Nvidia Sparked Tech Rally Failed to Expand to Broader Market

Alexander Garcia
23 May, 2024
Miami

Benchmark indexes on Wall Street rallied after Nvidia surpassed elevated market expectations, but the rally failed to broaden beyond tech stocks after an early morning bounce. 

In morning trading, the S&P 500 index and the Nasdaq Composite advanced more than 0.8% after Nvidia said it sees no slowdown in demand for its chips to support artificial intelligence applications. 

Nvidia, at the center of the artificial intelligence boom, lived up to the market hype and raised its sales estimate in the current quarter. 

Initial claims of jobless benefits slowed after rising to elevated levels early in the month, stoking fears that the labor market may be heading for a softer patch. 

Initial claims for jobless benefits fell by 8,000 to 215,000 for the week ended May 18, the U.S. Department of Labor reported on Thursday. 

Initial jobless claims rose to 232,000 in the week ending on May 4, a high not seen since the third week in August 2023. 

Continuing claims, which run one week behind, also rose by 8,000 to 1.794 million. the highest level in five weeks. 

 

New Home Sales Fall as Home Inventories Rise

Sales of single-family houses fell in April as buyers struggled with elevated home prices and rising mortgage rates. 

Single-family home sales declined 4.7% from the previous month to a seasonally adjusted annual rate of 634,000 from the downwardly revised 664,000 in March, the U.S. Census Bureau reported Thursday. 

Home sales declined 7.4% from the April 2023 estimate of 687,000. 

The median sales price of new houses sold in April was $433,500, and the average sales price was $505,700, higher than $417,200 and $500,900, respectively, a year ago. 

Homes listed for sale during the period increased to 480,000, about 9.1 months of supply at the current rate of annual sale, higher than 428,000 and 7.5 months of supply from a year ago, respectively.

 

U.S. Indexes and Treasury Yields

The S&P 500 index rose 0.2% to 5,316.24, and the Nasdaq Composite jumped 0.8% to 16,927.95. 

The yield on 2-year Treasury notes edged lower to 4.88%, 10-year Treasury notes decreased to 4.42%, and 30-year Treasury bonds edged higher to 4.54%.

WTI crude oil increased $0.58 to $78.20 a barrel, and natural gas prices declined 1 cent to $2.83 a thermal unit.

Gold decreased by $38.05 to $2,343.14 an ounce, and silver fell 53 cents to $30.35. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.84.

 

U.S. Stock Movers

Nvidia Corp. soared 6.7% to $1,013.0 after the advanced chipmaker reported better-than-expected quarterly results and lifted its revenue outlook for the current year, driven by strong data center revenue growth. 

The company also announced 10-for-1 stock. 

Snowflake jumped 4.6% to $170.80 after the cloud computing company reported better-than-expected revenue in its fiscal first quarter. 

VF Corp. dropped 8.5% to $11.28 after the apparel and footwear maker reported weaker-than-expected revenue and unexpectedly swung to a loss. 

LiveRamp Holdings soared 17.8% to $38.09 after the advertising technology company exceeded earnings expectations and lifted revenue guidance for the current quarter and full year. 

 

European Indexes Rebound, Private Sector Activity Growth Gains Momentum 

Market indexes in Europe advanced, bond yields in the region gained, and the euro held firm against major currencies. 

Benchmark indexes in London, Paris, and Frankfurt rose in early trading following a surge in tech stocks after the leading artificial intelligence chip maker Nvidia reported strong quarterly results. 

The rise in private sector activities to the highest level in a year also lifted market sentiment in European trading. 

The HCOB Eurozone Composite PMI increased to 52.3 in May from 51.7 in April after new orders, business activity, and employment levels picked up pace. Business confidence in the region advanced to a 27-month high amid steady improvements in new orders and demand. 

 

Europe Indexes and Yields

The DAX index increased by 0.06% to 18,691.32; the CAC-40 index rose by 0.1% to 8,102.33; and the FTSE 100 index inched lower by 0.4% to 8,339.75. 

The yield on 10-year German bonds edged up to 2.54%; French bonds inched higher to 3.02%; the UK gilts edged higher to 4.21%; and Italian bonds inched lower to 3.82%.

The euro edged higher to $1.084; the British pound inched higher to $1.272; and the U.S. dollar gained to 91.36 Swiss cents.

Brent crude increased $0.30 to $81.59 a barrel, and the Dutch TTF natural gas rose by €0.70 to €35.38 per MWh.

 

Europe Stock Movers

Hargreaves Lansdown PLC soared 10.9% to 1,086.0 pence after the investment platform rejected a surprise takeover approach from a consortium of private equity buyers. 

Aviva plc decreased 0.8% to 492.30 pence, despite the UK-based insurance company reporting better-than-expected results in the first quarter. 

Wizz Air Holdings soared 6.9% to 2,099.77 pence after the low-cost carrier returned to profitability in fiscal year 2024. 

E.ON declined 1.7% to €12.40 after the electric utility company reported mixed quarterly results. 

Revenue in the first quarter decreased 20% to €27.2 billion, net income swung to a profit of €584 million from a loss of €143 million, and earnings per share were 22 cents from a loss of 55 cents a year ago. 

National Grid plunged 9.9% to 1,016.0 pence after the electricity and gas utility announced its plans to raise £7 billion, or $8.9 billion, through a secondary offering of 1.09 billion shares. 

United Utilities declined 3.7% to 1,034.50 pence, and Drax Group plunged 8.2% to 510.50 pence after utilities companies faced selling pressure. 

Gerresheimer AG soared 11.8% to €104.20 after Germany packaging products maker agreed to acquire Blitz LuxCo sarl, the holding company of the Bormioli Pharma Group, for €800 million, or $865.92 million. 

CTS Eventim AG jumped 10% to €88.80 after the event ticketing platform operator reported better-than-expected operating income in the first quarter. 

Merck KGaA gained 0.7% to €169.65 after the German pharmaceutical company agreed to acquire life science company Mirus Bio for $600 million. 

Gamma Biosciences, the parent company of Mirus, is based in Madison, Wisconsin, and specializes in the development of transfection reagents, which play a critical role in viral vector-based gene therapy. 

 

Tech Rally Lifts Indexes In Tokyo

Market indexes in Tokyo advanced and private sector activity expanded at the fastest pace in nine months. 

The Nikkei 225 and the Topix indexes gained after tech stocks rallied following a stronger-than-expected earnings report from the leading artificial chip maker, Nvidia. 

The AI chipmaker also estimated higher-than-expected revenue in the current quarter and announced a 10-to-1 stock split. 

The Japanese yen was under pressure and traded at 156.65 against the U.S. dollar at 3:00 p.m. Tokyo time, after the latest Fed's policy meeting minutes showed policymakers are worried about the slow pace of disinflation. 

The policymakers have been worried about stagnant inflation and suggested that the disinflation process is likely to take longer than previously anticipated. 

 

Private Sector Expansion Accelerates In May 

Japan's private-sector business activities accelerated for the third consecutive month in May. 

The au Jibun Bank Japan Composite PMI index increased to 52.4 from 52.3 in April, S&P Global reported Thursday. 

The index rose to its highest level since last August's 52.6 as private sector output accelerated for the third month in a row. 

The stabilization in manufacturing output also raised hopes that the economic recovery is likely to broaden in the second half of the year. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average rose 1.2% to 39,074.40, and the Topix index advanced 0.4% to 2,749.98. 

Tech stocks led the gainers in Tokyo trading after Nvidia reported sharply higher earnings and announced a 10-for-1 stock split. 

Disco Corp., Tokyo Electron, Advantest, and Screen Holdings gained between 1.5% and 2.7%. 

SoftBank Group advanced 4.4% to ¥8,738.0 after the credit rating agency S&P upgraded the company's debt rating by one notch to BB+. 

Teijin soared 10.2% to ¥1,550.0, and Renesas Electronics advanced 5.5% to ¥2,849.0. 

Last week, the composite and carbon fiber maker reported weaker-than-expected annual results. 

Revenue in the fiscal year 2023 ending in March increased 1.4% to 1.03 trillion yen from 1.01 trillion yen, net income swung to a profit of 10.6 billion yen from a loss of 17.7 billion yen, and basic earnings per share were 55.07 yen from a loss of 92.04 yen a year ago. 

The company lowered its total dividend in the fiscal year 2023 to 30 yen from 40 yen in the previous fiscal year and guided 30 yen in the current fiscal year. 

On the downside, Sumitomo Realty & Development, Sumitomo Metal Mining, and Dowa Holdings declined between 3% and 4%. 

 

China Stock Run Hits Wall

Stocks in Shanghai and Hong Kong headed lower amid earnings worries and a lack of investor interest. 

Benchmark indexes in Shanghai and Hong Kong fell around 1% after a 6-week market rally appeared to peter out amid a lack of catalysts. 

Investor enthusiasm has been waning for the second week in a row after market indexes retreated from their 10-week highs as the earning season nears its end. 

Most mainland Chinese companies are reporting weaker-than-expected earnings, and earnings growth for Hong Kong companies also lagged behind market expectations. 

Moreover, investors are increasingly skeptical of the effectiveness of the regulatory support announced for the property market because property prices are still too high in the top 10 largest cities when compared to wages. 

Property developers in Hong Kong were also under pressure after the latest minutes of the Federal Reserve's policy meeting showed policymakers are worried about the lack of progress on the inflation front. 

Hong Kong's interest rates are likely to follow higher U.S. interest rates as the city's currency is pegged to the U.S. dollar. 

Market indexes in Hong Kong and Shanghai are likely to revisit lows of the year reached earlier in January, with lack of economic catalysts and little improvement in earnings.

 

China Stock Movers 

For the week, the Hang Seng index is down about 4%, and the CSI 300 index has fallen more than 1.5%. 

The CSI 300 index dropped 0.9% to 3,651.79, and the Hang Seng index fell 1.4% to 18,930.02. 

Henderson Land Development dropped 3.7% to HK$25.80, Sun Hung Kai Properties declined 0.8% to HK$79.25, China Vanke fell 5.6% to HK$6.62, and Longfor Group Holdings fell 3.7% to HK$14.28. 

PDD Holdings gained 0.5% to $147.50 in New York after the e-commerce company reported sharply higher revenue in the March quarter. 

Temu-parent said revenue soared 131% to 86.8 billion yuan, or US$12.0 billion, and net income attributable to stockholders soared 246% to 28 billion yuan, or US$3.8 billion. 

Revenue from transaction services surged 327% to 44.4 billion yuan, and revenue from marketplace services increased 56% to 42.5 billion yuan.