Everything to Know about Macro and Markets
Stocks ended the turbulent week on a higher note, with the S&P 500 (SPX), Nasdaq Composite (NDAQ), and Nasdaq-100 (NDX) rising for a fifth straight week, lifted by renewed tech optimism. The tech benchmarks Nasdaq Composite and Nasdaq-100 wrapped up the week at new all-time highs.
Meanwhile, the Dow Jones Industrial Average (DJIA) snapped its string of weekly increases, recording its biggest weekly loss since early April. The blue-chip benchmark was taken down by its low exposure to technology stocks, as most stocks in other sectors flashed red for the week.
The Fed Stomps on the Rally
Stocks struggled for direction throughout Wednesday as investor confidence was shaken by the minutes from the Federal Reserve May meeting. The minutes revealed that the members of the rate-setting committee were concerned about stickier-than-anticipated inflation pressures and felt that there was no reason to cut interest rates before they received sufficient evidence that price increases were under control. Some policymakers have even suggested that the central bank should lift the rates if economic data comes in hotter than expected.
Meanwhile, incoming data points reflected a still-resilient economy, with weekly jobless claims, manufacturing and services PMIs, and durable goods orders coming in better than expected. Consumer sentiment also considerably improved over the past month, while household 5-year inflation expectations suggested slower price increases ahead. So far, the incoming numbers signal no apparent need for the Fed to rush with the rate cuts.
NVIDIA Lifts the Market’s Spirit
However, the market mood turned around after hours on Wednesday, as the AI poster child NVIDIA (NVDA) released its quarterly results. NVIDIA, which became the third most valuable U.S. company this year, topped elevated analysts’ revenue and earnings expectations in the previous quarter, reflecting surging AI-related demand. It also produced optimistic guidance for the current quarter, coming in way above analysts’ expectations.
NVIDIA’s report is one of the most important market events, and not only due to the company’s large weight in the stock market indexes. NVIDIA has led and embodied the current tech stock rally, centered around artificial intelligence. As its report and guidance confirm that spending on AI hardware is accelerating, investors have their reassurance that the AI Capex cycle is only just beginning.
Notably, NVIDIA’s CEO Jensen Huang said that this cycle has expanded beyond hyperscalers and other tech behemoths, reaching many other industries while “creating multiple multibillion-dollar vertical markets.” The company sees demand for its products outpacing supply well into the next year. Sustained AI momentum suggests that the revolutionary technology’s advancement can propel stocks further, regardless of whether interest rates are reduced or remain high.
Economic Data Retakes the Stage
This week will be shortened by Memorial Day, with the markets closed on Monday. With the earnings season nearly finished, there will be no releases that could swing the market sentiment. However, the week will be quite heavy on economic data, including the crucial Core PCE print, which is the Federal Reserve’s preferred inflation measure.
Stocks That Made the News
¤ NVIDIA’s 13.5% weekly surge propelled most of the semiconductor industry upwards for the week, with the PHLX Semiconductor Index reaching a record high.
¤ Qualcomm (QCOM) was the biggest outperformer after NVIDIA, boosted by renewed AI optimism as well as by the news about its collaboration with Microsoft (MSFT) to develop its PCs with Qualcomm’s AI chips.
¤ Analog Devices (ADI) was another clear winner, surging after its quarterly results and guidance easily topped Wall Street expectations.
¤ Still, the broad tech sector had many red spots this week. Thus, Workday (WDAY) slumped after cutting its fiscal-year revenue guidance.
¤ Outside of the tech sector, the biggest winner was Deckers Outdoor (DECK), whose stock soared to a record high on stronger-than-expected earnings results.
¤ Ross Stores (ROST) was another outperformer, surging after surpassing analysts’ revenue and earnings estimates.
Upcoming Earnings and Dividend Announcements
The Q1 2024 earnings season has almost ended, but some notable reports are still scheduled for this week.
This week, the spotlight will be on the earnings releases from Salesforce (CRM) and Dell Technologies (DELL).
In addition, investors will follow the reports scheduled to be published by Dollar General (DG), Veeva Systems (VEEV), Dick’s Sporting Goods (DKS), Agilent Technologies (A), HP (HPQ), Okta (OKTA), Best Buy (BBY), Costco Wholesale (COST), NetApp (NTAP), Marvell Technology (MRVL), and Ulta Beauty (ULTA).
Ex-dividend dates are coming this week for Goldman Sachs (GS), Qualcomm (QCOM), Home Depot (HD), Corning (GLW), Dow Inc. (DOW), Union Pacific (UNP), and other dividend-paying firms.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
