Your weekly summary with the most important news for your investments, in this edition:

• Nvidia with a large market capitalization.

• Inflation this month.

• Expectations on quarterly results.

After five consecutive weeks of bullishness, the US stock markets took a breather, not only because last month's inflation data came in above market expectations, and therefore long interest rates rose, but also because a more sophisticated group of investors opted to sell and lock in the gains they had been making since the beginning of the year on the understanding that the stock market had become overextended, a topic we addressed last week.

In the midst of this process, we saw how the artificial intelligence (AI) microprocessor company, Nvidia, surpassed the market capitalization of Alphabet and Amazon, reaching third place behind Microsoft and Apple, ratifying the insatiable market demand for all things AI. However, what we must continue to monitor is the evolution of the oil price, which measured by WTI is hovering around US$79 a barrel, accumulating an increase of +11% so far in 2024 and already surpassing the threshold by +3.8% in 12 months, an evolution that could have a greater impact than expected on the inflation reading in the coming months. This in an environment where the war rhetoric between the United States and Russia is on the rise, after the main opponent of the Russian government, Alexie Navalny, died suddenly the previous week. At the same time, military skirmishes in the Middle East continue to spread across the region, generating uncertainty about oil production.

This week the focus will be on the quarterly results of Home Depot, Intuit, Nvidia and Warner Bros. among many other companies, while awaiting the results of the retail sector next week. In an environment where the mega-merger of the financial companies Capital One and Discover was announced with a transaction valued at US$35.5 billion, both very focused on the granting of credit through credit cards in an environment where the deterioration of such portfolios is increasing, as a result of high interest rates. In addition, market participants will be looking closely at this month's preliminary PMI economic activity data to determine if there is any indication that the economy has been slowing in recent months, one month ahead of the next Federal Reserve monetary policy meeting to be held on March 19-20, 2024.

Let's start by briefly analyzing the inflation data for the month of January, where headline inflation closed at 3.1% (up from 3.4%) while core inflation, which excludes food and energy prices, closed at 3.9%, unchanged and above the market's expectations of 3.7%. In between, headline producer inflation was 0.9% (up from 1%), but here is the problem: the core producer inflation reading rose to 2% (up from 1.7%). This last figure was quite unexpected as the market had expected it to remain close to 1.7%. There are those who will claim that this reading is transitory as there are segments of the economy that are entering deflation, however, it may be that inflation resistance below 3% is more complex for the FED than the market is projecting. At this point it is very likely that the FED will not adopt any pro-cyclical measures at the March meeting as it waits to see if "inflationary confidence" gives it reason to proceed with monetary policy rate cuts (currently at 5.5%) going into the second half of the year.But as we have argued time and again, the first signs that this may happen must be accompanied by a drop in wage inflation, which is still above 4%.Furthermore, and as we commented earlier, it may be that the price of oil, if it continues to rise, will allow headline inflation readings to begin to reflect the rise, thereby further complicating the gains in inflation recorded in recent months.

For its part, tomorrow, Wednesday, the technology company Nvidia will be reporting, which will have to justify through its sales the valuation it achieved last week, climbing with its market capitalization above two mega technology conglomerates such as Alphabet and Amazon.Evidently, everything related to artificial intelligence and machine learning has had almost 18 months of unprecedented boom.However, at some point the fundamentals will begin to rule if sales and profits do not show exponential growth, just as the share price has been doing. It is clear that the AI industry has generated a shift in labor and business productivity by streamlining processes across all industries and tasks, particularly in developed countries.We are likely to see these processes spread rapidly throughout the rest of the global economy. However, the adoption of such technology may not be as rapid as everyone is estimating. The demand for Nvidia may not only be accompanied by such technological change, but also by its productive positioning in an environment where Taiwan continues to be a flank of Chinese encroachment, which could directly impact global microprocessor production. This is also why other microprocessor companies such as ARM and SMCI have accumulated extraordinary returns so far this year, showing a parabolic rebound in their share prices. Evidently, all these companies will have to justify their valuations with sales and profits with similar evolution to sustain such returns.

THIS WEEK 

Monday (February 19)

Quarterly Reports

• Arista Networks, Inc.

• Cadence Design Systems, Inc.

• Waste Management, Inc.

• Principal Financial Group Inc.

• James Hardie Industries plc.

Tuesday (February 20)

Quarterly Reports

• Coca-Cola Company (The)

• Shopify Inc.

• Airbnb, Inc.

• Zoetis Inc.

• Marriott International

Wednesday (February 21)

Quarterly Reports

• Sony Group Corporation

• Cisco Systems, Inc.

• Equinix, Inc.

• CME Group Inc.

• Occidental Petroleum Corporation

• The Kraft Heinz Company

Economic Reports

• Federal Open Market Committee Minutes

• Speech by Fed Governor Michelle Bowman

• Speech by Atlanta Fed President Raphael Bostic

Thursday (February 22)

Quarterly Reports

• Applied Materials, Inc.

• Deere & Company

• RELX PLC

• Stellantis N.V.

• Southern Company (The)

• DoorDash, Inc.

Economic Reports

• National Activity Index Report, FED Chicago

• Initial Jobless Support Report

• Speech by Philadelphia Fed President Patrick Harker

• Speech by Fed Governor Lisa Cook

• Speech by Fed Governor Christopher Waller

• Speech by Minneapolis Fed President Neel Kashkari

Friday (February 23)

Quarterly Reports

• TC Energy Corporation

• Vulcan Materials Company

• NatWest Group plc

• PPL Corporation

• Liberty Broadband Corporation

Now you have more information about your investments. See you next week with more news.

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