Everything to Know about Macro and Markets
Stocks ended Friday’s session with mixed results, with the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) registering minute declines, while the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) notched small gains.
The 30-stock blue-chip index was the center of attention last week, closing above the 40,000 mark for the first time. The DJIA locked in its fifth consecutive weekly increase, while the other three main stock indexes rose for a fourth straight week.
The milestone reached by Dow Jones is an important one, as the index is less heavily weighted to large-cap tech stocks that have propelled the U.S. markets since October. Thus, the DJIA’s record high takes the over-concentration concern off the table, with the rally’s breadth seen as a sign of its viability.
Economic Data and Earnings’ Strength
The stock rally received a fresh boost last week from a benign CPI report, as well as from weaker-than-expected retail sales numbers. These data points ignited speculations that the economy is cooling, elevating chances for the Fed to cut rates in the next few months. Traders are increasingly betting on the first interest-rate decrease in September, a turnaround from just a month ago when many market participants expected no cuts at all this year.
Meanwhile, Wall Street is wrapping up a blockbuster earnings season. With over 90% of the S&P 500 companies having reported, average Q1 EPS growth stands at 7.3%, which is the second-highest rate in two years. If not for the profit declines at some Healthcare companies, the growth would have reached 10.5%, the best since 2021.
While the Magnificent Seven firms led earnings growth again this quarter with an expected ~50% surge, things seem to be picking up beyond the tech giants’ cohort. Profits at the S&P 500 excluding Mag7 have shrunk less than in the previous quarters. Moreover, analysts expect the “other 493” companies to start showing notable positive EPS growth starting this quarter.
Fed Speak and Nvidia in Focus
This week, investors’ attention will be split between the minutes from the Federal Reserve’s last policy meeting and the earnings report published by Nvidia (NVDA).
The Fed’s May 1st meeting’s minutes are not expected to contain many surprises, given that many of the central bank’s members have been sharing their opinions on monetary policy following the meeting. However, the minutes could spell greater clarity on the Fed’s projected rate-cut timeline and the level of consensus among the members about monetary easing.
Meanwhile, Nvidia’s release is one of the most important events in this earnings season. The AI poster child has surged 125% from since the start of the current rally in late October, adding over $1 trillion to its market capitalization. Over that period, the AI chip designer has been responsible for 15% of the S&P 500’s gains, considerably more than any other single stock. As a clear market leader and an AI bellwether, Nvidia’s report will be critical for the market’s continued bullishness.
Stocks That Made the News
¤ Reddit (RDDT) saw its shares soar on the news about its partnership with OpenAI. The ChatGPT parent will gain access to the social platform’s vast data, allowing OpenAI’s AI models to train on that data in real-time, while Reddit’s users will have access to generative AI features. OpenAI will also become Reddit’s advertising partner, which has the potential to considerably increase the platform’s revenues.
¤ Robinhood (HOOD) was another notable outperformer last week, jumping on a double upgrade (from Sell to Buy) by Bank of America analysts.
¤ AMD (AMD) was a large-cap tech outperformer last week. The chipmaker’s shares surged on news that Microsoft (MSFT) is planning to integrate AMD’s AI chips into its Azure cloud platform.
¤ Walmart (WMT) saw its stock jump to an all-time high after the discount retailer published revenue and earnings that surpassed analysts’ estimates and lifted its full-year guidance.
¤ Dell (DELL) was another clear winner, surging after Morgan Stanley analysts lifted their price target on the stock, citing strong demand for AI server storage solutions.
Upcoming Earnings and Dividend Announcements
The Q1 2024 earnings season has almost ended, but some important reports are still scheduled for this week.
This week’s spotlight will be on the earnings release from Nvidia (NVDA), scheduled for May 22nd after hours.
In addition, investors will follow the reports scheduled to be published by Target (TGT), Palo Alto Networks (PANW), Zoom Video Communications (ZM), Lowe’s (LOW), Analog Devices (ADI), TJX Companies (TJX), Snowflake (SNOW), Medtronic (MDT), Intuit (INTU), and Workday (WDAY).
Ex-dividend dates are coming this week for Equinix (EQIX), Microchip (MCHP), Autoliv (ALV), 3M (MMM), Northrop Grumman (NOC), Johnson & Johnson (JNJ), Prudential Financial (PRU), and other dividend-paying firms.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
