Stocks Churn as Nvidia’s 150% Rally Faces Big Test: Markets Wrap

(Bloomberg) — Stocks fluctuated near all-time highs, with traders awaiting Nvidia Corp.’s results for clues on whether the artificial-intelligence euphoria that has powered the bull market has run too far.

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In the run-up to the giant chipmaker’s earnings, investors will be looking to see whether the AI darling will at least match Wall Street’s lofty estimates. Given its massive influence on broader indexes, Goldman Sachs Group Inc.’s trading desk has once called Nvidia “the most important stock on planet Earth.” A member of the “Magnificent Seven” group of megacaps, the company has been responsible for over a third of the Nasdaq 100’s gain this year.

Investors are getting ready for big swings in Nvidia’s shares when it reports earnings after the closing bell on Wednesday. Trading in the options market suggests investors see potential for a 9% move in either direction on the day following the report, Citigroup Inc.’s equity trading strategist Vishal Vivek said. The shares have rallied over 150% this year.

“In our view, Nvidia’s earnings report may actually have more impact on the overall market than Jerome Powell’s Jackson Hole speech last week,” said Anthony Saglimbene at Ameriprise Financial

To Chris Senyek at Wolfe Research, the results will set the tone for markets before the key payrolls report on Sept. 6.

“We remain bullish, but risks are now skewed to the downside over the very near-term. From a seasonal perspective, we enter a weaker period of the year that is even more amplified in election years,” Senyek said.

The S&P 500 hovered around 5,620, with Nvidia whipsawing. Super Micro Computer Inc. tumbled after Hindenburg Research said it’s short the company. A Bloomberg gauge of the “Magnificent Seven” stocks slid 0.3%.

Treasury 10-year yields rose four basis points to 3.85%. That’s ahead of a $69 billion sale of two-year notes.

With questions swirling around Federal Reserve policy, the state of the economy and the US presidential race, at least one thing seems clear on Wall Street: spending on AI is still key. Concerns about the returns of those investments recently contributed to a tech selloff, although that dip was readily bought.

AI hardware and chip companies have led the bounce in the Nasdaq 100 from its August low, with Nvidia up about 30%.

“Despite the potential for near-term volatility in tech, we believe the AI growth story remains intact,” said Mark Haefele at UBS Global Wealth Management. “Nvidia’s results this week as well as Apple’s upcoming iPhone launch will be key catalysts to watch. Without taking any single-name views, we maintain our positive outlook for quality AI beneficiaries in the semiconductor and software industries.”

It’s difficult to recall a period in the past where the earnings of one company have been so focused on by the market, but that is where we stand now on Nvidia and to a lesser extent Broadcom, according to Ryan Grabinski at Strategas.

“Their respective earnings results will be a significant catalyst for the broader market in either direction,” he said. “A miss from Nvidia — which has an EPS contribution of 4.6% — could swing estimates materially. Broadcom, which reports next week, contributes 1.6%. A less material EPS contribution, but just as important for ‘AI enthusiasm.”

Corporate Highlights:

• Producer David Ellison’s Skydance Media is set to become the new owner of Paramount Global after Seagram Co. heir Edgar Bronfman Jr. dropped out, ending one of the industry’s most dramatic acquisition contests.

• Cava Group Inc. tumbled after the Mediterranean restaurant chain’s largest individual shareholder and a group of executives filed to sell shares.

• Meta Platforms Inc. Chief Executive Officer Mark Zuckerberg alleged that Facebook was “pressured” by the US government to censor content related to Covid-19 during the global pandemic and that he regrets the company’s decision to accede to the demands.

• JD.com Inc. plans to buy back as much as $5 billion of its shares, moving to appease investors worried about a potentially worsening Chinese consumer downturn.

• Eli Lilly & Co. is now selling vials of its blockbuster weight-loss drug Zepbound to patients for as little as $399 a month as it works to overcome supply shortages of wildly popular shots.

• Struggling with plunging demand for its Covid products, Pfizer Inc. has a new plan to reach potential customers: Cutting out middleman and selling drugs straight to patients.

Key events this week:

• Nvidia earnings, Wednesday

• Fed’s Raphael Bostic and Christopher Waller speak, Wednesday

• Eurozone consumer confidence, Thursday

• US GDP, initial jobless claims, Thursday

• Fed’s Raphael Bostic speaks, Thursday

• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday

• Eurozone CPI, unemployment, Friday

• US personal income, spending, PCE; consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 10:27 a.m. New York time

• The Nasdaq 100 rose 0.1%

• The Dow Jones Industrial Average was little changed

• The Stoxx Europe 600 rose 0.2%

• The MSCI World Index was little changed

• Bloomberg Magnificent 7 Total Return Index fell 0.3%

• The Russell 2000 Index fell 0.7%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1170

• The British pound rose 0.4% to $1.3239

• The Japanese yen rose 0.2% to 144.26 per dollar

Cryptocurrencies

• Bitcoin fell 2.3% to $61,984.68

• Ether fell 3.5% to $2,596.56

Bonds

• The yield on 10-year Treasuries advanced four basis points to 3.85%

• Germany’s 10-year yield advanced four basis points to 2.29%

• Britain’s 10-year yield advanced 10 basis points to 4.01%

Commodities

This story was produced with the assistance of Bloomberg Automation.

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