Weekly Market News: Blowout Earnings Report from Nvidia Sends Stocks Soaring
Market Update
A blowout earnings report from AI darling Nvidia (NVDA) sent stocks to record highs last week. The S&P 500 (^GSPC) and Dow Jones (^DJI) ended the week up about 1% while the Nasdaq Composite (^IXIC) added about 0.6%. Both the S&P and Dow closed Friday at record highs.
Inflation Concerns
The largest challenge to markets in the week ahead will likely come from the latest reading of the Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, on Thursday. A look at consumer confidence and updates on the manufacturing sector will also be in focus during the week.
Key Earnings Reports
Quarterly reports from Salesforce (CRM), Lowe’s (LOW), Macy’s (M), Okta (OKTA), and Best Buy (BBY) are also on deck.
Price Check
The last time an inflation report came out before the opening bell, a hotter-than-expected Consumer Price Index (CPI) report rattled markets and sparked a stock sell-off.
That could happen again. The latest reading on inflation is slated for release on Thursday. Economists expect annual “core” PCE — which excludes the volatile categories of food and energy — to have clocked in at 2.4% in January. Over the prior month, economists project “core” PCE at 0.4%.
A monthly price increase of 0.4% would be a noted increase from the 0.2% seen in the month prior, and speaks to growing fears that inflation might be proving stickier than initially hoped. Notably, this would bring the six-month and three-month annualized inflation numbers, which had been tracking below the Fed’s 2% target, back above 2%.
Morgan Stanley chief US economist Ellen Zentner noted that an uptick in monthly price increases would set the stage for a “bumpy” inflation picture over the next several months. Markets are now pricing in three interest rate cuts for 2024, in line with the Fed’s most recent forecast and down from a former consensus of six cuts seen back in December.
Consumer Comes into Focus
Fourth quarter earnings season is slowing down, but a slew of companies are still set to report including many in the retail sector. The week ahead will bring a closer look at the consumer with results from Macy’s, Best Buy, and TJX among others.
To BMO Capital Markets senior retail analyst Simeon Siegel, the key question remains whether consumer spending is losing steam. At this point, he told Yahoo Finance Live, quarterly results have shown Americans are still spending on discretionary goods.
Have We Reached Market ‘Euphoria’?
With all three of the major averages trading near record highs and earnings from AI stalwart Nvidia sending a whole sector into rally mode, perhaps the largest question for investors is whether the market has reached a peak.
Citi’s US equity strategy team says no.
“Now is not quite the time to panic as sentiment has not reached euphoria,” Citi managing director Scott Chronert wrote in a weekly note to clients.
Chronert’s team uses an indicator called the Levkovich Index, which takes into account investors’ short positions and leverage, among other factors, to determine market sentiment. The current reading is 0.33, below the 0.38 that signals markets have entered euphoria, or an overstretched peak. Prior periods where the market extends into euphoric territory are often followed by drawdowns in the market.
Chronert concedes that strong momentum in the market could drive the S&P 500 above the firm’s 5,100 year-end target in the short term, but in the long run, more tailwinds will need to come to keep the market pressing higher.
Weekly Calendar
Monday
Economic data: Dallas Fed Manufacturing Activity, February; New home sales, January
Earnings: Domino’s Pizza (DPZ), Freshpet (FRPT), Hims & Hers (HIMS), iRobot (IRBT), Workday (WDAY), Zoom (ZM)
Tuesday
Economic data: Conference Board Consumer Confidence, February; S&P CoreLogic Case-Shiller, 20-City Composite home price index, December
Earnings: AutoZone (AZO), Beyond Meat (BYND), Cava (CAVA), Cracker Barrel (CBRL), Devon Energy (DVN), First Solar (FSLR), Lowe’s (LOW), Macy’s (M), Norwegian Cruise Line (NCLH)
Wednesday
Economic data: MBA Mortgage Applications, December; Wholesale inventories, January; Fourth quarter GDP, Second Estimate; Fourth quarter personal consumption, Second Estimate
Earnings: Advance Auto Parts (AAP), AMC (AMC), Baidu (BIDU), C3.ai (AI), Icahn Enterprises (IEP), TJX Companies (TJX), Marathon Digital Holdings (MARA), Novavax (NVAX), Okta (OKTA), Paramount Global (PARA), Salesforce (CRM), Snowflake (SNOW), Weight Watchers (WW)
Thursday
Economic data: Initial jobless claims; Personal income and spending, PCE inflation
Earnings: Anheuser Busch (BUD), Bath & Body Works (BBWI), Best Buy (BBY), Birkenstock (BIRK), Celsius (CELH), Dell (DELL), Fisker (FSR), Hewlett Packard Enterprises (HPE), Six Flags (SIX), SoundHound (SOUN), Zscaler (ZS)
Friday
Economic data: S&P Global US Manufacturing PMI, ISM manufacturing, ISM prices paid, University of Michigan consumer sentiment
Earnings: FuboTV (FUBO), Plug Power (PLUG)
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