(Bloomberg) — Stocks fell ahead of Nvidia Corp.’s highly anticipated results. – the last of the “Magnificent Seven” megacaps to report.
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Just hours away from the giant chipmaker’s numbers, Nvidia fell 2%. Investors are waiting to see if the company will be able to meet the sky-high expectations surrounding the artificial intelligence technology that has been called the opportunity of a lifetime. On average, analysts expect that Nvidia expects revenue growth of more than 70% for the current quarter. And traders will be keen to know how chief Jensen Huang sees demand developing through 2025.
Due to its undisputed leadership in AI, Nvidia’s market capitalization has soared to more than $3 trillion. Because of its large influence on broader indices, the reaction to the gains could pull the entire market up or down. Options trading involves a move of almost 10% in either direction the day after results.
Nvidia’s highly anticipated earnings call – seen globally as the key “tell” on the prospects for AI – is expected to confirm that demand remains strong, according to LPL Financial’s Quincy Krosby. But for the markets, meeting expectations may not be enough to support the stock price, she said.
“There is the issue of the slowdown in chip sales based on the advanced Blackwell construction that needs to be addressed,” Krosby noted. “And the question of whether companies can monetize their AI capabilities after allocating billions to build out their AI infrastructure.”
The S&P 500 broke below 5,600 points. Trading volume was 25% below last month’s average. The Nasdaq 100 fell 1%. Super Micro Computer Inc. fell 25% after it said it would delay filing its annual financial disclosures. Berkshire Hathaway Inc. by Warren Buffett surpassed the $1 trillion mark for the first time.
The ten-year government bond yield remained little changed at 3.83%. That comes ahead of the $70 billion sale of five-year bonds in the US.
While the hype almost never lives up to reality, when it comes to the “most important stock” in the market, investors may have a point about Nvidia, according to strategists at Bespoke Investment Group.
Over its history as a publicly traded company, the stock has averaged a one-day move of 8.1% in response to earnings, they noted. In addition to Meta Platforms Inc. were Tesla Inc. and Alphabet Inc. the only other stocks to experience an average reaction of more than 5% following their results.
For Miller Tabak’s Matt Maley, it’s been a “fairly boring week” so far. Chances are we’ll see significant movement one way or another after Nvidia reports.
“Activity should at least increase,” Maley said.
Of course, a big increase in “activity” doesn’t mean we’ll definitely get a big increase in “volatility,” but it’s a good bet that investors won’t be sitting on their hands as much on Thursday, he said.
Future gains in global technology stocks should be more gradual after the rapid recovery over the past three weeks, with potential headwinds from US macroeconomic data and further news on controls on semiconductor exports likely to contribute to rising volatility, according to Solita Marcelli of UBS Global Wealth Management
“However, we continue to have a positive structural view on the broader AI theme and see ways for investors to manage their exposure to the technology that we believe will drive growth in the coming years,” she noted.
According to Bloomberg Intelligence strategists led by Gina Martin Adams, the correlation between the S&P 500 and Nvidia has fallen as the stock’s impact on the index’s earnings growth diminishes.
“AI topics continue to attract significant attention, but dominance is likely to decline as other sectors and themes gain attention and fundamental share,” they wrote.
The S&P 500 companies outside the “Magnificent Seven” cohort more than doubled growth expectations to 9.2%, up from the forecast 4%, BI said. Three of the eleven sectors – including the industrial sector, the real estate sector and the basic sector – experienced growth instead of declines. Energy was the only sector that fell short.
Stock options trading shows investors are positioning for gains after the August swing.
The S&P 500’s call skew, a measure of how much traders are willing to pay for bullish exposure, is steepening rapidly, indicating some urgency in grabbing bullish options after Jerome Powell’s dovish speech in Jackson Hole, according to Charlie McElligott of Nomura.
The market continues to “act like a beach ball trying to keep you underwater,” McElligott wrote in a note, noting the demand for right-side hedging outweighs the remaining forced risk management from the early August volatility event . That’s why stock indexes, despite some impulse selling at times, “continue to slide,” he said.
Business highlights:
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Kohl’s Corp. raised its full-year profit outlook as the retailer cuts costs and reduces inventory levels amid a consumer slump.
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Abercrombie & Fitch Co. beat analysts’ sales expectations for the sixth consecutive quarter, but it wasn’t enough to impress investors who have grown accustomed to the ’90s fashion comeback.
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Foot Locker Inc.’s sales exceeded analyst expectations as turnaround efforts and a revived relationship with key partner Nike Inc. are starting to pay off, but investors remain unimpressed with the progress.
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Nordstrom Inc. offered a rosier picture for this year’s sales after better-than-expected results at its discount chain, the latest indication that shoppers are turning to options beyond price as they hunt for deals.
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Warren Buffett sold another $982 million worth of Bank of America Corp. stock. as his conglomerate continues to scale back its investments in the second-largest U.S. bank.
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The lenders of B. Riley Financial Inc. have given the troubled company more time to prepare an overdue financial report as it looks for ways to ease its more than $2 billion debt burden.
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Neurocrine Biosciences Inc. collapsed after a study of its experimental treatment for schizophrenia was disappointing compared to a competing drug that is likely to hit the market much sooner.
Main events this week:
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Consumer confidence in the eurozone, Thursday
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US GDP, first jobless claims, Thursday
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Raphael Bostic of the Fed will speak on Thursday
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Unemployment in Japan, CPI in Tokyo, industrial production, retail sales, Friday
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CPI eurozone, unemployment, Friday
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US personal income, expenses, PCE; consumer confidence, Friday
Some of the major moves in the markets:
Stocks
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The S&P 500 was down 0.5% as of 11:59 a.m. New York time
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The Nasdaq 100 fell 1.1%
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The Dow Jones Industrial Average fell 0.3%
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The Stoxx Europe 600 rose 0.3%
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The MSCI World Index fell 0.4%
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Bloomberg Magnificent 7 Total Return Index fell 1.3%
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The Russell 2000 index fell 0.4%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.5% to $1.1126
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The British pound fell 0.5% to $1.3200
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The Japanese yen fell 0.4% to 144.47 per dollar
Cryptocurrencies
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Bitcoin fell 4.6% to $59,033.13
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Ether fell 3.2% to $2,497.99
Bonds
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The yield on 10-year government bonds was little changed at 3.83%
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The German ten-year yield fell by three basis points to 2.26%
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The British ten-year yield was little changed at 4.00%
Raw materials
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West Texas Intermediate crude fell 1% to $74.79 a barrel
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Spot gold fell 0.7% to $2,506.27 an ounce
This story was produced with the help of Bloomberg Automation.
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