Stock rally stumbles with Nvidia earnings on tap: What to know this week
The feverish post-election stock market rally came to a screeching halt last week.
For the week, the S&P 500 (^GSPC) fell more than 2%, while the Dow Jones Industrial Average (^DJI) shed more than 500 points or nearly 1.3%. The tech-heavy Nasdaq Composite (^IXIC) sank over 3%.
Two firm inflation readings and commentary from Federal Reserve Chair Jerome Powell weighed on markets last week, with growing uncertainty over the Fed’s rate path outweighing previous investor excitement over Trump’s potential policy agenda.
In the week ahead, a few economic data releases are expected to add to that narrative, with activity in the services and manufacturing sector and a consumer sentiment reading headlining the schedule.
Earnings, however, will bring attention back to some of the biggest names in the corporate world after a few weeks of macro and political events dominating investor mindshare.
Key among these reports will be earnings from AI leader Nvidia (NVDA), which is set to report results after the bell on Wednesday. Quarterly results from Walmart (WMT), Target (TGT), BJ’s (BJ), and Deere & Company (DE) will also be in focus.
Since the Federal Reserve slashed its benchmark interest rate by half a percentage point on Sept. 18, bond yields have ripped higher. 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 hadn’t been an issue for the stock 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, recent inflation data has thrown a wrench in that thesis.
On Wednesday, the “core” Consumer Price Index (CPI), which strips out the more volatile costs of food and gas, showed prices increased 3.3% annually for the third consecutive month during October. On Thursday, the “core” Producer Price Index (PPI) revealed prices increased by 3.1% over last year in October, up from 2.8% the month prior and above economist expectations for a 3% increase.
Later on Thursday, Powell said in a speech the Fed doesn’t need to be “in a hurry” to lower interest rates given the strength of the US economy. Markets moved lower on the comments, and the selling continued on Friday, with the Nasdaq Composite sliding more than 2.2% for the session.
“Slower progress on inflation in recent months may prompt the Fed to reevaluate its pace of easing moving forward,” Wells Fargo’s economics team led by Jay Bryson wrote in a weekly note to clients on Friday.
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