As a result, stock prices ended the week near all-time highs. The S&P 500 (^GSPC), Nasdaq Composite (^IXIC), and Dow Jones Industrial Average (^DJI) all rose more than 1% for the week. The S&P 500 is currently within 1% of its all-time closing high.
However, the market’s recovery from August lows will be tested after the bell on Wednesday with the much-anticipated earnings release from AI leader Nvidia (NVDA).
Earnings from Salesforce (CRM), Best Buy (BBY), Dell (DELL), and Lululemon (LULU) will also be in focus, while key readings on the Fed’s recommended inflation indicators will highlight the economic calendar.
On Friday, Chairman Powell told investors that a rate cut would occur in September.
However, he did not specify how aggressively the central bank would cut interest rates as the easing cycle progresses.
Powell said the timing and pace of rate cuts would be “dependent on the data coming forward,” and markets were quick to move after the Fed chairman said Friday morning that the central bank has “plenty of room.” The bank has moved to fully factor in four 0.25% rate cuts by the end of 2024. As the policy moves into its next phase, we will continue to make the policy work.
With only three Fed meetings left in 2024, the pressing question remains when the Fed will cut rates by 0.50% in one meeting to meet current expectations.
“If the August (employment) data is weaker than expected, a 50 basis point rate cut is likely (on September 18),” Goldman Sachs’ economics team led by Jan Hadzius said in a note to clients. I continue to think so.” .
As of early Monday morning, the market was pricing in a 36.5% chance that the Fed would cut interest rates by 50 basis points by the end of its September meeting, up from about 24% a week ago, according to CME’s FedWatch tool. rose.
Jonas Goltermann, deputy chief market economist at Capital Economics, argued that the Fed cutting interest rates by more than 0.25% due to a weak labor market may not be a welcome sign for investors. .
“Investors believe that if the FOMC feels the need to bring policy easing forward, it means the economy has slowed further than the still very rosy outlook discounted by stock and credit markets,” Golterman said. There may be legitimate concerns that this may be due to the fact that there are Note to client on Friday.
“Therefore, there is a good chance that a 25bp rate cut in September will actually be a positive outcome for the stock market.”
Powell spent much of Friday’s speech emphasizing downside risks to the labor market, but the Fed remains focused on Friday’s important inflation update.
Economists expect annual “core” PCE, which excludes the volatile categories of food and energy, to be 2.7% in July, up from 2.6% in June. Economists expect “core” PCE to rise 0.2% last month, matching June’s month-on-month rise.
“We have increased confidence that we are on a sustainable trajectory for inflation to return to 2%,” Powell said on Friday.
While nearly every member of the S&P 500 has just reported their earnings, one big report is looming: Nvidia.
Expectations are sky high for Jensen Huang’s company, as they have been since the semiconductor giant accelerated an AI-driven stock market rally with its May 2023 earnings report.
Wall Street expects Nvidia’s revenue to increase about 109% year-over-year and sales to increase 99% year-over-year. Of particular note is the latest information on potential delays for Nvidia’s new Blackwell chips.
The stock is printing up about 160% year-to-date.
“We believe our modest expectations for Blackwell shipments in the third quarter were offset by increased hopper bookings,” KeyBanc analyst John Vinh wrote in a recent note. Hopper GPU. ”
Bin, who has a $180 price target on Nvidia, told Yahoo Finance on Thursday that the stock still looks attractive after a recent 30% rally.
“We are clearly one of the best-positioned semiconductor companies, leveraging one of the strongest product cycles in the AI space today, and the value remains attractive at this level.” We believe there is,” Bin said.
Omar Aguilar, CEO and chief investment officer of Charles Schwab Asset Management, said the release is “highly anticipated” for the broader market.
“I think what the market is looking forward to is hearing what the outlook for AI is going to be as people continue to pour money into AI technology and what the demand for chips will be going forward,” Aguilar said Friday. told Yahoo Finance.
NVIDIA CEO Jensen Huang speaking at Computex 2024 in Taipei on June 4, 2024 (I-HWA CHENG/AFP via Getty Images) · I-HWA CHENG via Getty Images
The whiplash of Nvidia and other “Magnificent Seven” tech stocks has been a hallmark of the market’s recent selloff and subsequent rebound.
Ben Snyder, an equity strategist at Goldman Sachs, told Yahoo Finance this week that the ebb and flow may be calming down.
“I think most of the short-term volatility in[Magnificent Seven’s]stock price is behind us,” Snyder said.
The group, which includes Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA) and Nvidia, will meet from August 5th to August It will be held until the 5th. And on Aug. 19, the overall market capitalization increased by more than $1.4 trillion.
“The trajectory of sales and earnings growth has been resilient, more resilient than many investors feared heading into the second quarter,” Snyder added. “While valuations are not historically low, they are lower than they were a few weeks ago, and we won’t see any new earnings reports for the next few months.”
For the first time since the start of 2022, hedge funds lost exposure to many of the Magnificent Seven’s tech stocks toward the end of the second quarter, according to Snyder’s recent analysis of second-quarter year-end securities reports. reduced. Amazon and Apple were exceptions.
Snyder said the move “speaks to the anxiety we’re hearing from investors heading into the second quarter earnings season.”
He added that investors feel stocks are benefiting from the excitement surrounding AI, but also expressed “some concern that the AI investment boom may be coming to an end.” .
“In our conversations with investors, including hedge fund clients, it was clear that given the downside, they were very excited about the opportunity to buy stocks they already liked at lower valuations,” Snyder said. spoke.
Investors are less guilty now than they were when they bought on the spurt in early August following a sharp rally in tech stocks. “I’d say the sentiment (around mega-cap tech) is cautiously optimistic,” Snyder said.
Nothing changes investor sentiment like price.
Economic data: Durable goods orders, preliminary figures for July (+4.2% expected, -6.7% previously). Dallas Fed manufacturing activity, August (forecast -16, previous -17.5)
Revenue: Trip.com (TCOM)
Economic Data: Conference Board Consumer Confidence, August (100.1 expected, 100.3). S&P CoreLogic Case Shiller, 20 City Composite Home Price Index, m/m, June (expected +0.3%, previously +0.34%). S&P CoreLogic Case Shiller 20 City Composite Home Price Index, YoY, June (previously +6.81%). August Richmond Fed Manufacturing Business Index (previously -17)
Earnings: Bank of Montreal (BMO), Box (BOX), Nordstrom (JWN)
Economic data: MBA home loan applications, week ending August 23 (-10.1% last week)
Revenue: Nvidia (NVDA), Abercrombie & Fitch (ANF), Affirm (AFRM), Bath & Body Works (BBWI), CrowdStrike (CRWD), Chewy (CHWY), Foot Locker (FL), Five Below (FIVE), HP (HPQ), Kohl’s (KSS), Okta (OKTA), RBC (RBC), Salesforce (CRM), The JM Smucker Company (SJM)
Economic data: New jobless claims for the week ending August 24th (expected 235,000, previously 232,000). January personal income, month-on-month change (forecast +0.5%, previous +0.3%). Second quarter GDP, second forecast (forecast +2.8%, previous +2.8%). Wholesale inventory, month-on-month change, preliminary figures for July (+0.2% month-on-month). Pending home sales, m/m, July (expected +0.4%, previous +4.8%)
Revenue: American Eagle Outfitters (AEO), Best Buy (BBY), Birkenstock (BIRK), Burlington Stores (BURL), Campbell’s (CPB), Dell (DELL), Dollar General (DG), Gap (GAP), Lululemon (LULU) ), Marvell Technology (MRVL), MongoDB (MDB), Ulta Beauty (ULTA)
Economic news: Personal spending in July compared to the previous month (expected +0.5%, previously +0.3%). July PCE inflation rate, month-over-month (expected +0.2%, previous +0.1%). July PCE inflation rate, YoY (+2.6% expected, +2.5% previously). “Core” PCE for July compared to the previous month (forecast +0.2%, previous +0.2%). “Core” PCE in July, compared to the same month last year (forecast +2.7%, previous +2.6%). MNI Chicago PMI for August (44.5 forecast, 45.3 advance). University of Michigan consumer sentiment, August final (expected 67.9, advance 67.8)
Revenues: There are no significant revenues.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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