U.S. stock markets held onto gains on Thursday, May 21, as a tepid investor response to NVIDIA's earnings report dampened the momentum from the previous session's rally. Oil prices declined while bonds edged higher. Traders are awaiting to see if hopes for a Middle East peace deal will translate into substantive progress.
As of the latest update, Dow Jones futures were down 0.11%, S&P 500 futures fell 0.24%, and Nasdaq futures declined 0.38%.
The European Stoxx 600 index rose 0.4%, failing to follow the broader global equity rebound. Paris's CAC 40 was flat, while Germany's DAX fell 0.2%. Spain's IBEX 35 dropped 0.25%; Italy's FTSE MIB gained slightly by 0.1%. Amsterdam's semiconductor-heavy AEX index fell 0.4%. ASML, Europe's most valuable company, declined 1% following the market's muted reaction to NVIDIA's overnight results.
NVIDIA's stock was volatile in pre-market trading, fluctuating between gains and losses and recovering from after-hours declines. The chipmaker's record first-quarter sales were still insufficient to boost investor sentiment. The stock was last up 0.2%.
In U.S. pre-market trading, Intuit fell 13% after the financial software company announced plans to cut approximately 17% of its workforce. Shares of space exploration and satellite internet companies were largely stable after Elon Musk's SpaceX publicly filed for an initial public offering.
"Investors had extremely high expectations for NVIDIA," said Dan Coatsworth, Head of Markets at AJ Bell. He noted, "Although the company's quarterly sales and profits once again exceeded market consensus, concerns over the sustainability of its rapid growth led to a decline in pre-market trading."
However, questions about the longevity of the AI rally have not yet impacted the significant rise in U.S. stock markets, which have gained over 8% year-to-date.
**Asian Markets More Upbeat**
The relatively subdued tone in U.S. markets contrasted with optimism in Asia, where a key technology stock index posted its largest gain in six weeks.
In Seoul, shares of LG Electronics and Hyundai Mobis surged after NVIDIA CEO Jensen Huang highlighted opportunities in robotics and autonomous vehicles. SoftBank Group's stock jumped 20% on reports that two companies backed by the Japanese investor—OpenAI and SB Energy Corp.—are preparing for IPOs. Regional chipmakers followed the gains of their U.S. counterparts from Wednesday.
"The Asian rally is supported by strong momentum in the tech sector, particularly around the current reality of AI demand," said Francisco Simón, Head of European Strategy at Santander Asset Management. "Looking ahead, investors continue to see structural growth potential related to the future evolution of AI, including companies that may emerge as leaders."
**Trump Sends Mixed Signals on Iran**
Brent crude fell 0.7% to just over $104 per barrel; WTI futures rose 1.5% to $99.80 per barrel. U.S. and European investors digested mixed signals from Trump regarding Iran.
U.S. President Trump stated that negotiations with Tehran are in their final stages but warned that Iran could face "another major blow" if a deal is not reached. Pakistan is intensifying diplomatic efforts to keep U.S.-Iran peace talks on track; officials in Tehran indicated that the latest U.S. proposal has somewhat bridged differences between the warring sides.
"Market confidence is lower this time," said ING currency strategist Francesco Pesole. "The rhetoric from both sides remains tough, and after previous disappointments, the market is more hesitant to chase optimistic news."
Meanwhile, the latest EIA data showed tightening in the U.S. market, driven by stronger oil exports. "The market continues to fluctuate with conflicting news," said Soojin Kim of Mitsubishi UFJ Financial Group. "Declining U.S. crude inventories and ongoing uncertainty over Iran's response to the latest U.S. proposal are keeping oil markets volatile."
**Traders Continue to Pull Back Rate-Cut Bets**
U.S. Treasury yields edged higher following a significant rebound in the previous session but remained below highs reached earlier in the week. The yield on the 2-year U.S. Treasury rose 3 basis points to 4.067%; the 10-year yield increased 2.3 basis points to 4.593%; the 30-year yield climbed 1.4 basis points to 5.128%.
Minutes from the Federal Reserve meeting showed policymakers maintaining a wait-and-see stance, though they would support rate hikes if inflation proves persistent. "The question is how long patience can last when inflation remains stubbornly above target," said Marcus Widen of SEB in a report.
JPMorgan Chase CEO Jamie Dimon warned that interest rates could rise significantly further from current levels. In recent days, global long-term bond yields have tested multi-year highs due to concerns over oil-driven inflation spikes and worries about government spending.
Against the backdrop of rising energy costs, investors on Thursday will also receive readings on business activity in major economies. These data, compiled by S&P Global, are closely watched as they are released relatively early in the month and provide good insight into trends and turning points.
In the UK, business output recorded its first decline in over a year, as the Iran shock and escalating opposition to Prime Minister Keir Starmer weighed on service sector activity. In the eurozone, business activity contracted at its fastest pace in two and a half years.
**Dollar Gains**
In currency markets, the U.S. dollar rose, with the dollar index up 0.1% to 99.182, supported by expectations of potential Fed rate hikes. Minutes from the latest Fed meeting released on Wednesday indicated that most policymakers would support rate increases if inflation persists above the 2% target. LSEG data shows markets are pricing in a 70% probability of a 25-basis-point hike by December, with a full hike priced in by March 2027.
The euro extended losses after key indicators for French manufacturing and services activity fell sharply in May. Following the data release, the euro dropped from a previous level of $1.1617 to an intraday low of $1.1593.
Gold prices fell as confidence grew that the Fed will raise rates this year. New York gold futures declined 0.4% to $4,517.20. Market observers noted that for gold to regain upward momentum, it may need to see a significant easing of oil-driven inflationary pressures or new evidence that risks of slowing growth are beginning to outweigh inflation concerns.
**Stocks in Focus**
The U.S. government's plan to provide $20 billion in subsidies and simultaneous equity investments to nine quantum computing companies spurred a collective surge in related stocks. Rigetti Computing rose 15%, D-Wave Quantum surged 17%, Quantum Computing Inc. gained nearly 14%, IonQ climbed 8%, IBM advanced 6.5%, and GLOBALFOUNDRIES Inc. jumped 13%.
Wal-Mart's full-year and current-quarter guidance fell short of market expectations, sending its stock down 2%. Data from London Stock Exchange Group showed Wal-Mart's adjusted EPS forecast range of $2.75 to $2.85, below the market expectation of $2.91; its first-quarter adjusted EPS met expectations, while revenue exceeded estimates.
Rocket Lab: Shares of the space exploration company Rocket Lab fell 6% after SpaceX formally submitted its IPO filing to the U.S. SEC, preparing to list on Nasdaq. CNBC reported last week that its roadshow would begin on June 8.
NVIDIA's stock was largely flat with minimal movement. The chip giant reported first-quarter revenue soaring 85% year-over-year to $81.62 billion, exceeding analyst estimates of $78.86 billion.
Financial software firm Intuit announced a 17% workforce reduction, coupled with third-quarter revenue missing expectations, leading to a 14% stock decline. The company's quarterly revenue was $8.56 billion, below the consensus estimate of $8.61 billion.
E.l.f. Beauty's fourth-quarter revenue and profit both surpassed Wall Street expectations, driving its stock up 7%. The company stated that, given rising oil prices increasing living cost pressures, it plans to lower prices on some products previously raised due to tariff adjustments.
Star Bulk Carriers reported first-quarter revenue of $281.2 million and non-recurring EPS of $0.56, both beating market expectations of $225.9 million in revenue and $0.47 EPS, leading to a 3% stock increase.
Grocery chain Kroger plans significant across-the-board price cuts to compete with Wal-Mart and Costco for market share, causing its stock to drop 4% on the news.
Data center company Applied Digital announced a long-term lease agreement with a major, highly-rated U.S. cloud service provider, sending its stock soaring 10%.
NIO Inc. rose nearly 5%. Its first-quarter profit, revenue data, and second-quarter guidance all exceeded market expectations; the company expects second-quarter new vehicle deliveries between 110,000 and 115,000 units, a year-over-year increase of nearly 60%.
Agricultural equipment giant Deere reported better-than-expected second-quarter results, with EPS of $6.55, above the market expectation of $5.70; net sales of $11.78 billion also exceeded the market estimate of $11.54 billion. The company maintained its full-year net profit guidance, but its stock still fell nearly 4%.
Comments