Image Source: Pexels
 

As we close out a light week from an economic data perspective, what we did get points to a still strong employment picture, with declining Initial and Continuing unemployment claims, a bump in Existing Home Sales to 4 million in January, and a PMI composite that while ticking slightly lower remains above 50, indicating expansion. The Nvidia (NVDA) earnings figures seemed to be the catalyst the market needed to boost all those animal spirits and the question now is can the promise of AI can continue to carry this current rally. We will get a test of sorts today as the market’s reaction to Alphabet’s Google (GOOGL, GOOG) decision to temporarily shut down the image generation capabilities of their Gemini platform following claims of what has been described as inaccurate historical images.  It’s not exactly a precursor to the Terminator movie’s Skynet takeover of the world but still something that might give some investors pause. 

Despite any AI-related hesitation, the current earnings cycle has also served as a boost to investors as the majority of companies have been providing upside surprises. Despite this, we have yet to see a significant broadening in market participation as evidenced by the YTD 6.77% return of the market cap weighted SPDR S&P 500 ETF Trust (SPY) as compared to the 2.39% result of the Invesco S&P 500 Equal Weight ETF (RSP). Part of this has to do with the influence of beyond mega capitalization companies but some of it also has to do with investors’ lack of focus on the rest of the market.

Block, Inc (SQ) reported quarterly earnings of $0.45, which, while up 109% YoY, came in lower than the $0.58 estimate on revenues of $5.77 billion, which beat the $5.70 billion estimate. The company offered a strong quarter-ahead EBITDA guidance of $580 million as compared to expectations of $515 million. The shareholder letter focused on the company’s Cash App and its goal “to become one of the top providers of banking services to households across the United States which earn up to $150,000 per year” which by the company’s estimate represents “approximately 80% of consumers and 50% of household income.”

Social media sometimes darling, sometimes scourge of the internet Reddit filed its Form S-1 indicating its intent to offer shares to the public. Lead syndicate underwriters include Goldman Sachs (GS), JP Morgan (JPM), Morgan Stanley (MS), and Bank of America (BAC).

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