TRG Fast Facts

By TRG Advisors on February 23, 2024

Weekly data-driven insights on the markets and economy

1. Bounce back

Markets bounced back significantly on Thursday, setting new records. After Nvidia reported stronger-than-expected earnings, the S&P 500 soared to an all-time high, up 1.7%, the Dow Jones increased 0.7% and the Nasdaq jumped 2.4%.[i]

2. Cautious Fed

After remarks from the Fed indicated its caution about cutting rates too soon, Treasury yields were mixed. On Thursday, the 10-year yield was hovering around flat at 4.3% and the 2-year yield was last up by 5 bps at 4.7%. Investors were initially hoping for rate cuts as soon as March but are now expecting the first one to take place in June.[ii]

3. Pending Approval

Capital One has announced it will acquire Discover Financial in a $35.3 billion deal. If approved, this deal enables Capital One to pass JPMorgan as the biggest credit card company by loans and solidifies its position as the third largest by purchase volume. The deal also adds support to Capital One’s banking operations ($109 billion in total deposits from Discover’s digital bank) and helps shave $1.5 billion in expenses by 2027. By 2027, the bank expects to add at least $175 billion in payments and 25 million of its cardholders onto the Discover network.[iii]

4. Strike Outs

According to the Bureau of Labor Statistics, there were 33 major work stoppages last year, the most since 2000, due to U.S. labor strikes. The number of strikes averaged 16.7 over the past 20 years. 458,900 total workers participated in a strike last year, with the services sector accounting for 397,700, or 86.7% of idled workers during the year. Within the services industry, 188,900 education and health workers and 171,500 information services workers walked off the job. Factory workers made up 61,200, or 13.3% of idled workers over the year.[iv]

5. Trading Places

Japan’s unexpected slip into a recession has caused the country to lose its spot as third-largest economy, usurped by Germany. Japan’s nominal GDP grew 5.7% in 2023 to come in at 591.48 trillion yen, or $4.2 trillion based on the average exchange rate that year. Meanwhile, Germany saw its nominal GDP grow 6.3% to reach 4.12 trillion euros, or $4.46 trillion based on last year’s average exchange rate.[v]

6. Complicated Picture

The producer price index (PPI) rose 0.3% for the month of January, the biggest move since August. Core PPI, excluding food and energy, increased 0.5%, also above expectations of a 0.1% gain. PPI excluding food, energy and trade services jumped 0.6%, its biggest one-month advance since January 2023.[vi] This rise in wholesale prices further complicates the inflation picture.

7. AI Excitement

The market was anxiously awaiting chipmaker Nvidia’s earnings report this week. On Thursday, Nvidia shares jumped 15% after beating earnings expectations. It reported revenue of $22.10 billion for its fiscal fourth quarter, a rise of 265% year on year, while net income surged by 769%. Much of this growth is driven by excitement over AI: Nvidia chips are used to train the huge AI models like those developed by Microsoft and Meta.[vii]

8. Disney Star

Former Disney Channel star Brigit Mendler is launching startup Northwood Space, which aims to produce ground stations to connect to satellites in space. The startup already has about $6 million in initial funding raised from investors including Founders Fund, Andreessen Horowitz and Also Capital. The startup aims to conduct a first test connecting to a spacecraft in orbit later this year.

[i] Singh, Pia and Yun Li, “S&P 500 rallies to record high on the back of strong Nvidia earnings: Live updates,” CNBC, February 22, 2024, https://www.cnbc.com/2024/02/21/stock-market-today-live-updates.html. Accessed February 22, 2024.

[ii] Singh, Pia and Sophie Kinderlin, “2-year Treasury yield rises as investors fret over interest rate outlook,” CNBC, February 22, 2024, https://www.cnbc.com/2024/02/22/us-treasury-yields-as-investors-fret-over-interest-rate-outlook.html. Accessed February 22, 2024.

[iii] Son, Hugh, “Here’s why Capital One is buying Discover in the biggest proposed merger of 2024,” CNBC, February 21, 2024, https://www.cnbc.com/2024/02/21/why-capital-one-is-buying-discover-in-the-biggest-merger-yet-of-2024.html?__source=iosappshare%7Ccom.apple.UIKit.activity.CopyToPasteboard. Accessed February 22, 2024.

[iv] “US labor strikes jump to 23-year high in 2023,” Reuters, February 21, 2024, https://www.reuters.com/world/us/us-labor-strikes-jump-23-year-high-2023-2024-02-21/. Accessed February 22, 2024.

[v] Hui Jie, Lim, “Japan is no longer the world’s third-largest economy as it slips into recession,” CNBC, February 14, 2024, https://www.cnbc.com/2024/02/15/japan-loses-spot-as-worlds-third-largest-economy-to-germany.html?recirc=taboolainternal. Accessed February 22, 2024.

[vi] Cox, Jeff, “January wholesale prices rise more than expected, another sign of persistent inflation,” CNBC, February 16, 2024, https://www.cnbc.com/2024/02/16/january-wholesale-prices-rise-0point3percent-more-than-expected.html. Accessed February 22, 2024.

[vii] Kharpal, Arjun, “Nvidia shares pop 15% after AI-fueled bumper earnings,” CNBC, February 22, 2024, https://www.cnbc.com/2024/02/22/nvidia-shares-pop-12percent-in-premarket-trade-after-ai-fueled-bumper-earnings-.html. Accessed February 22, 2024.