Breakfast News: Easing Expectations

• “We have to keep policy moving down to accommodate the economy”: Daly stopped short of stating whether she would be voting for a rate cut at the upcoming meeting, with CME’s FedWatch tool indicating a 74% chance of a 25 bps cut.
• Data showing positive signs: Policy makers and investors alike will have cheered on the Tuesday JOLTS job openings release, which came in at 7.74 million, well above the 7.48 million consensus. A stronger labor market is a good indicator of a resilient economy.

Chewy (CHWY 1.23%) releases quarterly earnings ahead of the market open, with shareholders hoping it builds on a strong second quarter. 

• What to watch: Investors will be looking for growth in the mobile app adoption and the take-up of the Autoship subscription program. A holiday season update on the annual Chewy Claus campaign will also provide an indication on how Q4 is going.
• Thrice-recommended Rule Breaker: May 2024’s recommendation of Chewy in the service is beating the S&P 500 by 84%, though the first two (October 2021 and July 2023) remain laggards for now. As a reminder, Rule Breakers’ goal is to beat the market over 5 years.

• Booming demand: Nvidia (NVDA -0.02%) dominates the AI chip market with more than 70% market share. Amazon’s own-brand chips packed in large servers are now built to compute more than Nvidia’s can, with some AI models able to be trained at 40% lower cost than on Nvidia chips.
• A potential power shift: Companies like Amazon, Meta (META -1.16%), and Microsoft (MSFT 0.52%) make their own chips yet are large clients of Nvidia. The balance of power in this profitable hunting ground could help to dictate which stock performs the best in the years ahead.

• Forecasts for further growth: The market is expecting a 2.5% growth in revenue year over year to $1.63 billion, and a 4.1% increase in earnings per share to $3.30.
• Direct benefit from AI demand: Investors will be keen to see commentary surrounding the increase in companies making their own AI chips, as this stands to be a large area of growth for Synopsys. The proposed merger with ANSYS (ANSS 2.27%) is still under regulatory review, but an update may be provided. 

• “More evidence malls aren’t dead”: He points to Simon Property Group (SPG 0.30%), which “not only survived pandemic-era lockdowns, but its business has arguably never been stronger.” Both DI recommendations from the past 18 months are currently beating the S&P 500, by 40% and 3% respectively.
• “Popular brands throughout our portfolio reported double-digit sales increases over the weekend compared to last year”: CEO David Simon also reported a 7.1% increase of Black Friday Weekend foot traffic versus last year. Anthony concludes “It's evident there is still a need -- a growing need -- for high-quality physical retail space.”

Under the Radar is our newest digest section that seeks to answer: What's something important going on that no one else is talking about?