CEO Sightings

Nvidia's Historic Earnings Propel Record Market Surge and a Chip Stocks Rally

By:JJ Kinahan

Global markets are reaching new highs despite geopolitical tension. Meanwhile, fear of inflation looms.

  • Nvidia's historic earnings report is fueling a record market surge, highlighting the pivotal role of chip stocks.
  • Global markets are reaching new highs despite geopolitical tensions, underscoring resilience amid economic uncertainties.
  • Concern about inflation persists amid rising food prices, shaping consumer behavior and market sentiment.

Yesterday brought a remarkable surge in stocks, spurred by the extraordinary Nvidia (NVDA) earnings report. The S&P 500 surged by over 2%, while the Nasdaq Composite soared nearly 3%, with advancing stocks outnumbering decliners by a staggering 16:1 ratio, signaling broad-based gains.

Nvidia's performance stole the spotlight, driving a historic market rally. With sales reaching $22 billion, a staggering 265% increase, the stock soared over 16%, adding a whopping $277 billion to its market cap, marking the largest single-day increase in stock market history, according to MarketWatch.

This Nvidia euphoria cascaded to other chip stocks, propelling Super Micro Computer (SMCI) by 33%, Advanced Micro Devices (AMD) by nearly 11% and Micron Technology (MU) by over 5%.

Worldwide gains in stock prices

Globally, markets exhibited robust performance, with Germany, France, Turkey, Taiwan and Argentina all achieving record highs, as reported by Dow Jones Market Data. Even Japanese stocks reached a 34-year peak, defying longstanding struggles amid global tension and concern about inflation.

Amid this optimism, inflation remains a focal point, with upcoming economic releases potentially shaping interest rate expectations. Reports loom large on durable goods, housing prices, consumer confidence and the personal consumption expenditures (PCE). However, the volatile nature of food and energy prices poses challenges in assessing long-term inflation trends, which influence consumer spending habits significantly.

The upcoming week

Attention shifts in the week ahead to earnings from household names like Macy's (M) and Best Buy (BBY), offering insight into consumer spending patterns amid rising food costs. While earnings season winds down, data from FactSet suggests a year-over-year earnings increase of 3.2%, pushing the forward-looking price-to-earnings ratio to 20.4, above historical averages. Negative guidance from 59 S&P 500 companies compared to 26 offering positive guidance adds to market uncertainties.

In premarket trading, stocks display mixed signals, with Nvidia poised for further gains, potentially adding another $35 billion to its market cap. While the market's upward trajectory persists, caution is warranted. Consider stretched valuations, hinting at the possibility of a near-term pullback. Amid these fluctuations, adherence to long-term investment objectives remains prudent.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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