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Stocks ended the turbulent week on a higher note, with the S&P 500 (SPX), Nasdaq Composite (THEN), and the Nasdaq-100 (NDX) up for a fifth consecutive week, lifted by renewed technology optimism. The tech benchmarks Nasdaq Composite and Nasdaq-100 ended the week at all-time highs.
Meanwhile, the Dow Jones Industrial Average (DJIA) snapped its streak of weekly gains, posting its biggest weekly loss since early April. The blue-chip benchmark was stripped of its low exposure to technology stocks, as most stocks in other sectors turned red during the week.
Fed Stops Rally
Stocks struggled for direction on Wednesday as investor confidence was shaken by minutes from the Federal Reserve’s May meeting. The minutes revealed that rate-setting committee members were concerned about more sustained inflationary pressures than expected and felt 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 raise 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 improved significantly last month, while household 5-year inflation expectations suggested slower price increases going forward. So far, the incoming numbers signal that there is no apparent need for the Fed to rush rate cuts.
NVIDIA Raises the spirit of the market
However, market sentiment turned after hours on Wednesday as AI poster child NVIDIA (NVDA) published quarterly results. NVIDIA, which became the third most valuable US company this year, topped analysts’ increased revenue and profit expectations last quarter, reflecting growing AI-related demand. It also produced upbeat guidance for the current quarter, coming in well above analysts’ expectations.
NVIDIA’s report is one of the most important market events and not only because of the company’s large weight in the stock market indices. NVIDIA has led and embodied the current rally in technology stocks centered around artificial intelligence. While the report and its guidance confirm that AI hardware spending is accelerating, investors can rest assured that the AI Capex cycle is just beginning.
Notably, NVIDIA CEO Jensen Huang said this cycle has expanded beyond hyperscalers and other tech giants, reaching into many other industries “creating multiple multi-billion dollar vertical markets.” The company sees demand for its products exceeding supply for next year. The steady momentum of artificial intelligence suggests that the advancement of the revolutionary technology could carry stocks further, regardless of whether interest rates are lowered or remain high.
Economic data reclaims the stage
This week will be cut short by Memorial Day, with markets closed on Monday. With the earnings season almost over, there will be no releases that could change 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 measure of inflation.
Stocks that made the news
¤ NVIDIA’s 13.5% weekly gain led much of the semiconductor industry for the week, with the PHLX semiconductor index hitting a record high.
¤ Qualcomm (QCOM) was the biggest performer behind NVIDIA, boosted by renewed AI optimism as well as news of its collaboration with Microsoft (MSFT) to develop its PCs with Qualcomm’s AI chips.
¤ Analog devices (DO YOU KNOW) was another clear winner, rising after its quarterly results and guidance easily topped Wall Street expectations.
¤ However, the broader technology sector had many red spots this week. Thus, working days (WDAY) fell after lowering revenue guidance for the fiscal year.
¤ Outside the technology sector, the biggest gainer was Deckers Outdoor (THE DECKS), whose stock rose to a record high on stronger-than-expected earnings results.
¤ Ross Stores (Baking) was another top performer, rising after beating analysts’ revenue and earnings estimates.
Future earnings and dividend announcements
The 2024 Q1 earnings season is almost over, 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 (vein).
In addition, investors will follow reports scheduled to be released by Dollar General (DG), Veeva Systems (VEEV), Dick’s Sporting Goods (DKS), Agilent Technologies (or), HP (HPQ), octa (eight), Buy Best (BBY), Costco Wholesale (COST), NetApp (NTAP), Marvell Technology (MRVL), and Ulta Beauty (LOW).
Ex-dividend dates are coming up this week for Goldman Sachs (GS), Qualcomm (QCOM), Home Depot (large), Corning (GLW), Dow Inc. (DOW), Union Pacific (UNP), and other firms that pay dividends.
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