Futures Flat As Yields Jump, Traders Brace For Nvidia Earnings
Traders are bracing for Nvidia's earnings report tomorrow. In the meantime, it's another quiet session with most asset classes close to unchanged and US equity futures flat in a muted overnight session. S&P futures were unchanged as of 8:00am, trading in a narrow range and erasing modest earlier gains. Nasdaq futures rose 0.1% with tech leading as NVDA/TSLA edge higher after lagging the Mag7 yesterday. Bond yields continue to rise amid a steeper curve, pushing the 10Y 3bps higher to 3.85%, while the USD is weaker and commodities are lower ex-base metals and natgas. Today’s macro data focus is on Consumer Confidence, Housing Price updates, and regional activity indicators. There is a 2Y bond auction.
Notable Premarket Movers
In premarket trading, Paramount Global fell after Seagram's heir Edgar Bronfman Jr. dropped out the acquisition contest for the CBS parent, with producer David Ellison’s Skydance Media set to become the new owner. Nvidia shares erased earlier gains and were last trading flat. Other notable premarket movers include:
- Cava Group (CAVA) falls 8% after the Mediterranean restaurant chain’s largest individual shareholder and a group of executives filed to sell shares.
- Hershey (HSY) slips 1.7% after Citi downgraded the chocolate bar maker to sell, saying volume weakness and cocoa inflation presents a looming downside risk.
- JD.com (JD) gains 3% on plans to buy back as much as $5 billion of its shares in a move to appease investors worried about a potentially worsening Chinese consumer downturn.
- Leslie’s (LESL) rises 2% after the outdoor supplies and sporting goods retailer named Jason McDonell as CEO and reaffirmed its fiscal 2024 outlook.
- Eli Lilly & Co. (LLY) ticks 0.6% lower as the company is now selling Zepbound vials at 50% discount to popular shots.
- Paramount Global (PARA) drops 5% as Seagram Co. heir Edgar Bronfman Jr. dropped out of a bidding war for the media company.
- Trip.com (TCOM) jumps 8% after the Chinese online travel agency reported second-quarter revenue and earnings that beat estimates.
All Eyes on Nvidia
Slowly but surely, all eyes now turn to Nvidia, and arguably the most important earnings release of the quarter; the company has the second-biggest weighting in the S&P 500 after Apple but has far greater importance on the broader "AI narrative", and its nosebleed valuation mean that it’s susceptible to big swings that could reverberate widely. As noted yesterday, pricing in the options market shows that traders see the potential for an almost 10% move in either direction after earnings, which would translate to roughly 160 points in the Nasdaq 100 Index, or a 0.8% move.
Nvidia’s “numbers will be good but what matters is the guidance in order to understand if the demand is still healthy,” said Alberto Tocchio, a portfolio manager at Kairos Partners. “If we get bad news, the rotation will be ever stronger as the market is still very heavy on the mega-cap.”
Investors will also hope the bull market will broaden out of big tech after fed Chair Jerome Powell signaled Friday the central bank will cut rates soon. Other policy makers echoed his dovish tone: Fed Bank of San Francisco President Mary Daly said it’s appropriate to begin cutting rates, while her Richmond counterpart Thomas Barkin said he still saw upside risks for inflation, though he supported “dialing down” policy. Economists see the core PCE index rising 0.2% in July for a second month. That would pull the three-month annualized rate of core inflation down to 2.1%, just above the central bank’s 2% goal.
“Of course, the central bank will emphasize that it has not yet made a decision and wrap that in the words ‘data dependent’,” said Volkmar Baur, a strategist at Commerzbank AG. “But 95 percent of what it needs to know for its September meeting should already be available.”
Bottom Line
The market is in a state of anticipation as traders await Nvidia's earnings report. The company's performance could have a significant impact on the broader market, particularly given its importance in the AI narrative. Investors will also be watching for any changes in the Fed's stance on interest rates. What are your thoughts on these developments? Share this article with your friends and sign up for the Daily Briefing, which is everyday at 6pm.
Futures Flat As Yields Jump, Traders Brace For Nvidia Earnings
Traders are bracing for Nvidia's earnings report tomorrow. In the meantime, it's another quiet session with most asset classes close to unchanged and US equity futures flat in a muted overnight session. S&P futures were unchanged as of 8:00am, trading in a narrow range and erasing modest earlier gains. Nasdaq futures rose 0.1% with tech leading as NVDA/TSLA edge higher after lagging the Mag7 yesterday. Bond yields continue to rise amid a steeper curve, pushing the 10Y 3bps higher to 3.85%, while the USD is weaker and commodities are lower ex-base metals and natgas. Today’s macro data focus is on Consumer Confidence, Housing Price updates, and regional activity indicators. There is a 2Y bond auction.
Notable Premarket Movers
In premarket trading, Paramount Global fell after Seagram's heir Edgar Bronfman Jr. dropped out the acquisition contest for the CBS parent, with producer David Ellison’s Skydance Media set to become the new owner. Nvidia shares erased earlier gains and were last trading flat. Other notable premarket movers include:
- Cava Group (CAVA) falls 8% after the Mediterranean restaurant chain’s largest individual shareholder and a group of executives filed to sell shares.
- Hershey (HSY) slips 1.7% after Citi downgraded the chocolate bar maker to sell, saying volume weakness and cocoa inflation presents a looming downside risk.
- JD.com (JD) gains 3% on plans to buy back as much as $5 billion of its shares in a move to appease investors worried about a potentially worsening Chinese consumer downturn.
- Leslie’s (LESL) rises 2% after the outdoor supplies and sporting goods retailer named Jason McDonell as CEO and reaffirmed its fiscal 2024 outlook.
- Eli Lilly & Co. (LLY) ticks 0.6% lower as the company is now selling Zepbound vials at 50% discount to popular shots.
- Paramount Global (PARA) drops 5% as Seagram Co. heir Edgar Bronfman Jr. dropped out of a bidding war for the media company.
- Trip.com (TCOM) jumps 8% after the Chinese online travel agency reported second-quarter revenue and earnings that beat estimates.
All Eyes on Nvidia
Slowly but surely, all eyes now turn to Nvidia, and arguably the most important earnings release of the quarter; the company has the second-biggest weighting in the S&P 500 after Apple but has far greater importance on the broader "AI narrative", and its nosebleed valuation mean that it’s susceptible to big swings that could reverberate widely. As noted yesterday, pricing in the options market shows that traders see the potential for an almost 10% move in either direction after earnings, which would translate to roughly 160 points in the Nasdaq 100 Index, or a 0.8% move.
Nvidia’s “numbers will be good but what matters is the guidance in order to understand if the demand is still healthy,” said Alberto Tocchio, a portfolio manager at Kairos Partners. “If we get bad news, the rotation will be ever stronger as the market is still very heavy on the mega-cap.”
Investors will also hope the bull market will broaden out of big tech after fed Chair Jerome Powell signaled Friday the central bank will cut rates soon. Other policy makers echoed his dovish tone: Fed Bank of San Francisco President Mary Daly said it’s appropriate to begin cutting rates, while her Richmond counterpart Thomas Barkin said he still saw upside risks for inflation, though he supported “dialing down” policy. Economists see the core PCE index rising 0.2% in July for a second month. That would pull the three-month annualized rate of core inflation down to 2.1%, just above the central bank’s 2% goal.
“Of course, the central bank will emphasize that it has not yet made a decision and wrap that in the words ‘data dependent’,” said Volkmar Baur, a strategist at Commerzbank AG. “But 95 percent of what it needs to know for its September meeting should already be available.”
Bottom Line
The market is in a state of anticipation as traders await Nvidia's earnings report. The company's performance could have a significant impact on the broader market, particularly given its importance in the AI narrative. Investors will also be watching for any changes in the Fed's stance on interest rates. What are your thoughts on these developments? Share this article with your friends and sign up for the Daily Briefing, which is everyday at 6pm.
