U.S. and Global Markets Trade Sideways as Investors Anticipate Another Stellar Results from Nvidia

Alexander Garcia
27 Aug, 2024
Miami

Stocks traded around the flatline on Wall Street ahead of widely anticipated earnings from Nvidia, a bellwether for artificial intelligence-related tech stocks. 

Market sentiment was cautiously optimistic as investors are hoping that Nvidia will deliver another quarter of a sharp increase in revenue and earnings amid rising acceptance of its hardware and software platforms for AI-related applications. 

Nvidia is a key beneficiary of a sharp jump in capital spending by Amazon, Microsoft, Alphabet, and other leading tech companies developing artificial intelligence-linked applications. 

Analysts are estimating the company to deliver between 64 cents and 71 cents per share in the latest quarter ending in July, sharply higher than 25 cents in the corresponding quarter a year earlier. 

Revenue in the quarter is expected to soar to $28.68 billion from $13.51 billion a year earlier. 

Nvidia sales have been on a tear, and the company has benefited from its leadership positioning in the market and accelerated its quarterly sales growth between 80% and 100% for eight quarters in a row. 

Nvidia's quarterly earnings per share have also exceeded between 5 cents and 6 cents from the consensus earnings estimates of analysts. 

On the economic front, home prices in metropolitan areas continued to rise, but at a slower pace in June, according to the S&P Core Logic Case-Shiller 20 city Composite Index. 

The metropolitan home price index rose at an annual pace of 6.5% in June, following the upwardly revised 6.9% annual rate in the previous month. 

Home prices are still rising in the largest metropolitan cities because people are still moving to these areas and wages are still rising at a faster pace than inflation. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.02% to 5,618.24, the Nasdaq Composite rose 0.04% to 17,728.97, and the Russell 2000 index declined 0.9% to 2,198.65.  

The yield on 2-year Treasury notes edged higher to 3.96%, 10-year Treasury notes increased to 3.86%, and 30-year Treasury bonds inched higher to 4.16%.

WTI crude oil decreased $1.70 to $75.69 a barrel, and natural gas prices edged down 3 cents to $1.91 a thermal unit.

Gold fell by $1.74 to $2,513.64 an ounce, and silver increased by $0.06 to $29.92.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 100.81.

 

U.S. Stock Movers

Nvidia Corp. edged down 1.1% to $125.05, and investors are estimating that the company will deliver another quarter of strong revenue and earnings growth and surpass earnings per share expectations of 64 cents. 

Cava Group declined 8.2% to $115.60 after several corporate insiders and a key investor disclosed their plans in regulatory filings to trim their holdings. 

Apple Inc. decreased 0.8% after the company said chief financial officer Luca Maestri will step down on January 1, 2025, and be replaced by the current vice president for financial planning and analysis, Kaven Parekh.

Maestri will continue to lead a group responsible for real estate development, information technology systems, and security. 

 

European Markets Brave Higher Despite Weak Economic Data 

In cautious trading across Europe, stocks struggled to advance as investors reviewed the latest batch of economic updates on Tuesday. 

Benchmark indexes in Frankfurt and Paris edged up 0.5%; in London, they advanced 0.3% after Germany's GDP in the second quarter shrank as expected. 

Meanwhile, the hopes of a second-half economic recovery led by consumers in Germany got another hit after consumer morale weakened significantly. 

The seasonally adjusted GDP in the second quarter contracted by 0.1% from the previous quarter and advanced by 0.3% from a year ago, the Federal Statistics Office, or Destatis, reported Tuesday. 

As initially estimated, weak household spending and investment negatively impacted activities in the second quarter, following a 0.2% rise in the first quarter. 

 

German Consumer Sentiment Index Weakened 

Overall consumer spending was stable compared to the previous quarter, increasing slightly by 0.1% after adjusting for price, seasonal, and calendar effects. 

Private consumption decreased by 0.2% after increasing at the beginning of the year; however, government spending rose significantly by 1.0%.

German consumer morale is expected to weaken in September as fears of mounting job losses, rising insolvencies, and weakening economic activities weigh. 

The forward-looking consumer sentiment index dropped to -22.0 from -18.6 in August, according to a joint survey published by GfK and Nuremberg Institute for Market Decisions on Tuesday. 

 

UK Shop Prices Eased In August 

UK shop prices eased for the first time in nearly three years in August, according to data released by the British Retail Consortium on Tuesday. 

The shop price index dropped 0.3% in August, reversing the 0.2% increase in July, after retailers enlarged discounts to clear summer stocks and pushed down overall non-food prices. 

 

Europe Indexes and Yields

The DAX index increased by 0.4% to 18,681.81; the CAC-40 index fell by 0.3% to 7,565.78; and the FTSE 100 index advanced by 0.2% to 8,345.46. 

The yield on 10-year German bonds edged higher to 2.28%, French bonds inched up to 3.01%, the UK gilts edged higher to 3.98%, and Italian bonds increased to 3.67%.

The euro edged down to $1.12; the British pound inched higher to $1.32; and the U.S. dollar weakened to 84.65 Swiss cents.

Brent crude decreased $1.63 to $79.79 a barrel, and the Dutch TTF natural gas fell by €0.95 to €38.70 per MWh.

 

Europe Stock Movers

Flughafen Zurich AG decreased after the Swiss airport operator reported weaker-than-expected first-half results. 

Sandvik AB decreased 0.2% to DKK 214.0, and the Swedish engineering company agreed to acquire Universal Field Robots. 

Mining companies advanced in London after copper futures prices advanced to a six-week high in the hopes of a rate cut by the U.S. Federal Reserve next week. 

Antofagasta increased 1.3% to 1,901.50 pence, Anglo American increased 2.3% to 2,302.50 pence, and Glencore added 0.4% to 412.80 pence. 

Rheinmetall AG decreased 0.4% to €532.80, and the arms and automotive company said it won an order to build exhaust gas recirculation valves for a "renowned car manufacturer."

Bunzl plc jumped 7% to 3,440.0 pence and traded at a new record high after the diversified distribution and outsourcing group reported better-than-expected first-half results and announced a stock buyback plan. 

Revenue in the first half decreased 3.3% to £5.7 billion from £5.9 billion; pre-tax profit dropped 11.9% to £279.4 million from £317.1 million; and earnings per share fell 16.4% to 59.2 pence from 70.8 pence a year ago.

The company also launched a £250 million stock repurchase plan to be completed before March 3, 2025. 

The diversified conglomerate increased its interim dividend by 10.4% to 21.1 pence from 18.2 pence a year earlier. 

 

Japan's Nikkei Rebounds Following the Yen's Decline Ahead of Key Economic Updates 

Market indexes in Tokyo rebounded following a pullback in the yen. 

The Nikkei 225 gained 0.5% and the broader Topix index increased 0.7% in Tuesday's trading and erased losses from the previous session after the yen edged slightly lower. 

Stocks have lacked direction and danced around following the volatility in the yen amid rate path uncertainty and ongoing anxieties about the appropriate level of the currency. 

Investors are hoping the yen will be less volatile in the months ahead if the U.S. Federal Reserve embarks on its rate-cut cycle while the Bank of Japan lifts its rates higher. 

The moves in the opposite direction by two central banks would accelerate the unwinding of the yen carry trade, lowering yen volatility and stabilizing market sentiment. 

 

Japan Stock Movers 

The Nikkei 225 Stocks Average rose 0.5% to 38,288.62, and the Topix index advanced 0.7% to 2,680.80. 

Semiconductor equipment makers were in focus ahead of the release of Nvidia's earnings after the close on Wednesday in New York. 

Tokyo Electron, Advantest, Lasertec, Disco Corp., and Screen Holdings decreased between 0.5% and 4.5%. 

Export-driven stocks closed higher after the yen edged lower but traded in a tight range and stabilized. 

Toyota Motor added 1.8% to ¥2,644.0, Honda Motor gained 1.8% to ¥1,561.0, and Nissan Motor increased 1.7% to ¥430.50. 

Retailers were in focus for the second week in a row as foreign tourists took advantage of the weak yen and drove retail sales higher at department stores and luxury boutiques. 

Isetan Mitsukoshi added 0.5% to ¥2,187.50, Seven & I jumped 4.2% to ¥2,122.0, Fast Retailing Co jumped 0.6% to ¥46,620.0, Aeon Co fell 0.7% to ¥3,743.0, and Nitori Holdings declined 0.2% to ¥22,340.0. 

 

China Indexes Extend Losses; PDD Holdings, Trip.com, and Petro China in Focus

Stocks in China faced selling pressure amid ongoing worries about weak economic growth and earnings outlooks. 

Benchmark indexes in Hong Kong edged lower by 0.2%, and in mainland China, they declined by 0.3%. 

Stocks faced selling pressure after the parent company of Temu, PDD Holdings, said the current rate of sales growth is unsustainable and lowered its earnings outlook. 

Last week, Walmart sold its stake in JD.com at a discount of $3.6 billion and ended its 8-year-long partnership. 

Investors have been selling stocks in Hong Kong after a reversal in sentiment amid a growing worry about an earnings slowdown. 

Moreover, investors in China have been allocating new capital to luxury residences in Shanghai and Beijing as property values continue to appreciate in top-tier cities, seeking safety in Chinese government bonds, and investing in ETFs focused on Japanese and U.S. stocks. 

 

China Stock Movers 

The Hang Seng index decreased 0.2% to 17,835.44, and the CSI 300 index fell 0.6% to 3,304.46. 

PDD Holdings dropped 29% to $98.70 after the parent company of China-based Temu lowered its revenue and earnings growth expectations for the current quarter amid intensifying competition and the need for higher capital expenditure on new projects. 

Revenue rose 86% to $13.4 billion, or 97.1 billion yuan, and adjusted earnings per ADS rose to $3.20, or 23.24 yuan, from 10.157 yuan a year ago. 

Trip.com Group soared 9.4% to HK $366.40 after the dominant online travel platform reported better-than-expected second quarter revenue and earnings. 

Revenue increased 13.% to 12.8 billion yuan from 11.2 billion yuan, and earnings rose to 3.83 billion yuan, or 5.57 yuan per share, compared to 0.63 billion yuan, or 0.94 per share, a year earlier. 

Excluding items, the company reported adjusted earnings of 4.99 billion yuan, or 7.25 yuan per share, for the period.

PetroChina jumped 4.5% to HK $7.18, and the oil and natural gas exploration company reported record operating profit in the first half amid rising energy production. 

Net income rose 3.9% to 88.6 billion yuan, or $12.6 billion, benefiting from higher international oil prices, but weak domestic demand kept processed crude oil production increasing to 3%, while refined crude production advanced only 2.1% from a year ago. 

Jet fuel production soared 42% from a year ago, following a rebound in demand for air travel.