 Welcome to Nasdaq Trey Talks. I'm Jill Milantrino, global market reporter at Nasdaq. Joining us on the desk at MarketSight, we have Michael Normile, U.S. economist at Nasdaq, as well as Max Cabasso, Maddie Ragnar, directors on Nasdaq's Market Intelligence desk. And we have Fausto Puglisi back with us, president at Cyber Trading U. We're gonna take a look at the performance of earning season's large versus small cap. We're also gonna talk a little bit of Bitcoin, which really has been the story of the day. It's great to have you guys back with us. Welcome to Trey Talks as always. Michael, let's kick it off with you. We're somewhat near the end of earning season. Give us a recap of what led the way, what isn't leading the way, and how this is kind of translating into what we're seeing with large and small. Yeah, it turned out better than expected. I think you can say for large caps. Back in mid-January, early on in earning season, we were looking at maybe negative 2% year-over-year earnings growth projected at the time. Here we are now. It's almost 4% positive growth year-over-year. And that's with about three-quarters of stocks beating their earnings estimates, which is pretty standard beat rate, more or less for large caps, S&P 500 firms. And so we've had about 95% of the S&P 500 having reported at this point. Excuse me. And it's been a lot of the same themes that we saw the last few quarters where consumer-led stocks have been really doing the bulk of the gains. If that's, we're talking communication services, information technology, consumer discretionary. Those have still been areas of strength. But if you turn to mid-cap stocks, we've seen that their earnings recession come to an end this quarter, looking at almost 2% year-over-year earnings growth this quarter, but a bit more mixed with about half the sectors, just over half the sectors seeing negative earnings growth. And then for small caps, their earnings recession continues. It's about six quarters now and projected to continue beyond that with much, much weaker. I think about negative 20% year-over-year earnings growth for Q4. What's going on with the small caps here? This is Elaine that you're in. Is it because we're still in a higher interest rate environment? Is it because the fundamentals just aren't good? Yeah, so small caps did see a nice four-day run, but unfortunately, they're the laggards again today. There's been kind of this back and forth with them. I think they're definitely just looking for direction where clarity on when rate cuts will happen, as well as inflation prints. Last month, we saw a little bit stickier of inflation. So just looking to see what's next. The Russell 2000 as well as the S&P 600 are still about flat year-to-date. They both were up a very impressive amount. S&P 600 was up about 14% last year. Russell was up about 15% last year. Since the end of 2021, they're both down about 8%. So a bit of a laggards. As Michael mentioned, seven out of the 11 sectors in the S&P 600 are seeing a negative earnings recession this quarter. So still have a lot of catching up to do. And what's interesting and fast though, we continue to hit all-time highs, right? But we haven't gotten those interest rate cuts. The expectations were for six at the end of last year. We might get three. So I think it's good that we're seeing positive performance in most sectors, most stocks. And we haven't gotten that interest rate cut. You know what, Jill? I have some hope that if they do lower them, these small caps took a really big hit with earnings. I mean, everybody looks at the Fabulous 7. They did unbelievable Amazon, Facebook, all of them, the video. But small caps took a very, very big hit. And, you know, they're in these variable rates that are really hurting them. So if they could really, if they could, if they can't get those interest rates, I think they're gonna come back. But there's gonna be some really good buying opportunities. You know, some people like, some of these other stocks are getting very expensive. And people are looking for deals with Allen. So there's gonna be some good opportunities. And some of them actually do make some comebacks too. Certainly some of the, we've seen what's happened in the healthcare biotech space over the past week as well. I mean, that's certainly, you know, in addition to the news that's out there, there certainly is an evaluation story behind it. But again, when it comes to small caps, even if rates are cut, you still need to have good underlying fundamentals. And I think some small cap companies do struggle with that. I mean, Costa Capital has been high for the past two to three years. And then, you know, balance sheets do matter in this environment. Investors certainly are more discerning. They are, but when it comes to, if they survive this long, you know, and you know, to still keep their earnings. And some of them, what they're also noticing a lot too, some of them doing a lot of reverse stock splits. So trying to keep their values up higher. So that's one thing that's got to be a little concerned about that if they can, because some of them made so many, have so many outstanding shares out there that if they could just limit it, limit that and keep their value up higher, I think they'll, I think they'll survive. They could do them well. Michael, it's interesting how sometimes financial engineering with whether it's stock splits or buying back stock really can impact investor sentiment and the valuation of some of these companies. Yeah, and I think to your point, you know, it can be helpful to get ahead of that before you get your stock price too low that doing a kind of a preemptive reverse split can be helpful in that sense before it gets kind of to a territory where it's a little bit more concerning, right? Right. It gets too low. Yeah, exactly. And, you know, I know I was talking about the earnings recession earlier in small cap stocks, but if analysts are to be believed, there is projections for earnings to pick up in the second half of this year. So that could be, you know, a big benefit for those small and mid caps later on. And on top of that, I saw a few headlines, at least in this small healthcare space, private placements are up. So in the shorter term, companies are looking to raise capital shorter term with the hope that cuts will come in the later half of the year. Yeah. As negative as it's been, I also think part of it is healthy to kind of get this wash out. We talked about in 21, 22, we had, you know, a thousand IPOs in that two year period where it was double, triple, you know, in 21, I think we're at 350, which kind of double our average 20 or 20 was double. 21, we had 750. There was a ton of new companies coming out of there. People that didn't necessarily have great business models. There's out there, but because there's no cost of capital, you could just raise it basically whatever you needed, whatever you wanted. He had your run rate for a few years. Now it's okay, do you really have a business? Is this sustainable? And some of those are going to get washed out. You know, some of that probably shouldn't be public, but it's starting to kind of clean up a bit. Again, it's, I've been looking at kind of the Russell trade for a while now. You keep hearing talks about, you know, there's small cap value names out there that are good businesses and buying opportunities that hasn't come to fruition yet. All right, the momentum hasn't been there. They've really unperformed. So I think it's still gonna take something bigger to get more of those tailwinds behind them. And again, rate cuts, we've been talking about it for a couple of months here. We didn't think six was on the table. You know, the Fed was saying four, potentially four, Mark was saying six, seven. We were kind of saying, I don't believe it. I think Mark is gonna come back. And I think once that clarity is out there, now it's 50-50 in June, but again, it's still 50-50 when, you know, cuts are gonna start to happen. Once that gets out of the way, I think the fundamental story potentially gets a bit clearer for companies, but there still is that uncertainty. And then we have the, you know, political environment coming up in November. So there's still gonna be some headwinds there. So I think once that clears out, you know, you might have a bit more of a tailwind, which is interesting too because of course, our fiscal policy situation is messy, going into an election year as well. And then, you know, we're also talking about a government shutdown again. Right? So it's nothing, I mean, the market's always gonna climb a wall of worry. It's always gonna be a story. It's not like this is, you know, specific to 2024, it's an anomaly. There's always gonna be something out there. I would say that the fact that earnings season was decent and companies delivered was a good thing because we certainly have six rate cuts aggressively priced in. And if earnings weren't as good as they were, that could have been really ugly. But let's get into some charts here, Max. Let's pull up Bitcoin. This was super interesting. As I came into studio at 1245, it's over 64,000. Got done with my last, it's at 59,000. I think we're 60-ish somewhere now. Yeah, 61 now essentially we're back. Bitcoin's back. This is what we all live for, Bitcoin. You know, obviously ETFs have seen massive inflows. Some of them are hitting, again, new records today. Looking to overtake some of the gold ETFs in terms of assets, it's coming quickly. You know, again, feels like we're getting overbought. We've had these crazy moves higher. But when you kind of look back historically, we're really not even close to kind of what the potential is if we're going back and we see a similar move. You look at 2020, we were trading, basically 2018, 19, 20, around 10,000 sat there and then 6X in short order. We kind of came back down to 20,000. Again, 6X, 5X, weren't like a 3X from the lows here. So, and now, again, we have additional tailwits behind it. Companies now can start using Bitcoin on their balance sheets as a reserve currency. And I've spoken to a company, a few in the space that are doing that, that will benefit from it. So, we'll see if we get a tailwind from that as well. So, it's back. Volatility is back in it. It is back in it. What about volatility in the market overall? What are you seeing in the VIX? It still seems to be... Muted. Muted, for sure. This is going back to 2019, this chart, which was a lows, just under 12. We saw that small spike, inflation and Fed basically coming out. Okay, we're not going to be cutting rates. We're not going to be doing 6, like everybody thought. We saw that, I don't even know if you can call it a spike because we still didn't even break 20. But now, we're back at 1375. Put call skew and options. Protection is still relatively cheap. No one's really putting it on. There seem to be a lot of questions, but again, a lot of this gets tied into the large caps, which have been really outperforming. So, there's not as much fear there. There's not as many question marks with large caps. Even the single names, the Mag7, they performed. Where that was kind of the worry, I thought you'd potentially see a spike in the VIX if those earnings weren't good and those mega caps that really have outperformed. They started to turn. You start to see some question marks, but they all performed. They hit it out of the park. So, now it's kind of backed up. We're sitting here waiting. Usually, something comes up. VIX goes low, low, low. Everybody starts selling ball, selling ball, selling ball. And then some shock comes in and it's like, oh, wait a second. We shouldn't have been selling ball this whole time, but right now it's muted. It's been a tight range. We're sitting here basically below 15 for the last few months. We had a couple of spikes, but otherwise it's been really muted. Well, you know how it is with the VIX. The lower the VIX, the move to the upside can certainly feel more shocking than the other way around. And finally, quick read on the SPX. Starting to consolidate a little bit. We had that run, obviously the end of last year. Large caps, S&P 500 had that run. They really kept going. We got to new all-time highs and now we're starting to consolidate it again. Some of the froth potentially coming out. Some people are starting to take profits. Yeah, we're kind of sitting tight here. And one of the things that, valuation metrics here, we're getting a bit more expensive. We were talking about it's getting more expensive. It's pricier to buy some of these names, but again, they're performing. You can see we're kind of back at 21 levels here with PE. Even price of sales, price of book. We're at elevated levels. But again, they're performing. So people are willing to pay up for those names that consistently continue to perform and perform, perform. They have these drivers behind them. Obviously AI is getting as big hype cycle again and what has that's coming to fruition. So again, it's getting more expensive but investors seem to be okay with it. So again, a little consolidation here. We'll see what happens now. It's earnings are out of the way. Probably go back to kind of more macro focused information but doesn't seem like there's a ton of headwinds for them. All right, my turn for the charts. But to your point exactly, we are gonna get into this earnings vacuum where it's gonna be hyper focused again on what's happening with the Fed, what's happening with interest rates. But let's talk about how we're trading these things, Val. So Nvidia, I mean, how much higher can it go? So when you're thinking about what levels you wanna get in or out, let's take a look at some of the charts here. I mean- Yeah, I mean like in getting back, if I may just forgot about your Bitcoin, we're talking about what we're gonna be mentioning about the book viewers that I've noticed also on seeing a lot of people are shorting Bitcoin now. And that's just causing a big, big flux in it. And so if you don't see that, that's why you got this big, big pop. So by the stock hovering there for a while, that's why we're seeing a big pop that I've noticed. But getting back to, yeah, Nvidia, last time we were here, we saw some huge iceberg orders on Nvidia, hovering around 500 last time we were here. I mean, obviously be one of the part of the Fabio 7, but was nice about Nvidia. It finally broke through that major, major resistance levels, but it wasn't, people look at it as a resistance level, it's more of seeing big block orders out there. And I think last time we were here, we had like over two, almost a quarter million shares out there on that. But now what happened, once it broke through that major resistance, we had a big pop of almost $300 on that stock. I mean, the stock's up almost about 600% since the beginning of the year. It's been, I mean, that's really been the number one stock for AI stocks. It's just been doing great. Now the question people asking is like, okay, is it over? Is there's a party done? I mean, is it gonna continue to go higher? Well, like anything else on the book viewer, I mean, it's nice about it is that you get to see those orders, not only seeing those orders at 800, but look at all the different orders, not just as price. You got 1,500 people, 1,500 orders out there at like 800, another 450 orders at 795. I think the video is down to like, was hovering, it did come back down about 175. It's not a huge drop from where it is, but what's nice about it is that is it starting to go down? Well, it's starting to channel a little bit here. If it continues to channel, and I keep seeing refreshing going on on the book viewer, this could be the top for a little while, but we'll need to see how things go out in the next couple of days if it continues. Yeah, and we can see that right there, right? On the iceberg order. Yeah, huge iceberg order, just hovering there around 800, and now you got a new iceberg order that's been holding there. But what I like about this 175 price is that there's an order out there on book viewer. It keeps refreshing his order, it keeps updating it. More orders keep going out there. You see the time in sales, you see that person getting executed, and it's holding there pretty strong. So if we hold it here for the next day or so, depending on if you're a day trader or more of a swing trader, 800's the cap, but the 175 is a really, really big support. Let's talk about Rivian here, right? Looking for this balance. Well, Rivian got destroyed because of the earnings. I mean, that stock literally came down almost like from 18 and 19 down to like $10. What was beautiful about this example here is that you had literally a 500,000 share buyer at $10. He was there for not one day, but several days. I would say, well, probably like three, four days. And what's nice about, what you could see is that they pulled their order the night before, then they came back when the market opened up at 9.30 and then they put it back there again. So they would not drop, they would not let go at $10. Now, obviously 10 being a mental number for people, but for us as traders, there was over half a million shares. Stock hit there within the same day, stock rate about 10% went shot up all the way up to about 11. And then like everyone always asks is, okay, where do I get out? And the big thing is you had some big sellers starting to show up there, 150,000 share orders at 11, and that's where you started to get the stock back off a little bit. Yeah, and you could see that in the chart there for sure. All right, last one, Amazon. Of course, everyone wants to know how to trade this one. I love Amazon. I haven't had Amazon for a long time, but, and it was great to hear when it broke earnings. But now the next thing is, how much higher is it gonna go? So Amazon's obviously breaking all-time highs. But as a trader, you're always thinking about taking profits. Remember, you did not make a single penny until you sell it. So Amazon all of a sudden you're coming up to a big order out there, about 200,000 shares hovering there with 63 orders at 175. Now, once again, a mental number, 175 is a number, never got to 175. One little trick that we always learn as traders, always sell right below that whole number. Don't ever sell a solid number like that. And by seeing that on the bookbure, you'll notice it hit it and then obviously over the course of the day, 175 right down 169. All right, I appreciate the insight as always. Now we know how to read charts, now we know how to trade these stocks. Thanks for joining us on Trade Talks and thanks for joining me from MarketSight. I'm Jill Melandrino, Global Market to Porter at Natstack.