US Market's Fate Hangs on NVDA Earnings ?

Rally Ended!

US stock market’s post-election euphoria came to a screeching halt last week, after its last ‘high’ on Mon, 11 Nov 2024.

Thereafter it was downhill all the way. (see below)

For the week: (see above)

• Dow Jones Industrial Average fell by -1.39% (-612.66 to 43,444.99).

• The S&P 500 fell more by -2.3% (-138.24 to 5,870.62).

• The tech-heavy Nasdaq Composite sank by -3.49% (-657.22 to 18,680.12)

Two firm inflation readings (CPI & PPI - click to read) and commentary from Fed Chair Jerome Powell weighed on markets last week.

Mainly it is the growing uncertainty over the Fed's last interest cut for 2024, outweighing investor excitement over Trump's potential policy agenda.

Just look at the CME FedWatch tool’s interest cut probability taken on Tue, 12 Nov and after Mr Powell speech on Thu, 14 Nov 2024: (see above)

• Probability of a further -0.25% interest cut: Fell from 82.5% to 61.6%.

• Probability of status quo, no interest cut: Rose from 17.5% to 38.4%.

Treasury Yields.

What is a strange though is the US Treasury yields.

Since the Fed’s 18 Sep 2024 cut interest rate by half a percentage point (-0.5%), bond yields have ripped higher instead. (see above)

The 10-year Treasury (^TNX) yield rose by +80 basis points between that date and the days following the election to trade near 4.5%.

That move in rates had not been an issue for US market rally until last week.

While strategists have pointed out that a move higher in rates supported by stronger-than-expected economic growth could be welcome news for stocks, latest inflation data has thrown a wrench in that thesis.

Eyes on Nvidia

Amid all the macro headlines influencing the stock market in November, most S&P 500 companies have posted solid Q3 earnings.

As per FactSet data, the S&P 500 has grown earnings by +5.4% YoY, marking the 5th straight quarter of earnings growth.

$NVIDIA Corp(NVDA)$ one of S&P 500 index's largest contributors to the expected growth is due to report earnings on Wed, 20 Nov 2024 after market closing.

Earnings Forecasts: (according to Bloomberg consensus)

• Earnings per share (EPS): Expected $0.74 per share.

• Revenue: Expected to be $33.21 billion.

• Both metrics represents more than +80% YoY growth.

Jefferies Financial Grp, MD & Analyst - Blayne Curtis:

• Thinks Nvidia’s earnings will be better than expected for Q3 2025.

• He predicts revenue will come in around $2 billion more than what Nvidia has forecasted.

• Noted that expectations have continued to "creep higher" as Nvidia shares have rallied more than +7% just last month alone and are up more than +180% YTD.

• Believes Nvidia will "continue to work" as it proceeds with the release of its latest AI chip — The Blackwell.

Clout and Influence.

Given Nvidia's large weighting in the S&P 500, its earnings for the past couple of quarters have been viewed by investors as a key catalyst for the market's overall direction.

In addition, investors will be listening for any clues about which Big Tech companies will continue to spend with the AI chip leader.

Past 2 Weeks.

Examining Nvidia’s stock price movement for the past two weeks: (see above)

• It could be concluded that Nvidia did not fully benefit from the post-election rally.

• It peaked on 7 Nov 2024 at $148.88, 2 days after election day when ex-president was announced as the winner.

• Thereafter, it trended down until last Mon, 11 Nov 2024, that was the ‘unofficial’ end to post-election rally for most US stocks.

• While most US stocks continued to pullback, Nvidia turned around and rose, peaking for the 2nd time within 2 weeks on 12 Nov 2024 at $148.29 - $0.59 shy of 7 Nov 2024’s peak.

• With the stock price vastly ahead of its 200-day and 50-day moving average, there should be sufficient momentum to see the stock rise further in the short to medium term.

All it takes now is for Nvidia to put out a good set of earnings results and the rest will be history, as they say!

If Only Things Were So Straight Forward.

As much as Nvidia wields suffiicient influence over the S&P 500 index’s movement / direction, other economic reports and corporate earnings exert their own ‘influences’ on the index too.

Economic Reports:

• Mon, 18 Nov 2024 - Home builder confidence index.

• Thu, 21 Nov 2024 - US weekly jobless claims.

• Fri, 22 Nov 2024 - S&P flash U.S. services PMI.

• Fri, 22 Nov 2024 - S&P flash U.S. manufacturing PMI.

• Fri, 22 Nov 2024 - Consumer sentiment (final).

Corporate Earnings:

• Tue, 19 Nov 2024 - $Wal-Mart(WMT)$. (am)

• Tue, 19 Nov 2024 - Lowe's Companies, Inc.(LOW)$. (am).

• Wed, 20 Nov 2024 - $Palo Alto Networks(PANW)$. (pm).

• Wed, 20 Nov 2024 - $NIO Inc.(NIO)$. (am)

• Wed, 20 Nov 2024 - $Target(TGT)$. (am)

FOMC members engagements.

This week’s FOMC members are particularly active in their socialization activities. (see below)

Would their engagements lead to a calm being restored in the US market ? It’s to be seen.

• Mon, 18 Nov 2024. Austan Goolsbee, Chicago Fed President, will deliver opening remarks at the Bank's Financial Markets Group conference.

• Wed, 20 Nov 2024. Lisa Cook will speak at the UVA Economics Presents event.

• Wed, 20 Nov 2024. Michelle Bowman,Governor will be speaking at The Forum Club of the Palm Beaches.

• Thu, 21 Nov 2024. Austan Goolsbee, Chicago Fed President will participate in a moderated Q&A at a Central Indiana Corporate Partnership board member.

• Thu, 21 Nov 2024. Michael S. Barr, Vice Chair for Supervision will be in a discussion at the 2024 FinRegLab AI Symposium.

• Fri, 22 Nov 2024. Michelle W. Bowman, Governor will be giving a speech at the 27th Annual Symposium on Building the Financial System of the 21st Century.

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• Do you think US market will take its cue from — economic reports or quarterly earnings ?

• Do you think Nvidia’s earnings will be able to pull itself and the S&P 500 index up ?

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