The Long Term Investor

I certainly agree that what we are seeing in the markets right now is....UGLY. I also agree that this trend is not a good sign for the next 3-6 months in the markets. BUT.....all of us experienced investors know that nothing is set in stone and the markets can turn on a dime.

There's an ugly trend developing in the stock market
Some of the market leaders experienced an 'incredible reversal of fortune' lately, one strategist explained.

https://finance.yahoo.com/news/theres-an-ugly-trend-developing-in-the-stock-market-173015701.html

 

A braod based sell off today....at least in what I happen to own. My only two stocks that were UP today were....COST and AAPL. I also got hammered today by the SP500 by 1.55%.

Moving on to my HD earnings tomorrow and my NVDA on Wednesday.

 

To make myself feel better today I made our one art purchase for this year. it is a piece of Western sculpture....a bronze. Less than $10,000. I got a very good price.....a 15% discount for doing a wire transfer..... plus free shipping. So....a better deal than I expected.

So....screw the markets.

 

Another UGLY open like we have been seeing lately. With NVDA reporting tomorrow I dont expect to see anything happening that is positive today.

My expectation today is for another day like yesterday. Same media content......same market action.....same weakness in stocks especially tech......and the same old fear-mongering. In other words.....NOTHING....to write home about for long term investors as we sit and wait for this little period of market confusion and weakness to come to an end.

 

I like this little article.

Tune Out The Noise

https://alhambrapartners.com/weekly-market-pulse-tune-out-the-noise/?src=news

(BOLD is my opinion OR what I consider important content)

"Okay, I confess. It was my fault. I decided to take a couple of days off. I took my eye off the ball and the stock market fell a quick 2% while I was relaxing, eating too much, and seeing some great art in the Holy City, Charleston, SC. I promise it won’t happen again, at least until my wife tells me where we’re going next.

It is a running joke within Alhambra that every time I go away for a few days the market takes a hit. Of course, that isn’t true even if that’s how we remember it; all kinds of things look different in the rear view mirror. We humans are the masters of selective memory. We remember ourselves as being calm through every downturn in the market during our investing career; only our subconscious knows better. It’s easy to look at some past correction or bear market or recession and wonder how in the world anyone could have missed something so obvious.

But you know it isn’t that easy in real time. When markets take a hit like last Friday, we assign meaning to it even though we have no way of knowing what all the other traders and investors were thinking, why they were selling or why they were not buying. We will worry that is the start of something bigger, that the correction or bear market is finally here. It feels like the end of last week was significant but it always feels that way after a big down day. But, but, but last week we got weak economic data, there was a scary story getting passed around about a new coronavirus in China and it was options expiration day and, and, and….All that is true and yet no trends changed Friday. None. Every trend that was in place on Wednesday was still in place by the close Friday.

We did get some weak economic data last week. Housing starts, housing permits, and existing home sales all fell in January. The housing market is weak isn’t exactly news if you ask me and all of those metrics are improved from where they were 3 to 6 months ago. I wish the housing market would improve but with uncertainty about future economic policy at extremes, I’m more concerned about next month and the one after that. Last week’s data didn’t change anything. More weak economic news came from the S&P Global US PMIs where the composite fell to 50.4, barely above the expansion line of 50 and the services component fell to 49.7, below 50 for the first time since early 2023. On the more positive side, the manufacturing index rose to 51.6, just barely enough to offset the negative of the services part. That could be a trend change but if so it is one we expected and have talked about on our podcast.

We have been anticipating a ramp up in goods production since last year because the inventory overhang from COVID has been worked off. Even if goods consumption just continued to grow at the current pace, production (and imports) would have to rise to meet demand. As for services, despite the below 50 reading on the S&P PMI, the latest figures from December show a 6.7% year-over-year change in services consumption. That’s well above the average of 4% we saw during the 2010s. There is also a pretty good explanation of why services consumption may be starting to lag some. The Trump administration’s emphasis on tariffs as an everything tool means that lots of US businesses and individuals are buying goods today just in case the President does actually follow through. We’ve seen this in the import numbers and I suspect we’ll see it in the durable goods and personal consumption numbers this week. If goods consumption rises artificially, it shouldn’t be a surprise that services has to pull back to make room for it.

There was also good news last week, data that confirmed the upturn in manufacturing. The Empire State manufacturing survey was back in positive territory where it’s been for 5 of the last 7 months. The Philly Fed manufacturing survey was also well above zero (although down from last month’s huge jump) at 18.1 and has now been positive for 9 of the last 12 months. The only bad news in the survey was the rise in prices paid from 31.9 to 40.5.

Even without the threat of tariffs, the growth rate of goods consumption was likely to rise and the growth rate of services was likely to fall; the tariff threat just accelerated the process. Prior to COVID, the growth rate of the two was similar and if one turned down so did the other, but since COVID that hasn’t been true. That’s why so many market pundits got the recession call wrong. When goods consumption turned down they expected services to follow but it didn’t because services consumption was supported by COVID savings and rising incomes. COVID changed consumption patterns, which still aren’t back to normal – and now they’re being distorted by the Trump administration’s tariff agenda. Goods consumption is more volatile than services consumption and the rate of change was already turning higher before the threat of tariffs. Goods production will have to ramp up some to meet that rising demand. Meanwhile, services consumption – whose growth rate was already falling pre-Trump – is still rising at a rate well above the pre-COVID average so it isn’t surprising that it continues to moderate. All the data from last week merely confirmed trends that were already in place.



We don’t know what the consumption and durable goods reports will show next week. We don’t know what tariffs will actually be enacted and sustained or which ones will never be imposed because a trade deal gets done. We don’t know what the corporate tax rate will be for 2025 or ensuing years. We don’t know if Congress can somehow produce a bill that reduces taxes and also reduces the deficit, although history says it is unlikely. We can never know the future but usually change is incremental while the current environment feels more unsettled than it has in a long time. It would be natural for people to wait and see how some of these things get resolved. It is what we warned about before the election; one party control creates more uncertainty because they try to make big changes (something that applies to either party by the way). But is that uncertainty enough to cause a recession? We don’t know. We have only markets to guide us and, as I said at the top, no trends changed last week. (see the sections below).

There is no way to know if last week’s minor selloff in stocks was the start of something bigger. We can’t know whether the economy will continue to slow or when the economic policy uncertainty will be reduced. All we can do is observe and respond when necessary. Last week’s data and market action certainly weren’t sufficient to warrant any response. One week doesn’t make a trend. "

MY COMMENT

The article continues after the above......but this is the guts of the article. the short term is OPAQUE and inscrutable......so it is a waste of time to even try to figure it all out.

 

HERE is my HD earnings.

Home Depot earnings beat Wall Street estimates, as retailer breaks comparable sales losing streak

https://www.cnbc.com/2025/02/25/home-depot-hd-q4-2024-earnings.html

( BOLD is my opinion OR what I consider important content)

"Key Points

• Home Depot narrowly beat Wall Street’s fourth-quarter earnings estimates on Tuesday.
• The home improvement retailer posted positive comparable sales after eight straight quarters of declines.
• High interest rates and home prices have challenged the businesses of Home Depot and its rival Lowe’s.

Home Depot on Tuesday topped Wall Street’s quarterly sales expectations, even as elevated interest rates and housing prices dampened consumer demand for large remodels and pricier projects.

For the full year ahead, the company said it expects total sales to grow by 2.8% and comparable sales, which take out the impact of one-time factors like store openings and calendar differences, to increase by about 1%. Home Depot projected adjusted earnings per share will decline about 2% compared with the prior year.

In an interview with CNBC, Chief Financial Officer Richard McPhail said “housingis still frozen by mortgage rates.” Yet he said Home Depot saw broad-based growth, as sales increased in about half of its merchandise categories and 15 of its 19 U.S. geographic regions.

Home Depot anticipates consumers will stop putting off projects as they gradually get used to higher interest rates, rather than waiting for them to fall, McPhail said.

“They tell us their lives are moving on,” he said. “Their families are growing. They’re moving for a new job. They’re upsizing their home. They want to upgrade their standard of living. Home improvement always persists, and so the question, I think, will be around the mindset of whether long-term rates have gotten to a new normal.”

Here’s what the company reported for the fiscal fourth quarter compared with Wall Street’s estimates, according to a survey of analysts by LSEG:

• Earnings per share: $3.02 vs. $3.01 expected
• Revenue: $39.70 billion vs. $39.16 billion expected

Home Depot shares rose more than 2% in early trading. The company was holding an earnings call on Tuesday morning.

In the three-month period that ended Feb. 2, Home Depot’s net income climbed to $3.0 billion, or $3.02 per share, from $2.80 billion, or $2.82 per share, in the year-ago period. Revenue rose 14% from $34.79 billion in the year-ago period.

Comparable sales, a metric also known as same-store sales, increased 0.8% across the company. Those results ended eight consecutive quarters of falling comparable sales. They also exceeded analysts’ expectations of a decline of 1.7%, according to StreetAccount. Comparable sales in the U.S.increased 1.3% year over year.

Regions hit by hurricanes Helene and Milton contributed about 0.6% to comparable sales, McPhail said.

Customers spent more and visited Home Depot’s stores and website more in the quarter compared with the year-ago period. Transactions rose to 400.4 million, up nearly 8% from the year-ago period. The average ticket was $89.11 in the quarter, up slightly from $88.87 in the prior-year quarter.

Home Depot has faced a more difficult backdrop for selling supplies for home improvement projects. Sales growth slowed in 2023, after consumers’ huge appetite for home renovations during the Covid pandemic returned to more typical patterns. Inflation and a shift back to spending on services like vacations and restaurants also dinged consumer demand for larger projects and pricier items.

Since roughly the middle of 2023, Home Depot’s leaders have pinned the company’s problems on a tougher housing market. McPhail told CNBC that the same challenge persisted in the fourth quarter, as consumers still showed reluctance to splurge on bigger projects, such as redoing a kitchen or installing new flooring.

Mortgage rates have remained high, despite interest rate cuts by the Federal Reserve. The median price of a home sold in January was $396,900, up 4.8% from the year before and the highest price ever for the month of January, according to the National Association of Realtors.

Tougher weather also hurt the company’s sales in January, and that’s carried into February in some parts of the country, McPhail said.

“Where weather is good, we continue to see engagement,” he said. “Where weather is tough, projects get put on the shelf.”

Even so, he said Home Depot has focused on ways it can move the needle, such as opening new stores and investing in its e-commerce business.

Online sales rose 9% in the fourth quarter compared with the year-ago period, McPhail said, the strongest quarter of the year for Home Depot’s digital business. He chalked that up to the company’s investments in faster deliveries, particularly with getting appliances and power tools to customers.

McPhail saidHome Depot opened 12 new stores in 2024, and it plans to open 13 new locations in the coming year.

Home Depot has also looked to home professionals as one of its major sales drivers. It bought SRS Distribution, a Texas-based company that sells supplies to professionals in the roofing, pool and landscaping businesses, for $18.25 billion last year. It marked the largest acquisition in the company’s history.

Some pro-heavy categories, such as roofing, drywall and lumber, saw sales increases in the quarter because of Home Depot’s push to serve contractors and other home pros better, McPhail said.

Shares of Home Depot closed Monday at $382.42. As of Monday’s close, the company’s shares have fallen about 2% so far this year. That trails behind the S&P 500′s approximately 2% gains during the same period"

MY COMMENT

A nice earnings beat and a positive move forward for HD. The number one store in the world in their business category.

 

As expected a RED day so far across all the big averages. Do yourself a favor and simply ignore it all today and go do something else.

 

I will take my own advice and simply not waste any more time today. Perhaps later.

ENDURE.......

 

I do have to say that HD is my focus today....since it is a positive......and..... I want to focus on the positive. it is UP by nearly $12 right now......or......about +3.12%.

I shop at my local HD all the time. They are a very well run company with great management.....plus....the advantage of being the greatest in the world in their business area. A classic long term holding that I love to own.

HD and COST are two of my long time OLD SCHOOL big cap long term holdings. I am hoping that my recent mini-position in WMT will also end up being the same for me. They have certainly dominated retail for a long time......along with AMZN.

 

Ok....one last post for the morning....just to sum up where we are today and over the past week or so.

S&P 500 falls for a fourth day after weak consumer confidence, Nvidia leads Nasdaq lower

https://www.cnbc.com/2025/02/24/stock-market-today-live-updates.html

(BOLD is my opinion OR what I consider important content)

"The S&P 500 ticked down Tuesday, on pace for its fourth consecutive losing session, with traders weighing concerns around global trade and economic growth.

The broad market index fell 0.6%. The Dow Jones Industrial Average flickered near the flatline. The Nasdaq Composite underperformed, dropping 1.2%. Nvidia’s 2.6% pullback led the tech-heavy index lower.

Bitcoin prices fell below $90,000 to a three-month low. The blue chip coin is trading almost 20% below its all-time high reached on President Donald Trump’s inauguration day.

The benchmark 10-year Treasury yield dropped to 4.331%, the lowest level since December on concerns about the economy. The most recent consumer confidence survey from the Conference Board came in much weaker than economists’ estimates. This comes after a series of weak data releases, including lackluster manufacturing and home sales numbers.

On Monday, shares of key tech companies dragged down the S&P 500 and the Nasdaq to session losses. That decline among tech names also pulled the Nasdaq into negative territory year to date.

“Investors in the market more broadly, they sort of almost want to believe that the AI trade is over. They’re looking for evidence [and] reasons to doubt,” Doug Clinton, a managing partner at Deepwater Asset Management, said on CNBC’s “Closing Bell” on Monday. “From our perspective, the AI trade is still real. I don’t think this boom is over. I still think we have two to four years to go.”

Investors are also mulling President Donald Trump’s latest remarks on trade. On Monday, Trump announced that tariffs on imports from Canada and Mexico “will go forward” after the current 30-day moratorium ends. The White House is also preparing for tighter curbs over China’s semiconductor exports, according to a report from Bloomberg News.

Wall Street also turned its attention to key earnings reports. Home Depot reported fourth-quarter figures that beat analyst expectations, sending the stock higher by 2%.

Nvidia is set to report earnings Wednesday after the bell. Shares are down more than 5% in 2025, underperforming the broader market.

The report comes ahead of a slew of other economic data releases later in the week, including January’s personal consumption expenditures price index reading Friday. The PCE is the Federal Reserve’s preferred inflation gauge."

MY COMMENT

What I see and hear when I consider the above.....BLAH, BLAH, BLAH, BLAH.

I do agree with this comment:

“Investors in the market more broadly, they sort of almost want to believe that the AI trade is over. They’re looking for evidence [and] reasons to doubt,"

We seem to be caught up in a negative feedback loop in the markets. A period of self fulfilling prophesy. Actually.....what I would call a gateway to a BROAD market correction. OK.....WHATEVER.

 

I think you are correct tireSmoke......we will just have to...."ride it out". Another form of....riding the wave.

 

As to me today....RED...of course will ALL the tech companies down for the day. I was able to get some green in my non-tech stocks....WMT, COST, HD, and AMZN. But...I got beat by the SP500 by 0.61%.

We move on to.....NVDA DAY tomorrow....for what it is worth.

At this point I just want to get past earnings and simply......MOVE ON.