Can Nvidia (NVDA) Earnings Wake Stocks Asleep After Powell Speech?
Can Nvidia (NVDA) Earnings Wake Stocks Asleep After Powell Speech?
By:Ilya Spivak
Are stock markets out of bullish fuel to burn, or can Nvidia’s earnings report revive the rally?
- Stock markets are struggling to build on optimism after Fed Chair Powell’s speech
- All eyes now turn to the Q2 earnings report from tech powerhouse Nvidia (NVDA)
- Soggy price action warns that bullish AI and Fed rate cut narratives may be fizzling
Stock markets have struggled to keep going after a much-anticipated speech by Federal Reserve Chair Jerome Powell cheered investors last week. Speaking at the annual Jackson Hole Symposium, the US central bank chief seemed to set the stage for resuming interest rate cuts next month, to the delight of Wall Street.
Since then, a curious lack of follow-through is clearly on display. The bellwether S&P 500 has fallen back a bit, down 0.43% in the first 48 hours of trade this week. The tech-tilted Nasdaq 100 has fared only a little better, returning a flat result. Meanwhile, the US dollar is up 0.67% against the euro and 0.36% against the yen.
Markets struggle to keep going after cheering Fed Chair Powell
These are hardly the hallmarks of market optimism fueled by dovish speculation about US monetary policy. There is no compelling evidence to suggest that traders have had a change of heart about what Mr. Powell meant. The likelihood of a rate cut in September has only increased this week and now stands at a commanding 87.3%.
One possible explanation may be that the Fed Chair did little more than confirm what traders already knew. September’s rate cut has been priced in with strongly better-than-even odds for months. Meanwhile, the markets’ overall baseline of 50 basis points (bps) in stimulus this year has matched the Fed’s own forecasts since at least mid-May.
With that in mind, frustrated bulls may be hoping that a second-quarter earnings report from artificial intelligence (AI) darling Nvidia Corporation (NVDA) will stir animal spirits back to life this week. The chipmaking giant is the last of the so-called “magnificent seven” (Mag7) tech titans to release results in this reporting season.
Can Nvidia (NVDA) earnings wake Wall Street from its slumber?
Nvidia is expected to produce earnings per share (EPS) of $1.00 on revenue of $45.81 billion. An upside EPS surprise of about 5-10% - with an average of 7.53% - seems to be the recent baseline and probably represents what would be considered “normal” or broadly in line with expectations, in a way that does little to inspire speculative fervor.
For those hoping that the behemoth firm will revive the blistering rally from April’s lows, a let-down may be in the works. Upside surprises from the other six Mag7 names failed to inspire. Even a sharply stronger showing from Meta Platforms (META) that spurred a withering rally for the company’s shares did little to move the needle overall.
The Roundhill Magnificent Seven ETF (MAGS) fell 0.77% between July 23 and the close of trade on August 1, the first full session following Apple (AAPL) and Amazon.com (AMZN) delivering results after the close on July 31. This inability to make hay of good news hints that the bullish AI-linked narrative may now be as stale as the one about Fed rate cuts.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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