Nasdaq Down 1.8%, Global Markets Set to Fall 4th Consecutive Week

Barry Adams
24 Aug, 2023
New York City

Market indexes reversed morning gains to losses by midday as investors shifted focus away from tech stocks. 

Tech stocks rallied for two days in a row ahead of Nvidia's release of earnings. The chipmaker has been a favorite among tech investors for its semiconductor chipsets in enabling computing devices in processing AI-queries. 

Nvidia's blockbuster quarterly results confirmed the company's leadership status in the chip industry, after revenue nearly doubled and earnings surged eight-fold. 

The tech-heavy Nasdaq and the broader market S&P 500 index 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 this week and digest the latest report on durable goods and weekly jobless claims. 

Investors are divided about the future direction of interest rates after the  10-year Treasury yield jumped to a 16-year high and investors debated the timing and the depth 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, and extended this year's gain to 230%, 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.  

 

European Markets Rebounded, Crude Oil Dropped to 5-month Low

Market indexes in Europe traded higher after chip stocks rallied and tech investors hunted for bargains. 

Popular averages in London, Paris and Frankfurt advanced in volatile trading after chipmakers jumped more than 2% on the hopes that the record quarterly results reported by Nvidia are indicative of a broader industry trend. 

Traders drove up chipmakers in Europe, Asia and in the U.S.

Market participants also reviewed the volatile trading pattern in the oil and natural gas markets, which has a deeper impact on the inflation path. 

Crude oil prices dropped to a four month low on the rising imbalance between demand and supply. China's uneven economic rebound is having a negative impact on the expected demand growth for crude oil. 

Moreover, natural gas prices dropped about 4% after talks between union leaders and LNG producers in Australia indicated that a long strike may be averted.  

Closer to the region, France's manufacturing confidence index deteriorated to the lowest since January 2021 on weak new orders largely because of weakness in exports and production. 

The manufacturing sentiment index declined to 96 in August from 101 in July, the statistical agency INSEE reported Thursday. 

 

Europe Indexes & Yields

The DAX index decreased 0.7% to 15,621.49, the CAC-40 index declined 0.4% to 7,214.46 and the FTSE 100 index edged higher 0.3% to 7,333.63.

The yield on 10-year German bonds decreased to 2.51%, French bonds traded lower to 3.06%, the UK gilts edged down to 4.43% and Italian bonds fell to 4.18%.

The euro edged lower to $1.082, the British pound to $1.268 and the U.S. dollar fetched 88.07 Swiss cents.

Natural gas prices traded volatile after local reports showed some progress between the workers' unions and Woodside Energy and Chevron in averting a long strike at LNG terminals. 

Brent crude increased $0.23 to $83.44 a barrel and the Dutch TTF natural gas fell €4.46 to €32.33 per MWh.

 

Europe Stock Movers

European chipmakers rallied after Nvidia reported record quarterly sales. 

ASML Holding NV jumped 0.6% to €630.20, Aixtron SE advanced 1.% to €36.50, BE Semiconductor Industries NV jumped 2.5% to €108.60 and ASM International NV increased 1.7% to €465.15. 

UBS Group AG jumped 2.5% to CHF 21.86 after the company said its group company Credit Suisse dropped its plan to list its real estate fund citing weak demand from Swiss investors.   

Norwegian Air Shuttle ASA dropped 7% to €0.84 after the discount air carrier reported a decline in second quarter profit. 

Harbour Energy PLC declined to 231.60 pence after the company narrowed its production forecast narrowed towards the lower end of its estimate

Hunting Plc decreased 9.6% to 230.0 pence after the company said it plans to sell its non-core production and exploration assets in order to further its business restructuring. 

Hays Plc increased 0.3% to 103.60 pence and the recruiting company appointed a new chief executive.