Market Rally Fizzled After Nvidia Results Exceeded Expectations, Focus Shifts to Fed Talk

Barry Adams
24 Aug, 2023
New York City

Market indexes on Thursday declined after the Nvidia-powered tech rally in the previous session waned. 

The tech-heavy Nasdaq and the broader market index S&P 500 declined after investors shifted focus to the upcoming comments from the Federal Reserve Chairman Jerome Powell on Friday.  

Market sentiment has wavered as investors reacted to new economic data every week. 

Investors are divided about the future direction of interest rates after Treasury yields jumped to 16-year highs and investors debated the prospects of economic recession. 

Durable goods orders provided another data point that suggested that the economy is resilient despite the elevated inflation and multiple-rate hikes. 

Initial jobless claims in the week ending on August 19 declined by 10,000 to 230,000 from the previous week's upwardly revised 240,000. 

Continuing claims decreased 9,000 to 1.702 million for the week ending on August 12.

The weak jobless claims indicated tight labor market conditions are persisting, supporting the case of hawkish stance from the Federal Reserve. 

 

Durable Goods Orders Dropped On Aircraft Demand  Weakness

Durable goods orders, which represent demands for big-ticket appliances, computers and transportation equipment, declined more than expected in July, the Commerce Department reported Thursday. 

new orders for manufactured durable goods declined 5.2% in July, following a downwardly revised increase of 4.4% in June.  

The orders declined at the fastest pace in July since the onset of Covid-19 outbreak in April 2020, because of the weakness in transportation orders. 

Durable goods orders, excluding transportation, increased 0.5% in the month, indicating stable demand for manufactured goods. 

Transportation equipment orders which include civilian and military aircrafts declined 14.3% after rising for four months in a row. 

However, orders for non-defense goods excluding aircrafts, generally viewed as a proxy for capital spending by businesses, increased 0.1% in the month.  

 

U.S. Indexes & Yields 

The S&P 500 index traded up 0.2% to 4,444.49 and the Nasdaq Composite gained 0.2% to 13,741.65.  

The yield on 2-year Treasury notes increased to 5.0%, 10-year Treasury notes inched higher to 4.20% and 30-year Treasury bonds edged up to 4.28%. 

West Texas Intermediate crude oil eased and Brent crude oil price fell to the level last seen In April.  

Crude oil decreased $0.50 to $78.31 a barrel and natural gas prices decreased 5 cents to $2.45 a thermal unit. 

 

U.S. Stock Movers 

Nvidia Corp jumped 3.8% to $488.05 after the chipmaker reported sharply higher sales and earnings in its latest quarter. 

Nvidia reported quarterly sales soared 88% to $13.51 billion and net income jumped eight-fold to $6.1 billion from $656 million and diluted earnings per share advanced to $2.48 from 26 cents a year ago. 

Gross margin jumped to 70.1% from 43.5% in the quarter a year ago. 

NVIDIA said it will pay its next quarterly cash dividend of4 cents per share on September 28 to all shareholders of record on September 7.

The company's earnings exceeded high expectations of earnings and also forecasted revenue above market expectations. 

During the second quarter of fiscal 2024, NVIDIA returned $3.38 billion to shareholders  through the sale of 7.5 million shares repurchased for $3.28 billion, and cash dividends. 

As of the end of the second quarter, the company had $3.95 billion remaining under its share repurchase authorization. 

On August 21, the Board of Directors approved an additional $25 billion in share repurchases, without expiration. and the company plans to continue share repurchases this fiscal year.

The maker of graphics processing chips benefited from the surge in AI-driven demand for its chips as device makers rushed to release products that can process AI queries. 

The company expected revenue in the current quarter around $16 billion with a band of 2% and gross margin of 71.5% with a band of 50 basis points.  

T-Mobile US Inc declined 1.9% to $133.77 and the company said in an 8-K filing with the SEC that it plans to take a one-time pre-tax charge of $450 million in the third quarter to account for 5,000 job cuts, about 7% of its workforce. 

Boeing Company declined 3.5% to $220.43 after the company said fastener holes on after pressure bulkheads were improperly drilled on some versions of 737 Max jets, this will further delay deliveries of these planes. 

Spirit AeroSystems Holdings Inc plunged 15% to $19.45 after Boeing highlighted manufacturing defects on the fuselage made by the company.