[New York Stock Market] Nasdaq Rises 1.59% on Nvidia Earnings Expectations...

The three major indices of the U.S. New York stock market all rose on the 23rd (local time) as investors awaited Nvidia's earnings announcement scheduled after the market close, fueled by expectations of an earnings surprise. Recently surged Treasury yields also declined, supporting the rally. Later this week, Federal Reserve (Fed) Chair Jerome Powell is scheduled to deliver a speech at the economic symposium, the ‘Jackson Hole Meeting’.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,472.98, up 184.15 points (0.54%) from the previous session. The large-cap S&P 500 index rose 48.46 points (1.10%) to 4,436.01, and the tech-heavy Nasdaq index closed at 13,721.03, up 215.16 points (1.59%).

All ten sectors of the S&P 500, excluding energy, posted gains. Notably, technology, communication, and real estate stocks showed prominent increases. Nvidia, which released its earnings immediately after the market close, rose 3.17% by the end of regular trading. Technology stocks rallied with Apple up 2.19%, Google Alphabet up 2.55%, and Tesla up 1.57%. Apparel company Abercrombie & Fitch surged more than 24% on better-than-expected earnings. Peloton slid over 22% after reporting a larger-than-expected quarterly net loss per share in its pre-market earnings release. Foot Locker dropped more than 28% following a decline in quarterly sales and a downward revision of its outlook. Dick's Sporting Goods, which had a double-digit plunge the previous day due to disappointing earnings, closed slightly down after Bank of America (BoA) downgraded its investment rating to neutral.

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Investors closely monitored Nvidia’s earnings while also watching the results of major retailers, key economic indicators, and Treasury yield movements. Wall Street had already raised price targets, anticipating Nvidia’s Q2 earnings to surpass market expectations. Economic media outlet CNBC reported, "Investors will look to Nvidia’s earnings report for signals on whether the market will resume its upward trend this year or if the August downturn will persist." The S&P 500 index has fallen more than 4% so far this month.

Nvidia’s Q2 earnings per share, released after the market close, came in at $2.70, beating the market forecast of $2.09. Quarterly revenue also exceeded expectations, reaching $13.51 billion compared to the Refinitiv consensus estimate of $11.22 billion. Nvidia projected Q3 revenue of $16 billion, higher than anticipated. In after-hours trading, Nvidia’s stock price rose more than 7%. Todd Jones, Chief Investment Officer at Gratus Capital, commented, "There is almost nothing more important to the market’s short-term direction than Nvidia’s earnings."

The decline in Treasury yields also contributed to the recovery of investor sentiment on this day. Recently, Treasury yields, especially long-term ones, had surged due to expectations of a soft landing, concerns over prolonged Fed tightening, and increased Treasury issuance by the U.S. Treasury Department. In the New York bond market, the benchmark 10-year yield fell to around 4.19%. The 2-year Treasury yield, sensitive to monetary policy, hovered around 4.96%. This was influenced by weak manufacturing and service sector data released that day. The dollar index, which measures the value of the U.S. dollar against six major currencies, also declined slightly to around 103.4.

The U.S. manufacturing sector showed contraction. According to S&P Global Market Intelligence, the preliminary August Manufacturing Purchasing Managers’ Index (PMI) registered 47.0, below both Wall Street expectations and the previous month’s 49. The PMI indicates contraction below 50 and expansion above 50. The service sector also weakened, with the preliminary August Services PMI falling to 51.0, the lowest in six months. Conversely, new home sales in July showed stronger-than-expected growth. According to the U.S. Department of Commerce, new home sales in July rose 4.4% month-over-month to 714,000 units, exceeding Wall Street’s forecast of 1.0% growth.

Investor attention now turns to Fed Chair Powell’s remarks on the 25th. Powell is scheduled to deliver an economic outlook speech at the ‘Jackson Hole Meeting’ economic symposium held this week in Wyoming. As this event offers insights into the direction of monetary policy at the end of the tightening cycle, market impact is expected depending on the tone of his remarks. Powell is anticipated to reaffirm a data-dependent stance and keep the door open for additional rate hikes if necessary.

James Bullard, former President of the Federal Reserve Bank of St. Louis and known as a hawkish figure favoring monetary tightening, stated in an interview with the Wall Street Journal (WSJ) that the acceleration of U.S. economic growth may require higher interest rates. He said, "The Fed’s June economic outlook heavily factored in a recession scenario, but at least for now, that scenario appears to be off the table," adding, "The committee is signaling it will continue raising rates for a period this fall." He also noted, "There were predictions that the U.S. economy would be very weak or even enter a recession, but that does not seem to be materializing. Based on this, inflation forecasts should be revised upward." He pointed out, "The labor market remains tight, and the U.S. economy is accelerating. Risks are leaning more toward inflation not falling as quickly as expected."

The market still largely expects a rate hold in September. According to the Chicago Mercantile Exchange (CME) FedWatch tool, federal funds futures on this afternoon reflected an over 88% probability that the Fed will hold rates steady in September. Although the Fed’s June dot plot indicated the possibility of one more rate hike this year, investors seem to be increasingly hopeful that there will be no further hikes. The probability of at least one rate increase this year stands at about 42%. The remaining Federal Open Market Committee (FOMC) meetings this year are scheduled for September, November, and December.

Oil prices fell for the third consecutive trading day. On the New York Mercantile Exchange, October delivery West Texas Intermediate (WTI) crude oil closed at $78.89 per barrel, down 75 cents (0.94%) from the previous session.