NVIDIA (NVDA) gave the stock market everything it needed to rally on Thursday. It did… for all of about 30 minutes and then it promptly rolled over as bids fell by the wayside. A promising day ultimately turned into a disappointing day, which in itself became a catalyst for the selling interest.
The stock market did not act the way many participants had expected it to act and that caught them off guard, particularly those participants who got bulled up so to speak by Wednesday’s price action.
Naturally, the selling Thursday got blamed primarily on nervousness that Fed Chair Powell might sound more hawkish than expected in his 10:05 a.m. ET speech today at the Jackson Hole Symposium. We found that explanation to be wanting, however, considering that the prevailing view captured in previews of the speech before yesterday was that Mr. Powell will likely take a middle-of-the-road approach.
Where was the purported angst on Wednesday when the 2-yr note yield fell 11 points to 4.93% and the S&P 500 increased 1.1%?
In our estimation, nervousness before Mr. Powell’s speech was the ostensible factor for Thursday’s weakness, whereas the disappointing price action after NVIDIA’s blowout report and guidance was the principal factor.
Strikingly, the equity futures market doesn’t appear too nervous this morning about what it might hear in Mr. Powell’s speech. The S&P 500 futures are up 18 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 43 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 162 points and are trading 0.5% above fair value.
There is some modest strength in many of the mega-cap stocks in pre-market trading that is helping to boost the futures market. Otherwise, there isn’t much news out there to account for the broad market movement.
There are several individual news items pertaining to earnings results. Ulta Beauty (ULTA), Marvell Technology (MRVL), Affirm Holdings (AFRM), Intuit (INTU), Workday (WDAY), Nordstrom (JWN), and Gap, Inc. (GPS) are headliners in that respect. The reactions to those reports has been mixed, so they can’t be considered as drivers of the bullish bias in the equity futures market this morning.
Similarly, there are reports that China is encouraging financial institutions to increase their stock investments in Chinese markets and that the stamp duty on stock trading will be reduced by up to 50%; however, that falls short as a positive catalyst this morning knowing that the Shanghai Composite and Hang Seng Index declined 0.6% and 1.4%, respectively, in Friday’s trading.
What we have this morning is a buy-the-dip bid and, ironically, a bid based on speculation that Mr. Powell won’t sound as hawkish as feared.
Everyone will know soon enough what he says and how he sounds saying it, and that will be today’s market driver after 10:05 a.m. ET.
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Originally Posted August 25, 2023 – Powell speech in focus
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