sales data came in below expectations at 4.14 million homes sold, reflecting a decline of -1.9% from March and a -1.9% drop from April 2023. Inventory increased to a 3.5-month supply, up from 3 months a year ago. Despite the slowdown in volume, the median sales price rose by 5.7% year-over-year to $407,600, indicating that buyers in this sluggish market are willing to pay a premium to secure a home.

This continued slowdown in home buying highlights the impact of higher mortgage rates, which are prompting many consumers to stay put in the short term, hoping for rate cuts from the Federal Reserve in the coming year.

Source: National Association of Realtors 

New Home Sales. Alongside April’s existing home sales data, new home sales also came in lower than expected. New single-family home sales came in at an annual rate of 634,000, marking a -4.7% decline from March and a -7.7% drop from a year ago. The median sales price was $433,500, down -1.4% from March but up +3.9% compared to a year ago. New home builders are facing significant headwinds from higher interest rates, which are dampening demand and making it more challenging to attract buyers, particularly for new builds at higher price points with higher mortgage rates. 

Durable Goods Orders. In April, durable goods orders rose by +0.7% month-over-month, defying expectations of a -1.2% decline. When excluding transportation, new orders increased by +0.4%, while new orders excluding defense remained virtually unchanged. Transportation equipment, which has been on the rise for three consecutive months, led the increase with a +1.2% uptick, reaching $96.2 billion.

Within the defense category, defense capital goods saw a +15.2% monthly jump in orders in April, which could be a result of increased demand related to geopolitical tensions in the Middle East. Although transportation and defense spending were the primary drivers of this month’s increase, the stable demand for durable goods overall remains a neutral indicator, hinting that the US may be on track for a soft economic landing.

Gold Rally. Gold reached new all-time highs on Monday, May 20th, driven by a combination of favorable factors. Persistent inflation, rising geopolitical tensions, and gold’s inherent value due to its limited supply have contributed to this rally. Other alternative assets, such as Bitcoin and silver, have also seen gains this year as investors seek to diversify their portfolios. Ethereum has also seen increased demand more recently as spot Ethereum ETFs won approval from the SEC last week. 

Another force at play is the substantial amount of cash remaining on the sidelines in risk-free instruments. As the Federal Reserve cuts rates and investors can no longer secure above 5% risk-free yields, this cash influx could drive various asset prices even higher.

NVDA Earnings. Nvidia reported its fiscal first-quarter earnings after the market closed on Wednesday last week, surpassing Wall Street’s estimates and raising their forward guidance. The company’s earnings surged +461% year-over-year, while sales soared by +262%.

In addition to these impressive financial results, the chipmaker revealed a 10-for-1 stock split effective June 7th, aimed at making its shares more accessible to investors, given the current stock price of approximately $1,000. Furthermore, Nvidia announced an increase in its quarterly dividend from $0.04 to $0.10 per share (pre-split), an increase of 150%, though only representing a forward dividend yield of 0.04%.

Following this news, Nvidia’s stock skyrocketed on Thursday morning, boosting the S&P 500, where it stands as the third-largest constituent. Nvidia’s continually stellar performance not only underscores its critical role in the US economy but also highlights the broader narrative of technological advancements driving efficiency and growth, particularly through innovations in AI, which is a key driver of the current market rally.

NVDA YTD performance, compared to the S&P 500:

Summary

Last week was quieter but still with a few notable economic data points, leaving the S&P 500 unchanged by the end of the week. April’s existing home sales fell -1.9% MoM to 4.14 million, and new home sales dropped -4.7% MoM to 634,000 annually, though home prices rose. Durable goods orders unexpectedly increased by +0.7%, driven by transportation and defense. Gold reached new highs on May 20th, related to inflation and geopolitical tensions. Nvidia’s earnings surged 461% year-over-year, boosting its stock and underscoring its importance in the tech sector. 

In closing, we want to express our sincere gratitude to our valued readers and loyal customers for entrusting us with your financial well-being. Your continued support is the cornerstone of our success, and we are committed to serving you with the utmost dedication and professionalism. As we navigate the ever-changing financial landscape together, we encourage you to reach out to us if there have been any shifts in your risk tolerance or if you have experienced any material changes in your Investment Policy Statement objectives or constraints.Your financial goals are our top priority, and we are here to adapt and tailor our strategies to align with your evolving needs, whether they pertain to risk and return objectives or constraints such as time horizon, taxes, liquidity needs, legal issues, unique circumstances, or changes in your financial planning and retirement objectives. Your feedback and communication are essential in helping us ensure your financial success. Thank you once again for your trust and partnership with Synergy Asset Management. We look forward to continuing this journey together.

We appreciate your continued trust.

Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA
The information contained herein is general in nature. It does not take into account your particular investment objectives, financial situation, or needs. It is provided for illustrative or informational purposes only, and should not be construed as advice. Our advisors can meet with you to discuss your retirement plan.