We Cover Earnings 💰| Economic Calendar 📅| Tesla In Trouble Again? 🤔| NVDA Impact On AI & What Is Next 🐳| NVDA Earnings Report This Week 👀
Market Performance 📈
Stocks ended the week at record highs, with the Nasdaq Composite rising more than 2%, the S&P 500 increasing more than 1.5%, and the Dow Jones Industrial Average rising more than 1%. The market’s optimism was driven by signs of an inflation cooldown, leading to expectations of Federal Reserve interest rate cuts.
Earnings Expectations 🫡
Nvidia’s earnings report is expected to be a key catalyst for markets this week. Analysts expect Nvidia to report earnings growth of over 400% in the prior quarter and revenue growth of 242%. For the second quarter, analysts project earnings growth of over 120% and nearly 100% revenue growth.
Other notable earnings reports include Target, Palo Alto Networks, and Lowe’s.
Economic Calendar 👀
The week is expected to be quieter on the economic front, with updates on activity in the manufacturing and services sectors, as well as the final reading of consumer sentiment for May. Minutes from the Fed’s May meeting are also expected on Wednesday afternoon.
Fed Interest Rate Cuts ✂️
Investors are pricing in two full interest rate cuts this year, bringing the market closer in line with the Fed’s projections of two or three interest rate cuts at some point this year. However, the key question is whether this bullish narrative is sustainable or if the market will once again jump ahead of the Fed.
“The minutes from the May FOMC meeting should sound more hawkish on the margin than Chair Powell’s press conference,” Bank of America US economist Michael Gapen wrote in a note to clients. “Though Powell signaled the bar for hikes is high and that standing pat is the proper response to disinflation stalling out, others on the committee were more concerned about whether policy was doing enough.”
Nvidia’s Impact on the Market 🎯
Nvidia’s stock is up over 86% in 2024 and over 200% in the past year, making it a key driver of the AI trade. The company’s updates on emerging technology demand will be closely watched, and its earnings report could have a significant impact on the broader market.
“If [Nvidia] can continue their enviable, remarkable string of beating estimates, raising guidance, then beating the raised guidance next quarter, that means that the AI trade can and will proceed apace,” Interactive Brokers chief strategist Steve Sosnick wrote in a research note. “If there is even the slightest sign of weakness, however, much more than that stock alone will suffer.”
The Expansion of the AI Trade
The AI trade is expanding beyond popular names like Nvidia, Microsoft, Alphabet, and Meta, with new companies in sectors like Energy and Utilities being tabbed as AI trades. Research from Goldman Sachs’ equity strategy team led by David Kostin shows mentions of AI soared in the first quarter amid a “broadening of the AI trade.” More than 66% of companies in the energy sector mentioned AI during their earnings calls this quarter, up from 19.1% last quarter.
JPMorgan Asset Management global market strategist Jack Manley said whether the AI story has legs “might be one of the more important questions that we have to ask.”
“Is this AI stuff the real deal or is it a flash in the plan?” Manley told Yahoo Finance. “And I mean, frankly, the jury is still out on whether or not it will fundamentally transform the world.”
Tesla in Trouble?
Tesla has faced multiple production issues at its South China manufacturing facility in late April. According to an unconfirmed report from Nikkei, the issues stem from an incomplete paint system, preventing Tesla from delivering on contractual commitments to China for 2,500 vehicles per day. Tesla shares closed at $383.37 on Thursday, a decrease of 2.76% from its previous close.
Weekly Calendar 📅
Monday:
Earnings: Palo Alto Networks | , Trip.com | , Zoom |
Economic news: No notable economic news.
Tuesday:
Earnings: AutoZone | , Macy’s | , XPeng | , Toll Brothers | , Urban Outfitters |
Economic news: Philadelphia Fed Non-Manufacturing Activity, May (-12.4 previously)
Wednesday:
Earnings: Nvidia | , e.l.f. Beauty | , Petco | , Snowflake | , Target ,Williams-Sonoma |
Economic news: MBA mortgage applications, May 17 (+0.5% previously); Existing home sales month-over-month, April (0% expected, -4.3% previously); FOMC meeting minutes
Thursday:
Earnings: BJ’s | , Deckers Brands | , Intuit |, Polestar | , Ralph Lauren | , Ross Stores | , TD Bank | , Workday |
Economic news: Chicago Fed Nat Activity Index, April (0.15 previously); Initial jobless claims, week ending May 18 (222,000 previously); S&P Global US manufacturing PMI, May preliminary (50 previously); S&P Global US services PMI, May preliminary (51.3 previously); S&P Global US composite PMI, May preliminary (51.3 previously); Existing home sales month-over-month, January (5.0% expected, -1% previously)
Friday:
Earnings: Lamar | , Warner Bros. Discovery |
Economic news: Durable goods orders, April preliminary (0% expected, 0.9% prior); University of Michigan Consumer Sentiment, May final (67.6 expected, 67.4 previously)
