4-Week Long Recovery Rally Picks Up Pace In New York After Positive Earnings

Alexander Garcia
29 Aug, 2024
Miami

Stocks on Wall Street extended recovery rally in the fourth week and rebound from the decline in the previous session after investors reviewed the latest results from artificial intelligence leader Nvidia Corp., Salesforce, Dollar General, and Best Buy. 

Nvidia reported a surge in revenue and earnings, exceeding market forecasts, and the company issued a cautious sales growth outlook in the current quarter. 

Despite the company's stellar quarter, Nvidia's stock faced selling in the early trading as short-term traders chose to lighten their holdings. 

In other earnings news, Dollar General lowered its annual sales, earnings, and comparable sales outlook, citing stretched consumers amid high cost of living. 

Best Buy reported better-than-expected quarterly results after comparable same-store sales fell at a slower pace from a year ago, but Salesforce's quarterly results exceeded market expectations. 

 

U.S. Second Quarter GDP Growth Revised Higher 

On the economic front, the U.S. economic growth in the second quarter was revised higher to 3.0% from the previous estimate of 2.8% and from 1.4% in the first quarter, the Bureau of Economic Analysis reported Thursday. 

 

International Goods Deficit Widened In July

The U.S. goods trade deficit widened to $102.7 billion in July from the downwardly revised $96.6 billion in the previous month, according to the preliminary estimate by the U.S. Census Bureau. 

The goods deficit was the widest in over two years, after imports expanded by 2.3% from the previous month to $275.6 billion and exports were flat at $172.9 billion. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.9% to 5,644.96, the Nasdaq Composite rose 1.2% to 17,771.48, and the Russell 2000 index advanced 1.3% to 2,217.42. 

The yield on 2-year Treasury notes edged higher to 3.89%, 10-year Treasury notes increased to 3.86%, and 30-year Treasury bonds inched lower to 4.14%.

WTI crude oil increased $1.41 to $75.93 a barrel, and natural gas prices edged up 4 cents to $2.14 a thermal unit.

Gold fell by $14.85 to $2,522.93 an ounce, and silver increased by $0.33 to $29.50.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 101.44.

 

U.S. Stock Movers

Semiconductor-related stocks were under pressure after Nvidia's current quarter sales estimate fell short of some analysts high expectations. 

Nvidia, the leading artificial intelligence technology player, and dramatic transformation of the company have attracted worldwide attention, catapulting the company's valuation above one trillion only a few months ago. 

The company's results are now viewed as a proxy for artificial intelligence spending by tech companies and provide critical support for the tech stock rally in 2024. 

Nvidia said revenue in the fiscal second quarter ending in July soared 122% to $30 billion, net income advanced 168% to $16.6 billion from $6.2 billion, and earnings per share rose to 67 cents from 25 cents a year ago. 

The company guided revenue in the current quarter of $32.5 billion, which fell short of some investors lofty expectations. 

Salesforce increased 4.5% to $270.50, and the customer relations management software developer reported better-than-expected fiscal second quarter results. 

In addition, the company said chief financial officer Amy Weaver will step down. 

Crowdstrike Holdings declined 1.3% to $260.78, and the cybersecurity company surpassed revenue and earnings expectations set by analysts. 

Dollar General plunged 26% to $92.38, after the discount store chain operator reported weaker-than-estimated sales and earnings in the latest quarter and slashed its annual outlook. 

Revenue in the second quarter increased 4.2% to $10.2 billion, net income dropped 20.2% to $374.2 million from $468.8 million, and diluted earnings per share decreased 20% to $1.70 from $2.13 a year earlier. 

The retailer lowered its annual sales outlook to between 4.7% and 5.3% from the previous estimate between 6.0% and 6.7%, with the same store sales range between 1.0% and 1.7% compared to the previous range between 2.0% and 2.7%.

The company estimated full-year diluted earnings per share to range between $5.50 and $6.20, lower than the previously estimated range between $6.80 and $7.55. 

Best Buy Company soared 14.2% to $100.45 after the electronics retailer reported better-than-estimated profit and lifted its annual adjusted earnings outlook. 

Net sales in the quarter dropped to $9.29 billion from $9.58 billion, net income in the fiscal fourth quarter increased to $291 million from $274 million, and diluted earnings per share rose to $1.34 from $1.25 a year earlier. 

The company said comparable sales in the quarter decreased 2.3%, compared with a shrink of 6.2% in the period a year earlier. 

The retailer now expects full-year adjusted earnings per share in the range of $6.10 to $6.35, up from the previously estimated range of $5.75 to $6.20. 

 

EU Inflation Outlook Weakened, Passenger Car Registration Edged Slightly Higher 

European market indexes advanced for the third consecutive day in a row amid rising hopes of a possible rate cut in September. 

Benchmark indexes in Frankfurt advanced 0.7% after a report showed inflation in six key states in Germany in August inched lower, lifting hopes of a rate cut. 

The euro edged lower after Germany's inflation eased more than expected in August, setting the stage for a possible rate cut in September. 

Consumer price inflation slowed to 1.9% in August from 2.3% in July, the lowest level since March 2023, according to data released by the Federal Statistical Office, or Destatis. 

Spain's annual inflation rate declined to a one-year low, according to a preliminary report released by the National Statistics Institute on Thursday. 

Consumer price inflation eased to 2.2% in August from 2.8% in July, mainly because of the decline in fuel prices. 

The core rate of inflation, which excludes volatile food and energy prices, slowed to 2.7%, the lowest since January 2022, and down from 2.8% in July. 

Bond yields in the euro zone eased following the easing of inflation, raising the prospect of a possible rate cut in September after the policy meeting on September 12. 

 

EU Passenger Car Sales Growth Slowed in July 

Passenger car registration in the European Union increased slowed to 0.2% in July from 4.3% in the prior month, the European Automobile Manufacturers' Association reported Thursday. 

Car registration increased to 852,051 units in July, driven by mixed results in the four largest markets in the region. 

Registrations from a year ago increased 4.7% in Italy, 3.4% in Spain, but declined 2.3% in France and 2.1% in Germany. 

Battery electric car registration declined 10.8% to 102,700 units, with total market share shrank to 12.1% from 13.5% a year earlier, driven largely by the decline of 36.8% in Germany. 

Hybrid-electric vehicles continued to be in favor in July, with car registrations rising by 25.7% to 273,003 units. 

All four of the largest markets recorded double-digit gains, and sales surged in France by 47.4%, Spain by 31.5%, Germany by 22.4%, and Italy by 17.4%. 

This increase in sales lifted the hybrid-electric car market share to 32%, up from 25.5% a year ago.

For the first seven months of 2024, car registration increased 3.9% from the previous year to 6.5 million. 

 

Europe Indexes and Yields

The DAX index increased by 0.6% to 18,912.57; the CAC-40 index rose by 0.8% to 7,640.95; and the FTSE 100 index rose by 0.4% to 8,379.64. 

The yield on 10-year German bonds edged higher to 2.24%, French bonds inched down to 2.94%, the UK gilts edged up to 3.98%, and Italian bonds increased to 3.63%.

The euro edged down to $1.10; the British pound inched higher to $1.31; and the U.S. dollar weakened to 84.34 Swiss cents.

Brent crude decreased $1.29 to $79.92 a barrel, and the Dutch TTF natural gas rose by €0.94 to €39.24 per MWh. 

 

Europe Stock Movers

Automakers edged slightly higher after passenger car registration in the European Union advanced in July. 

Volkswagen Group AG edged up 0.1% to €103.50, Mercedes-Benz Group added 0.6% to €62.55, BMW increased 0.2% to €83.66, and Renault inched up 0.4% to €43.03. 

British bank stocks rebounded between 1% and 2% and reversed losses in the previous session on the worry that the latest budget from the new government could impose additional taxes on the sector. 

HSBC Holdings jumped 0.5% to 662.90 pence, Barclays PLC advanced 1.4% to 227.10, NatWest Group PLC inched up 0.5% to 339.80 pence, and Lloyds Banking Group jumped 0.9% to 339.80 pence. 

GSK plc increased 0.6% to 1,660.50 pence after the pharmaceutical company's RSV received approval for a wider use in adults in Europe. 

Delivery Hero SE soared 10% to €25.85 after the food delivery service provider reported better-than-expected results in the first half. 

Revenue increased to €3.09 billion from €2.6 billion a year earlier, driven by an increase in gross merchandise volume to €11.89 billion from €11.08 billion. 

The company reiterated its annual gross merchandise volume to increase between 7% and 9%, revenue to jump between 18% and 21%, and adjusted operating earnings between €725 million and €775 million. 

 

Japan's Nikkei 225 Index Extended Losses to Third Consecutive Day Amid Weak Tech Stocks 

Benchmark indexes in Tokyo struggled to advance for the third day in a row, and losses in technology stocks outweighed gains in other sectors. 

Semiconductor-related stocks were under pressure in Tokyo after Nvidia's current quarter sales outlook fell short of some analysts high expectations. 

Nvidia, the leading artificial intelligence technology player, and dramatic transformation of the company have attracted worldwide attention, catapulting the company's valuation above one trillion only a few months ago. 

The company's results are now viewed as a proxy for artificial intelligence spending by tech companies and provide critical support for the tech stock rally in 2024. 

Nvidia said revenue in the fiscal second quarter ending in July soared 122% to $30 billion, net income advanced 168% to $16.6 billion from $6.2 billion, and earnings per share rose to 67 cents from 25 cents a year ago. 

The company guided revenue in the current quarter of $32.5 billion, which fell short of some investors lofty expectations. 

Closer to home, the yen weakened 0.13 to 144.53 yen against the U.S. dollar after comments from Deputy Governor Ryozo Himino soothed market anxieties about future rate paths. 

 

Japan Stock Movers 

The Nikkei 225 stock average decreased 0.1% to 38,352.12, and the broader Topix index declined 0.1% to 2,692.15. 

Semiconductor stocks plunged, tracking losses in Nvidia's stock in after-hours trading in New York. 

Tokyo Electron, Advantest, Screen Holding, Disco Corp., and Lasertec fell between 0.5% and 4%. 

Nidec declined 3.3% to ¥5,887.0, ZOZO dropped 3% to ¥4,615.0, Shiseido fell 2.2% to ¥3,271.0, and Rakuten Group eased 4.3% to ¥1,002.0. 

However, Sompo Holding increased 2.6% to ¥3,421.0, and Taiyo Yuden advanced 2.2% to ¥3,506.0. 

Sumitomo Mitsui Financial declined 0.4% to ¥9,597.0, Mitsubishi UFJ Financial increased 0.4% to ¥1,516.0, and Mizuho Financial Group fell 0.4% to ¥3,003.0. 

Toyota Motor decreased 0.7% to ¥2,726.0, Honda Motor increased 0.7% to ¥1,583.0, and Nissan Motor plunged 1.8% to ¥420.20. 

 

EV Makers In China Report Weakening Margins, Meituan Earnings Soared 

Stocks in Hong Kong and Shanghai faced another day of selling pressure, and electric vehicle makers led the decliners in Hong Kong trading. 

The Hang Seng index fell 0.3% and the CSI 300 index decreased 0.2% after Li Auto reported weaker-than-expected earnings and a sharp decline in margins. 

The intense price war among electric vehicle makers finally caught up with leading companies in the sector, and Li Auto's results reflected the worsening market environment. 

Moreover, semiconductor-related stocks were under pressure in Hong Kong and mainland China after Nvidia's current quarter sales outlook fell short of some analysts high expectations. 

Nvidia, the leading artificial intelligence technology player, reported revenue soared 122% from a year ago to $30 billion, net income advanced 168% to $16.6 billion from $6.2 billion, and earnings per share rose to 67 cents from 25 cents a year ago. 

The company guided revenue in the current quarter of $32.5 billion, which fell short of some investors expectations. 

Tech stocks declined despite the shopping platform operator Meituan reporting a sharp jump in profit in the second quarter. 

 

China Stock Movers 

The Hang Seng index declined 0.3% to 17,636.0 and the CSI 300 index dropped 0.2% to 3,278.07. 

Li Auto decreased 8.3% to HK $74.35 and BYD declined 1.3% to HK $223.0 after the electric vehicle makers reported their quarterly results. 

Li Auto profit in the second quarter soared 86% to 1.1 billion yuan, and gross margin shrank 1.1 percentage points to 19.5%. 

Li Auto said unit sales in the second quarter increased 35.1% to 108,581, and the electric vehicle maker estimated sales in the current quarter to range between 145,000 and 155,000 unis. 

BYD said first-half profit increased to 13.6 billion yuan, resulting in an increase of 32.8% from a year ago in the second quarter to 9.1 billion yuan. 

China is the world's largest electric vehicle market, with sales of battery-operated cars now accounting for more than 50% of all passenger car sales in the country. 

Meituan jumped 9.3% to HK $113.70, and the Chinese's largest shopping platform operator reported a jump in revenue and earnings in the second quarter. 

Revenue increased 21% to 82 billion yuan from 68 billion yuan, and net income soared 142% to 11 billion yuan from 4.7 billion yuan a year ago. 

On-demand transactions in the quarter rose 14% to 6.1 billion, driven by an increase in products available for sale and several campaigns for discounted delivery services. 

China Mengniu Dairy Company jumped 9.5% to HK $13.14 after the company announced a stock buyback worth HK $2 billion.