Stocks Climb Before the Open as Nvidia Results Boost Sentiment, Powell Speech Looms

Oleksandr Pylypenko - Barchart - Thu Aug 24, 2023

September S&P 500 futures (ESU23) are up +0.49%, and September Nasdaq 100 E-Mini futures (NQU23) are up +1.13% this morning as blockbuster results from Nvidia boosted investor sentiment, while market participants also braced for Fed Chair Powell’s speech on Friday.

NVIDIA Corporation (NVDA) surged over +8% in pre-market trading after the semiconductor giant reported better-than-expected Q2 results, issued upbeat Q3 revenue guidance, and unveiled an additional $25B stock buyback plan. Also, Stifel upgraded the stock to Buy from Hold.

In Wednesday’s trading session, Wall Street’s major averages closed higher, with the tech-heavy Nasdaq 100 rising to a 1-week high. Netflix Inc (NFLX) climbed over +3% after research firm Antenna said the company signed up about 2.6 million new subscribers on a gross basis in July. Also, chip stocks gained ground after the 10-year Treasury yield pulled back from a near 16-year high, with Advanced Micro Devices Inc (AMD) and Marvell Technology (MRVL) rising more than +3%. In addition, Advance Auto Parts Inc (AAP) gained over +3% after the company named a new chief executive officer and initiated a strategic review of the business. On the bearish side, Foot Locker Inc (FL) plunged over -28% after the company cut its annual guidance and suspended its quarterly dividend.

Economic data on Wednesday showed that the U.S. S&P Global Composite PMI unexpectedly fell to 50.4 in August, weaker than expectations of 52.0, sparking speculation that the Federal Reserve might be more inclined to pause rate hikes. Also, U.S. new home sales rose to a 1-1/2 year high of 714K in July, stronger than expectations of 705K.

“In terms of the economic data, it looks like bad news is good news for the market. In terms of PMIs in the U.S. and Europe, it’s good news for the market because they are now expecting no more rate hikes in the future. This is a tailwind for AI and tech stocks,” said Grace Tam, chief investment advisor for Hong Kong at BNP Paribas Wealth Management.

Meanwhile, investors are anticipating Federal Reserve Chairman Jerome Powell’s speech at an annual central bank symposium in Jackson Hole, Wyoming, on Friday, which could offer additional insights into the U.S. rate outlook.

U.S. rate futures have priced in a 13.5% probability of a 25 basis point rate increase at the September FOMC meeting and a 40.1% chance of a 25 basis point rate hike at the November FOMC meeting.

On the earnings front, notable companies like Intuit (INTU), Toronto-Dominion Bank (TD), Workday (WDAY), Ulta Beauty (ULTA), and Marvell Technology (MRVL) are slated to release their quarterly results today.

Today, all eyes are focused on U.S. Durable Goods Orders data in a couple of hours. Economists, on average, forecast that July Durable Goods Orders will come in at -4.0% m/m, compared to the previous value of +4.7% m/m.

Also, investors will likely focus on U.S. Core Durable Goods Orders data, which stood at +0.6% m/m in June. Economists foresee the July figure to be +0.2% m/m.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 240K, compared to last week’s value of 239K.

In the bond markets, United States 10-year rates are at 4.184%, down -0.38%.

The Euro Stoxx 50 futures are up +0.56% this morning, driven by improved risk sentiment following stellar earnings from chip maker Nvidia and growing anticipations that weak economic data could lead central banks to end their rate-hiking cycles. Gains in technology stocks are leading the overall market higher after industry bellwether Nvidia provided a higher-than-anticipated quarterly revenue forecast and announced a share buyback program. As a result, Asm International N.V. (ASM.NA), BE Semiconductor Industries N.V. (BESI.NA), and Asml Holding (ASML.NA) gained over +1%. Retail stocks also outperformed on Thursday. Meanwhile, investors have found encouragement in the increased likelihood of the European Central Bank pausing interest rate hikes in September due to weak business activity data that indicates a worsening economic situation in Europe. In other corporate news, Symrise Ag (SY1.D.DX) rose more than +2% after Morgan Stanley upgraded the German flavor and fragrance maker to Overweight from Underweight.

The European economic data slate is mainly empty on Thursday.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.12%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.87%.

China’s Shanghai Composite today closed slightly higher as some investors bought the dip following recent slumps, yet persistent concerns over a Chinese economic slowdown kept gains limited. The People’s Bank of China provided further support for the yuan by establishing a daily reference rate that exceeded expectations. Also, consumer sentiment in China showed signs of improvement in August, breaking a streak of declining months, although it still lags behind the levels observed earlier in the year, according to two surveys. Artificial intelligence-related stocks led gains on Thursday following stronger-than-expected results from tech darling Nvidia. Media and semiconductor stocks also outperformed. At the same time, China’s $2.9 trillion trust industry is displaying indications of strain, adding further pressure on the economy, and insiders are also expressing concerns about the potential shortcomings of efforts to enhance the stability of local government financing vehicles.

“It’s a good time for long-term investors to buy Chinese stocks, especially as the current valuation is low and attractive,” said Yang Delong, a chief economist at First Seafront Fund Management.

Japan’s Nikkei 225 Stock Index closed higher for a fourth consecutive session, marking its longest winning streak since mid-June, driven by the rise in semiconductor-related shares following positive earnings from U.S. chip giant Nvidia. Chip-making equipment giant Tokyo Electron climbed over +3% while chip-testing machine manufacturer Advantest rose more than +1%. Also, AI-focused startup investor SoftBank Group gained more than +2%. In other corporate news, Pacific Metals Co. Ltd. surged over +5% and was the top percentage gainer on the Nikkei following its announcement of a deal to develop nickel refining technology through the utilization of microwaves, which will reduce greenhouse gas emissions. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.72% to 17.89.

Pre-Market U.S. Stock Movers

Guess? Inc (GES) surged over +18% in pre-market trading after the company posted upbeat Q2 results and raised its FY24 guidance.

C3.ai Inc (AI), Palantir Technologies Inc (PLTR), and Marvell Technology Inc (MRVL) climbed more than +4% in pre-market trading after strong results from NVIDIA.

Splunk Inc (SPLK) gained over +12% in pre-market trading after the software company reported stronger-than-expected Q2 results and lifted its FY24 revenue outlook.

Autodesk Inc (ADSK) soared more than +5% in pre-market trading after the company reported upbeat Q2 results and provided solid FY24 guidance.

Kenvue Inc (KVUE) rose over +2% in pre-market trading after Goldman Sachs upgraded the stock to Buy from Neutral.

Vizio Holding Corp (VZIO) plunged about -5% in pre-market trading after BofA downgraded the stock to Underperform from Buy.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - August 24th

Intuit (INTU), Toronto Dominion Bank (TD), NetEase (NTES), Workday (WDAY), Marvell (MRVL), Dollar Tree (DLTR), Ulta Beauty (ULTA), Huazhu (HTHT), Burlington Stores (BURL), Futu (FUTU), Affirm Holdings (AFRM), Frontline (FRO), Gap (GPS), Weibo Corp (WB), PagSeguro Digital (PAGS), Nordstrom (JWN), Credo Technology Holding (CRDO), OSI Systems (OSIS), Petco Health and Wellness (WOOF), Opera (OPRA), The Hain Celestial (HAIN), Movado (MOV), Youdao (DAO).

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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.