NVIDIA’s Market To Lead — Or Not

There is a divide in the equity futures market this morning that breaks along the lines of the new economy and the old economy so to speak. The Dow Jones Industrial Average futures are lower, pressured by some weakness in Boeing (BA), which said it has identified a new flaw in the 737 MAX that will slow deliveries in the near term, while the Nasdaq 100 futures are solidly positive, bolstered by yet another blowout earnings report and outlook from AI leader NVIDIA (NVDA).

Currently, the S&P 500 futures are up 16 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 133 points and are trading 0.9% above fair value, and the Dow Jones Industrial Average futures are down 69 points and are trading 0.2% below fair value.

The positive disposition of the S&P 500 futures is largely a function of the positive disposition in its technology components, which are riding NVIDIA’s coattails. That would include the semiconductor issues and stocks like Microsoft (MSFT), Alphabet (GOOG), and Amazon.com (AMZN) that hold some extra AI appeal.

The question is, can NVIDIA take charge of the stock market or will it put a charge in its industry only while the rest of the market peters out in a continuing consolidation trade?

The Nasdaq 100 futures are off their highs of the morning and so is NVIDIA, which is up “only” 6.4% after being up more than 8.0%. 

Today, then, will offer an important look at market sentiment. There was more than enough in NVIDIA’s report and outlook to turn the low tide of selling interest seen in August. We say “low tide,” because the losses seen this month have occurred on low volume, which suggests they have been driven more by a lack of buying interest (after a big run) than concerted selling efforts.

This morning’s economic data may not offer much directional help. It was mixed relative to expectations.

Initial jobless claims decreased by 10,000 to 230,000 (Briefing.com consensus 240,000) for the week ending August 19 while continuing jobless claims decreased by 9,000 to 1.702 million for the week ending August 12.

The key takeaway from the report is that the leading indicator of initial claims is still leading the market to believe that the labor market remains tight, which is something that won’t escape the Fed’s eye.

Separately, durable goods orders declined 5.2% month-over-month in July (Briefing.com consensus -4.0%). Excluding transportation, durable goods orders increased 0.5% month-over-month (Briefing.com consensus 0.2%).

The key takeaway from the report, other than July’s weakness was driven predominately by transportation, was that business spending transpired at a tepid pace, evidenced by the 0.1% increase in new orders for nondefense capital goods excluding aircraft.

The Treasury market had its own mixed response following the data. The 2-yr note yield, which is more sensitive to changes in the fed funds rate, jumped from 4.97% to 5.01%, up eight basis points from yesterday’s settlement. The 10-yr note yield moved more deliberately, going from 4.22% to 4.23%, up three basis points from yesterday’s settlement.

A drop in rates factored favorably into yesterday’s positive showing for the stock market, so we will have to see how things shake out today, especially with participants cognizant that Fed Chair Powell is slated to give a speech about the economic outlook at the Jackson Hole Symposium on Friday at 10:05 a.m. ET.

Until then, this is NVIDIA’s market to lead or not to lead.

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Originally Posted August 24, 2023 – NVIDIA’s market to lead — or not