Global Tech Rally On Hold as Investors Anticipate Another Stellar Quarter from Nvidia

Alexander Garcia
28 Aug, 2024
Miami

Market indexes turned lower after struggling to advance in the morning as investors turned cautious ahead of the widely anticipated earnings results from artificial intelligence leader Nvidia Corp. 

Tech and semiconductor stocks were in focus for the third consecutive day, and Nvidia Corp. is scheduled to release its quarterly results after the close of regular trading hours today. 

Semiconductor equipment and technology stocks traded sideways ahead of Nvidia's earnings, and the company is seen as a bellwether for artificial intelligence-related spending by Microsoft, Amazon, Meta Platforms, and Alphabet and other leading tech companies. 

Investors are looking for clues about the company's progress in holding its leadership position in artificial intelligence technology, revenue growth outlook, and development of new higher-margin products. 

Nvidia's line of advanced semiconductor products has gained a solid following among leading tech companies to enable their artificial intelligence-based applications. 

Nvidia's revenues have surged multi-fold over the last three years as tech companies escalate deployment of AI-enabled applications, fueling a wild run on the stock.  

Nvidia's stock has soared 155% in the year so far and jumped 1,000% over the last three years, driven by stellar performance and strong interest from tech investors around the world. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.5% to 5,596.07, the Nasdaq Composite fell 0.9% to 17,592.80, and the Russell 2000 index declined 0.3% to 2,196.18. 

The yield on 2-year Treasury notes edged lower to 3.87%, 10-year Treasury notes decreased to 3.82%, and 30-year Treasury bonds inched lower to 4.12%.

WTI crude oil decreased $0.45 to $75.06 a barrel, and natural gas prices edged up 3 cents to $2.12 a thermal unit.

Gold fell by $23.95 to $2,499.22 an ounce, and silver increased by $0.79 to $29.22.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 101.10.

 

U.S. Stock Movers

Nordstrom increased 4.5% to $22.11, and the luxury apparel and accessories retailer reported better-than-estimated second-quarter revenue and earnings.

The retailer also lifted its annual sales outlook despite the macroeconomic uncertainty. 

PVH Corp. dropped 7.8% to $22.11, and the apparel manufacturer reported revenue that matched analysts' expectations, but the company's current quarter outlook disappointed investors. 

Berkshire Hathaway Class B increased 1% to $465.56, and the company said it sold 24.7 million shares of Bank of America and extended its sale to $5 billion over the last two months. 

Berkshire's share in Bank of America dropped to 11.6% after the latest sale. 

Abercrombie & Fitch declined 4.5% to $141.87 despite the specialty apparel retailer reporting higher sales and earnings in its fiscal second quarter and the company lifting its annual outlook. 

Revenue increased 21% to $1.1 billion, net income soared to $133 million from $57 million, and earnings per share advanced to $2.50 from $1.10 a year ago. 

The company revised its full-year sales to increase between 12% and 13%, from the previous estimate of an increase of 10%. 

Foot Locker plunged 15.3% to $27.77, and the footwear retailer reported better-than-expected sales and smaller-than-expected loss in the latest quarter. 

Revenue in the latest quarter increased 1.9% to $1.89 billion from $1.86 billion, net loss expanded to $12 million from $5 million, and diluted loss per share rose to 13 cents from 5 cents a year earlier. 

Comparable sales in the latest quarter increased 2.6%, driven by global Foot Locker and Kinds Foot Locker sales rise of 5.2%. 

 

European Markets Attempt to Extend Weekly Gains

Stock market indexes in the Euro Area advanced amid caution ahead of inflation data in the region and retail sales updates in Spain. 

Semiconductor equipment makers were in focus ahead of widely anticipated earnings from artificial intelligence leader Nvidia Corp. 

Benchmark indexes in Frankfurt and Paris advanced more than 0.5%, but leading indexes in London lacked direction in Wednesday's trading. 

Nvidia, widely seen as a bellwether for artificial intelligence investment by key technology companies, has soared more than 160% in the year so far and 1,000% in the last three years. 

The advanced chip designer's revenue has jumped more than 80% for eight quarters in a row, and investors are hoping for similar revenue growth in the current quarter. 

Semiconductor equipment could turn volatile if the company misses elevated revenue and earnings expectations set by global tech investors. 

 

Eurozone Lending Growth Accelerates to 8-Month High

The Euro Area's bank lending to households increased 0.5% to €6.883 trillion, accelerating from a 0.3% increase in the previous month, the European Central Bank reported Wednesday. 

In addition, lending to private corporations increased 0.6% to €5.14 trillion, and overall private sector lending, including non-financial corporations and households, picked up to 1.3% from 1.1% in the previous month. 

 

Europe Indexes and Yields

The DAX index increased by 0.5% to 18,782.29; the CAC-40 index rose by 0.2% to 7,577.67; and the FTSE 100 index fell by 0.02% to 8,343.85.

The yield on 10-year German bonds edged lower to 2.23%, French bonds inched down to 2.96%, the UK gilts edged down to 3.94%, and Italian bonds decreased to 3.61%.

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 $0.38 to $79.18 a barrel, and the Dutch TTF natural gas rose by €0.39 to €38.32 per MWh. 

 

Europe Stock Movers

Mining companies retreated after copper prices fell from a five-week high of $4.20 per pound amid a weak China demand growth outlook. 

BHP Group slashed its imminent China group outlook but held out for higher prices, citing a prolonged global supply deficit. 

Antofagasta decreased 4.3% to 1,828.28 pence, Anglo American declined 1.8% to 2,239.0 pence, Glencore PLC dropped 1.8% to 403.15 pence, and BHP Group fell 1.5% to 2,064.0 pence. 

Hochschild Mining Plc declined 5.6% to 182.40 pence despite the precious metal mining company reporting strong first-half results on higher output and realized prices. 

Oil and natural gas exploration companies traded down following the decline in crude oil prices after tensions in the Middle East eased, but the prospect of a wider war remains elevated. 

BP Plc declined 0.9% to 428.20 pence, Shell PLC dropped 1.5% to 2,685.0, TotalEnergies SE dropped 0.4% to €62.48, and Repsol SA fell 1.3% to €12.48. 

Elekta AB increased 3.5% to SEK 71.45, and the Swedish radiation therapy company reported strong fiscal first-quarter results. 

LEG Immobilien SE fell 1.7% to €86.12 after the German real estate company launched a €500 million senior unsecured convertible bond offering due in 2030. 

The company intends to use proceeds to repay debt and for general corporate expenses. 

 

Japan's Indexes Closed Up In Lackluster Trading; Retailers and Shipping Companies Extended Losses 

Benchmark indexes in Tokyo bounced around the flatline as tech stocks traded in a tight range ahead of Nvidia Corp.'s earnings. 

The Nikkei 225 and the Topix index gained more than 0.1% near the close of the trading session, as semiconductor equipment stocks were in focus. 

Nvidia Corp. is set to release its quarterly results after the close of regular trading in New York later today. 

The advanced semiconductor chip design company has led the surge in artificial intelligence-linked stocks over the last two years and is a key indicator of demand for artificial intelligence chips and servers. 

Nvidia is expected to earn between 64 cents and 71 cents per share in its latest quarter, significantly higher than 25 cents in the corresponding period 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 over the last five quarters have also exceeded between 5 cents and 6 cents from the consensus earnings estimates of analysts. 

The yen weakened by 0.55 yen to 144.54 against the U.S. dollar as traders continued to debate the future rate path and likelihood of a rate hike at the end of the Bank of Japan's next policy meeting on September 20. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average increased 0.1% to 38,333.50, and the Topix index advanced 0.3% to 2,687.92. 

Tech companies, retailers, financial services providers, and industrial companies were in focus. 

Advantest, Tokyo Electron, Lasertec, and Screen Holdings traded in a tight range and managed to bounce back and close up as much as 4% from early morning losses. 

Isetan Mitsukoshi, Seven & I, Fast Retailing, Aeon Co., and Takashimaya declined between 0.3% and 0.7%. 

Sumitomo Mitsui Financial declined 0.3%, and Mitsubishi UFJ and Mizuho Financial traded in a tight range and eased 0.3% in active trading. 

Toyota Motor and Honda Motor jumped about 2%, Nissan Motor declined 0.3%, and Subaru Corp. gained 0.4%. 

Ocean freight shipping companies extended losses for the second week in a row amid rising violence in the Middle East that could force shipping companies to seek alternative longer routes to Europe. 

Mitsui OSK Lines declined 0.5% to ¥5,069.0, Nippon Yusen KK decreased 0.2% to ¥5,077.0, and Kawasaki Kisen Kaisa dropped 0.5% to ¥2,064.0. 

 

China Stocks Extended Weekly Losses; Anta Sports Announced Stock Buyback Plan 

Investors avoided high-flying tech stocks in China ahead of an earnings report from a leading artificial intelligence company. 

Benchmark indexes in Hong Kong dropped 1% amid weakness in tech stocks as tech investors around the world await the release of earnings from Nvidia Corp. in the evening in New York on Wednesday. 

Market sentiment remained weak in Shanghai and Shenzhen amid fragile economic recovery and weak investor and consumer sentiment with no near-term catalysts. 

Earnings so far in China have been mixed, and most companies have surpassed market expectations, but a weak second-half outlook has kept investors on the sidelines. 

Moreover, investors are not committing new capital to recently beaten-down stocks after four straight years of losses. 33.7 

 

China Stock Movers 

The Hang Seng index fell 1% to 17,706.57, and the CSI 300 index dropped 0.7% to 3,281.29. 

JD.com and Anta Sports traded higher after the two companies announced stock buyback plans. 

JD.com increased 1.3% to HK $103.0 after the company launched a $5 billion stock buyback plan to be completed by September 2027. 

Anta Sports Products increased 4.5% to HK $74.90, and the company said it plans to buyback up to $1.3 billion or HK $10.6 billion of its stock over the next 18 months. 

The company reported sales in the first half increased 13.8% to 33.7 billion yuan, and net profit jumped 62.6% to 7.7 billion yuan. 

The supplier of podium uniforms to Chinese athletes in the Paris Olympics 2024 saw a 25.1% surge in its online sales in the period, increasing its contribution to overall sales to 33.8% from 30.8% in the year ago period. 

The company increased its interim dividend by 44% to HK $1.18 from 82 HK cents per share a year earlier. 

Nongfu Spring dropped 11.3% to HK $26.80 after the company reported weaker-than-expected earnings in the first-half period. 

Investors dumped the stock after earnings rose at the slowest pace in the period since the company's listing in 2020. 

SMIC decreased 0.5% to HK $16.32, SenseTime Group fell 5% to HK $1.12, and Kuaishou Technology dropped 1.8% to HK $39.30.