After a period of uncertainty in recent trading sessions due to anticipation surrounding Nvidia Corp.’s earnings, the market mood is starting to stabilize. Index futures are trading higher in early trading, with Nvidia shares recovering some of their premarket losses. Some strong tech earnings could provide a counterbalance to the recent volatility.
Traders are closely watching the preliminary GDP data due before the market opens for clues about economic growth and inflation. A speech by a Federal Reserve official is also on their radar. More significantly, Friday’s release of the Consumer Price Expenditure Index (PCE), known as the Fed’s preferred inflation gauge, could keep the market on tenterhooks. The Labor Day holiday on Monday might dampen trading volume, potentially leading to increased volatility, though traders generally don’t place much importance on low-volume moves.
On Wednesday, caution ahead of Nvidia’s earnings and a sharp decline in Super Micro Computer, Inc.’s shares weighed heavily on the tech sector, pulling down the major averages. After a sluggish start, stocks moved sideways in early trading before declining further. However, they managed to recover some of their losses in the late afternoon. The tech-heavy Nasdaq Composite closed at its lowest point in about two weeks, and the Dow Jones Industrial Average retreated from its all-time closing high. All but two S&P 500 sector classes retreated on Wednesday, with IT, communication services, consumer discretionary, and energy stocks bearing the brunt of the selling pressure.
As the presidential election campaign enters its final phase, Michael Zezas, Managing Director and Head of U.S. Public Policy Research & Municipal Credit Strategy at Morgan Stanley, suggests that the market will likely be more influenced by the business cycle than the election’s ups and downs. “We don’t think investors’ near-term strategies will focus on the election,” he said. Zezas anticipates a more pronounced election impact on specific sectors after the election, with a Democratic victory potentially negative for energy and telecom stocks but positive for clean-energy stocks. He also notes that the election outcome could affect the U.S. Treasury yield curve and the U.S. dollar. Trump’s hints of higher tariffs might weigh on economic growth and lead to a steeper yield curve, but it could also be positive for the dollar.
LPL Financial Chief Economist Jeffrey Roach expresses caution regarding the potential for equity market volatility if the economy weakens. The August payroll report, scheduled for September 6, and subsequent reports might reveal underlying weakness in broader hiring trends. Roach also points to a cautious consumer sentiment, suggesting they might hold back on big-ticket purchases as the economy enters late-cycle dynamics. LPL maintains its investment strategy of being modestly overweight on fixed income, funded by cash, to potentially buffer against equity market volatility if economic conditions worsen and provide attractive income.
The Labor Department is set to release the weekly jobless claims report at 8:30 a.m. EDT. The number of individuals claiming unemployment benefits is expected to come in at 230,000 for the week ended August 24, slightly down from the previous week’s 232,000. The Bureau of Economic Analysis will release the preliminary (second read) GDP data for the second quarter at 8:30 a.m. EDT. Economists anticipate an unchanged annualized pace of quarter-over-quarter growth at 2.8%, compared to the first quarter’s 1.4% growth. Traders are likely to focus on the personal consumption expenditure index and the GDP price deflator, both of which are considered inflation measures.
The National Association of Realtors will release its pending home sales index for July at 10 a.m. EDT, with expectations for a 0.2% month-over-month increase compared to June’s 4.8% growth. The Treasury will auction four- and eight-week bills at 11:30 a.m. EDT and seven-year notes at 1 p.m. EDT. Atlanta Fed President Raphael Bostic will make a public appearance at 3:30 p.m. EDT.
In premarket trading, Nvidia fell 1.77% as traders reacted to the company’s quarterly results. Other chipmakers also moved in sympathy. Other stocks moving on earnings include Affirm Holdings, Inc., Cooper Companies, Inc., CrowdStrike Holdings, Inc., Five Below, Inc., HP Inc., Nutanix, Inc., NetApp, Inc., Okta, Inc., Pure Storage, Inc., Salesforce, Inc., and Victoria’s Secret & Co.
Companies reporting earnings before the market open include American Eagle Outfitters, Inc., Best Buy Co., Inc., Burlington Stores, Inc., Campbell Soup Company, Dollar General Corporation, and Ollie’s Bargain Outlet Holdings, Inc. Companies reporting after the close include Autodesk, Inc., Dell Technologies Inc., Gap, Inc., Lululemon Athletica Inc., Marvell Technology, Inc., MongoDB, Inc., and Ulta Beauty, Inc.
Crude oil and gold futures rebounded after a two-session slide, and Bitcoin traded below the $60,000 level. The yield on the 10-year Treasury note fell 1.4 basis points to 3.827%. Following Wall Street’s overnight weakness and the negative reaction to Nvidia’s earnings, most Asian markets retreated on Thursday. However, European stocks traded higher early in the session.
