Stocks are ‘dead quiet’ ahead of Nvidia results: Markets Wrap

(Bloomberg) — Shares were trading in a tight range just hours before the release of earnings from Nvidia Corp., the last of the so-called “Magnificent Seven” megacaps to report results.

The chipmaker at the center of the artificial intelligence revolution will show whether it can once again exceed sales expectations. The bar is set high for the company, which has had the best performance in the S&P 500 this year. Analysts on average predict that Nvidia will see a sales increase of over 70% in the current quarter. And investors will be particularly keen to see how CEO Jensen Huang assesses demand trends through 2025.

Due to its undisputed leadership in AI, Nvidia's market cap has risen to over $3 trillion. Given its massive influence on broader indexes, the reaction to its results could pull the entire market up or down. Options trading implies a move of nearly 10% in either direction the day after the results.

“The entire universe is waiting for a 'certain' chipmaker to announce earnings,” said Dave Lutz of JonesTrading. “The markets are dead silent as we wait for Nvidia tonight and PCE on Friday.”

For Matt Maley of Miller Tabak, it's been a “pretty uneventful week” so far. While there's no guarantee that will change, he says there's a good chance we'll see some significant movement one way or the other following Nvidia's reports.

“Activity should at least increase,” Maley said.

The S&P 500 oscillated around 5,620 points. Trading volume was 35 percent below last month's average. Nvidia fell 1 percent. Super Micro Computer Inc. slumped more than 20 percent after the company announced it would postpone the release of its annual financial reports. Warren Buffett's Berkshire Hathaway Inc. exceeded the $1 trillion mark for the first time.

The yield on 10-year government bonds remained almost unchanged at 3.83%.

While hype almost never matches reality, investors may be right about Nvidia being the most important stock on the market, according to strategists at Bespoke Investment Group.

In its history as a public company, the stock has averaged a one-day move of 8.1% in response to earnings, they noted. Besides Meta Platforms Inc., Tesla Inc. and Alphabet Inc. were the only other stocks to average a one-day move of more than 5% in response to earnings.

Trading volumes have dropped significantly heading into Labor Day weekend, but Nvidia's long-awaited quarterly earnings conference call – considered the world's most important indicator of the outlook for AI spending – should confirm that demand remains strong, according to LPL Financial's Quincy Krosby.

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“But for markets, meeting expectations may not be enough to support the stock price,” she said. “There is the issue of lagging chip sales due to advanced Blackwell engineering that needs to be addressed, and the question of whether companies can monetize their AI capabilities after allocating billions to build out their AI infrastructure.”

Of course, a significant increase in “activity” does not necessarily mean a significant increase in “volatility,” but it's safe to assume that investors won't be sitting around as idle on Thursday as they have been for most of this week, Maley noted.

“If Nvidia doesn't give us any important answers, chances are next week's employment data will give us what we want/need,” the strategist said. “So we seriously doubt September will be as boring as it has been so far this week.”

Stock options trading shows that investors are bracing for profit opportunities after the August slump.

The S&P 500's call skew, a measure of how much traders are willing to pay for bullish exposure, is rising rapidly, suggesting there is some urgency to purchase bullish options following Jerome Powell's dovish speech at Jackson Hole, said Nomura's Charlie McElligott.

The market “continues to trade like a beach ball trying to keep it underwater,” McElligott wrote in a note, citing demand for right-wing protection that outweighs the remaining forced risk management from the early August volatility event. That's why “stock indices keep falling back despite intermittent impulse selling,” he said.

Company highlights:

• Kohl's Corp. raised its full-year earnings forecast as the retailer cuts spending and reduces inventory amid consumer reluctance to spend.

• Abercrombie & Fitch Co. beat analysts' revenue expectations for the sixth consecutive quarter, but it wasn't enough to impress investors who have grown accustomed to the comeback of '90s fashion.

• Foot Locker Inc.'s sales exceeded analysts' expectations as turnaround efforts and the revival of its relationship with key partner Nike Inc. begin to pay off. Investors, however, are unimpressed with the progress.

• Nordstrom Inc. offered a rosier forecast for current-year sales after its discount chain posted better-than-expected results, another indication that shoppers are turning to cheaper options in search of bargains.

• Warren Buffett sold another $982 million worth of Bank of America Corp. shares as his conglomerate continues to reduce its investments in the second-largest U.S. bank.

• Lenders to B. Riley Financial Inc. have given the troubled company more time to file a delinquent financial report while it looks for ways to reduce its more than $2 billion debt load.

Important events this week:

• Consumer confidence in the Eurozone, Thursday

• US GDP, initial jobless claims, Thursday

• Fed President Raphael Bostic speaks on Thursday

• Unemployment in Japan, CPI Tokyo, industrial production, retail sales, Friday

• CPI and unemployment in the Eurozone, Friday

• Personal income, spending, PCE in the US; consumer sentiment, Friday

Some of the key market movements:

Shares

• The S&P 500 fell 0.1% at 10:14 a.m. New York time

• The Nasdaq 100 fell 0.5%

• The Dow Jones Industrial Average rose 0.1%

• The Stoxx Europe 600 rose 0.5 percent

• The MSCI World Index remained little changed

• Bloomberg Magnificent 7 Total Return Index fell 0.6%

• The Russell 2000 Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.6% to $1.1118

• The British pound fell 0.5% to $1.3201.

• The Japanese yen fell 0.5% to 144.69 per dollar

Cryptocurrencies

• Bitcoin fell 3.3% to $59,804.63

• Ether fell 2.4% to $2,520.64

Bonds

• The yield on 10-year government bonds remained almost unchanged at 3.83%

• The yield on German 10-year bonds fell by three basis points to 2.26 percent

• The yield on British 10-year bonds remained almost unchanged at 4.00%

Raw materials

• West Texas Intermediate oil fell 1.4 percent to $74.50 a barrel

• The spot price of gold fell 0.7 percent to $2,506.98 an ounce.

This story was created with the assistance of Bloomberg Automation.

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