Last Night's Market Recap
S&P 500 - Heatmap
Overnight – Stocks mixed, weigh down by Nvidia
The S&P 500 managed to post a gain on Thursday, despite a decline in tech stocks led by Nvidia. This performance was supported by data indicating a stronger U.S. economy, which helped alleviate concerns about a potential recession and kept downward momentum in check.
By the end of the trading day the Dow Jones Industrial Average increased by 143 points, or 0.6%, the S&P 500 edged up by 0.1%, while the NASDAQ Composite experienced a slight decline of 0.2%.
Economic indicators provided a more optimistic outlook, with the Commerce Department reporting that the gross domestic product (GDP) grew by 3% in the second quarter. This figure surpassed expectations of 2.8% growth and marked a significant increase from the 1.4% annualized growth recorded in the first quarter. Additionally, the Labor Department revealed that initial claims for unemployment benefits for the week ending August 24 were 231,000, slightly below the anticipated 232,000. Despite widespread corporate job cuts, Jefferies noted that they do not foresee a sharp increase in unemployment claims in the near future.
The prospect of an interest rate cut in September has also bolstered Wall Street indexes, following Federal Reserve Chair Jerome Powell’s remarks at the Jackson Hole symposium.
In the tech sector, Nvidia’s shares dropped more than 6% after the company issued a disappointing outlook, even though it reported better-than-expected profits for the May-July quarter and announced a $50 billion share buyback. Nonetheless, Wall Street analysts remain optimistic about Nvidia’s prospects, citing strong demand for its AI chips from cloud service providers, including the upcoming Blackwell chips set for release in the fourth quarter. UBS noted that major cloud service providers are still indicating increased demand and extended capacity commitments, suggesting that the market is not yet nearing a downturn. Meanwhile, Apple Inc. saw its shares rise by over 1%, as the company reportedly considers taking a stake in OpenAI.
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The Day Ahead
ASX SPI 8054 (+0.56%)
With earnings all but wrapped up, we will start to look once again at the macro and global picture, which is waning.
Be wary in highly cyclical stocks at high prices, financials and consumer discretionary in particular
Nvidia has been the tent pole of the AI rally and poor price action shows that investors might be looking for the exit door, which has many knock-on consequences for global equity markets.
