Nvidia's Earnings Impact, Retail Woes, Credit Card Debt and Housing Signals Shape Market Trends

All eyes are on Nvidia

• We examine Nvidia's influence on market, credit card debt dynamics and the housing market’s trajectory.
• The Federal Reserve reveals a $45 billion upsurge in credit card balances.
• Mortgage rates inch toward 8%.

The trading session on Tuesday commenced with a robust surge, driven notably by tech titan Nvidia (NVD). However, this early enthusiasm waned as stocks gradually relinquished their gains, leaving the market in a mixed state by the day's end.

The S&P 500 experienced a modest 0.3% decline, marked by losses in seven out of its eleven sectors. On the other hand, the Nasdaq Composite managed to eke out a marginal 0.1% gain. The forthcoming days hold the potential to either propel markets upward or perpetuate the ongoing weakening trend.

Today, all eyes are on Nvidia, a singular stock that wields an extraordinary influence over the market's trajectory. The Nasdaq 100 has surged by over 36% this year, with the top five stocks within the index contributing 30% of that growth. Nvidia alone accounts for nearly 7% of these gains.

With its year-to-date performance more than tripling and a recent 5.5% weekly uptick, Nvidia's imminent earnings report assumes a pivotal role for the market, particularly in the immediate future. A substantial expected move of 10% in either direction for the week underscores the weightiness of this moment.

The retail sector endured most of Tuesday's challenges, with significant declines witnessed among certain players. Dick's Sporting Goods (DKS) experienced a startling 24% tumble after reporting disappointing earnings and a revision of their profit target. Similarly, Macy's (M) declined 14% owing to lower sales coupled with heightened credit card delinquencies. The escalating credit card debt narrative has surfaced in various contexts, demanding close observation.

In a noteworthy development, the Federal Reserve's recent report revealed a $45 billion upsurge in credit card balances during the second quarter, propelling total credit card debt to an unprecedented $1.03 trillion. The contrast between the pandemic's initial phase, marked by a contraction in credit card balances and personal debt, underscores the current shift. This uptick is indicative of consumer confidence and willingness to spend. However, it introduces complexity in the context of rising interest rates.

Debt that was once manageable can swiftly become burdensome in an environment characterized by substantial rate hikes. Consequently, monitoring this metric becomes crucial, as significant delinquency increases could potentially reverberate through aspects like holiday shopping patterns.

In the hours ahead, a pivotal economic report on new home sales for July is expected. While this data may possess a retrospective nature, its significance is heightened due to prevailing circumstances.

Mortgage rates are progressively inching closer to the 8% threshold, an escalation that could have far-reaching consequences for both new and existing home sales, thereby influencing overall consumer spending. It's crucial to note that a robust housing market bolsters consumer confidence in their financial capacity, enhancing their propensity to spend. A cooling housing sector, however, could potentially curtail spending, thereby exerting a ripple effect on the trajectory of credit card debt and delinquencies.

In the ever-evolving landscape, adhering to your investment plans and long-term objectives remains an astute strategy. The insights provided serve educational purposes, and this content does not constitute trading or investment advice, nor does it offer recommendations for specific investment products or strategies.

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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