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Thursday, November 7, 2024

Nvidia in the Spotlight: Can the Chip Giant Steer Wall Street Through a Tumultuous August?

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Nvidia’s Earnings and Inflation Data Highlight a Week of Market Volatility

The upcoming week promises a whirlwind of economic and corporate news, setting the stage for potential market swings. Investors will be glued to Nvidia’s second-quarter earnings report on Wednesday, the latest chapter in the saga of the AI chip giant. Meanwhile, the key Personal Consumption Expenditures (PCE) price index data release on Friday will shed light on the trajectory of inflation and the Federal Reserve’s future course. This backdrop is further complicated by the approach of a seasonally weak month for stocks, the looming US presidential election, and persistent geopolitical risks.

Key Takeaways:

  • Nvidia’s Q2 earnings will be a major market event, with investors eager to see how the company navigates potential delays and the future of its next-generation AI chips.
  • The PCE data could offer further confirmation that the Fed is on track to achieve its 2% inflation target, potentially paving the way for rate cuts in September.
  • The August market is poised to end on a positive note, but investors are entering a potentially turbulent period with a seasonally weak month, the election, and global geopolitical uncertainties ahead.

Nvidia Under the Microscope

Nvidia’s stock has been on a roller coaster ride this year. Following a record-breaking surge in the first half, the stock faced a significant pullback in early August amid concerns over delays in its next-generation Blackwell chips. The company’s monopoly on the AI chip market and the immense resources invested in research and development have garnered bullish sentiment from analysts.

Harsh Kumar, a senior research analyst at Piper Sandler, highlights Nvidia’s dominance: "Nvidia is in this enviable position where they make the best of the best chips… And the Blackwell is even superior to the previous generation — massively superior to previous generations."

However, Kumar cautions that high expectations could lead to limited impact from the results, even if Nvidia beats estimates. He emphasizes the importance of the company’s commentary concerning its position in the market: "As long as Nvidia, in its commentary, is able to convince people that business is not going away to somebody else, … the stock should hold."

Louis Navellier, chairman and founder of Navellier & Associates, reflects unwavering confidence in Nvidia: "I’m all in on Nvidia. I made 1,000% in it years ago. I got out. I got back in by May 10, of 2019, so I’m up 3,000% the second time. And I don’t plan to sell this thing at all."

Nvidia’s earnings report will undoubtedly be a highlight of the week, offering insights into the future of the AI chip industry and its impact on the broader market.

Inflation Watch: The PCE Data

The PCE price index data for July, scheduled for release next Friday, will be closely scrutinized as a potential indicator of the Fed’s future policy moves. The Federal Reserve has been aggressively raising interest rates in recent months to combat inflation, and the PCE data is expected to provide further confirmation of the central bank’s progress towards its 2% inflation target.

Jerome Powell, Chair of the Federal Reserve, hinted at a potential rate cut in September during his speech at the Jackson Hole Economic Symposium: "The time has come for policy to adjust… The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

Economists anticipate a modest increase in the PCE index, with a 0.2% month-on-month and a 2.6% year-on-year rise. A softer-than-expected inflation print could bolster confidence that the Fed is indeed on track for rate cuts. This could divert investor focus towards the labor market, particularly the upcoming jobs report, which will play a crucial role in determining the magnitude of the Fed’s September rate cut.

A Bumpy Road Ahead

Despite a positive August for the major averages, investors are facing a potentially bumpy road ahead. The month of September is historically weak for stocks, and the US presidential election will likely inject volatility into the market.

David Miller, Chief Investment Officer at Catalyst Funds, acknowledges the path of least resistance remains upwards, assuming continued rate cuts from the Fed: "I think the bigger question is, maybe, is there some other event that comes out of the blue."

Miller emphasizes the need to monitor how presidential candidates Kamala Harris and Donald Trump outline their economic policies and how the ongoing Russia-Ukraine war could affect oil prices.

Key Economic and Corporate Events

Monday, August 26

  • 8:30 AM ET: Durable Goods Orders (July)
  • 10:30 AM ET: Dallas Fed Index (August)

Tuesday, August 27

  • 9:00 AM ET: FHFA Home Price Index (June)
  • 9:00 AM ET: S&P/Case-Shiller Home Price Indices (June)
  • 10:00 AM ET: Consumer Confidence (August)
  • 10:00 AM ET: Richmond Fed Index (August)

Wednesday, August 28

  • Earnings: Nvidia, Bath & Body Works, J. M. Smucker, Salesforce, CrowdStrike, NetApp, HP

Thursday, August 29

  • 8:30 AM ET: Continuing Jobless Claims (August 17)
  • 8:30 AM ET: GDP Second Preliminary (Q2)
  • 8:30 AM ET: Initial Claims (August 24)
  • 8:30 AM ET: Wholesale Inventories Preliminary (July)
  • 10:00 AM ET: Pending Home Sales Index (July)
  • Earnings: Campbell Soup, Best Buy, Dollar General, Autodesk, Ulta Beauty, Lululemon Athletica

Friday, August 30

  • 8:30 AM ET: PCE Deflator (July)
  • 8:30 AM ET: Personal Consumption Expenditure (July)
  • 8:30 AM ET: Personal Income (July)
  • 9:45 AM ET: Chicago PMI (August)
  • 10:00 AM ET: Michigan Sentiment Final (August)

The upcoming week promises to be a decisive one for the market, with investors watching closely as Nvidia’s earnings and inflation figures provide crucial updates on the direction of the economy and the Federal Reserve’s policy.

Article Reference

Amanda Turner
Amanda Turner
Amanda Turner curates and reports on the day's top headlines, ensuring readers are always informed.

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