Stocks Finish Mixed on Economic Strength and a Slump in Nvidia

The S&P 500 Index ($SPX) (SPY) Thursday closed unchanged, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.59%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.13%.

On Thursday, the stock market settled mixed, with the Dow Jones Industrials posting a new record high.  Signs that the economy continues to expand boosted stocks Thursday after the US Q2 GDP was revised higher due to an upward revision of consumer spending, showing that the economy is holding up despite high interest rates.  Also, price pressures eased as the Q2 core PCE price index was revised lower.  The upward revision to spending with the downward revision to inflation builds the case for a soft landing and is bullish for stocks. 

Stock indexes fell back from their best levels, and the Nasdaq 100 dropped into negative territory after Nvidia slumped more than -6%.  Despite reporting better-than-expected Q2 earnings, Nvidia sold off more than -6% as it projected Q3 revenue will be about $32.5 billion.  While higher than the consensus of $31.9 billion, it failed to top lofty expectations of as high as $37.9 billion.

US weekly initial unemployment claims fell -2,000 to 231,000, showing a slightly stronger labor market than expectations of 232,000.

US Q2 GDP was revised upward to +3.0% (q/q annualized), stronger than expectations of no change at +2.8%. Q2 personal consumption was unexpectedly revised upward to +2.9% from +2.3% versus expectations of a downside revision to +2.2%.  The Q2 core PCE price index was revised slightly lower to +2.8% q/q from +2.9% q/q.

US Jul pending home sales unexpectedly fell -5.5% m/m, weaker than expectations of +0.2% m/m.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 32% for a -50 bp rate cut at that meeting.

Overseas stock markets Thursday settled mixed.  The Euro Stoxx 50 rallied to a 6-week high and closed up +1.08%.  China's Shanghai Composite dropped to a 6-1/2 month low and closed down -0.40%.  Japan's Nikkei Stock 225 closed down -0.02%.

Interest Rates

September 10-year T-notes (ZNU24) Thursday closed down -7 ticks.  The 10-year T-note yield rose +3.2 bp to 3.867%.  Sep T-notes fell to a 1-week low, and the 10-year T-note yield rose to a 1-week high of 3.886%.  T-notes were under pressure Thursday from the stronger-than-expected US jobless claims and Q2 GDP reports.  Also, slack demand for the Treasury’s $44 billion auction of 7-year T-notes weighed on T-note prices as the auction had a bid-to-cover ratio of 2.50, below the 10-auction average of 2.55.  An increase in inflation expectations is also bearish for T-notes after the 10-year breakeven inflation rate rose to a 3-1/2 week high Thursday of 2.172%.   

European government bond yields on Thursday moved higher.  The 10-year German bund yield rose +1.4 bp to 2.274%.  The 10-year UK gilt yield rose to a 1-month high of 4.030% and finished up +1.7 bp at 4.019%.

ECB Governing Council member Patsalides said if the ECB's projections "continue to materialize, there's nothing to prevent the Governing Council from reducing interest rates."

The Eurozone Aug economic confidence index rose +0.6 to a 15-month high of 96.6, stronger than expectations of 96.0.

German Aug CPI (EU harmonized) eased to +2.0% y/y from +2.6% y/y in July, better than expectations of +2.2% y/y and the smallest year-over-year increase in 3-1/2 years.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.

US Stock Movers

Nvidia (NVDA) closed down more than -6% after it forecasted Q3 revenue of $32.5 billion, which was above the consensus of $31.9 billion but not as high as some estimates as high as $37.9 billion. 

Best Buy (BBY) closed up more than +14% to lead gainers in the S&P 500 after reporting Q2 adjusted EPS of $1.34, better than the consensus of $1.16, and raising its full-year adjusted EPS forecast to $6.10-$6.35 from a prior view of $5.75-$6.20.

Cooper Cos (COO) closed up more than +11% after reporting Q3 net sales of $1.00 billion, better than the consensus of $997.9 million, and forecasting Q4 revenue of $1.02 billion to $1.04 billion, stronger than the consensus of $1.01 billion.

AI chip stocks and hardware providers are climbing today after Nvidia’s earnings report showed continued strong demand for AI chips and hardware.  As a result, ARM Holdings Plc (ARM) closed up more than +5% to lead gainers in the Nasdaq 100.  Also, Intel (INTC) closed up more than +2% to lead gainers in the Dow Jones Industrials.  In addition, ON Semiconductor (ON), Marvell Technology (MRVL), and Microchip Technology (MCHP) closed are up more than +2%.  Finally, Analog Devices (ADI), GlobalFoundries (GFS), and Texas Instruments (TXN) closed up more than +1%. 

Crowdstrike Holdings (CRWD) closed up more than 3% after reporting Q2 revenue of $963.9 million, above the consensus of $958.2 million. 

HP Inc (HPQ) closed up more than +2% after reporting Q3 net revenue of $13.52 billion, better than the consensus of $13.37 billion, and boosted its share buyback authorization to $10 billion.

Affirm Holdings (AFRM) closed up more than +30% after reporting Q4 revenue of $659.2 million, higher than the consensus of $605.1 million, and forecasting Q1 revenue of $640 million-$670 million, stronger than the consensus of $631.9 million. 

Veeva Systems (VEEV) closed up more than +9% after reporting Q2 adjusted EPS of $1.62, above the consensus of $1.53, and raising its 2025 adjusted EPS forecast to $6.22 from a previous forecast of $6.16.

Nutanix (NTNX) closed up more than +20% after reporting Q4 billings of $672.9 million, well above the consensus of $574 million, and forecast 2025 revenue of $2.44 billion-$2.47 billion, better than the consensus of $2.43 billion.

Dollar General (DG) closed down more than -32% to lead losers in the S&P 500 after reporting Q2 net sales of $10.21 billion, below the consensus of $10.37 billion, and cutting its full-year comparable sales estimate to +1% to +1.6% from a previous estimate of +2% to +2.7%.  Dollar Tree (DLTR) closed down more than -10% on the news to lead losers in the Nasdaq 100.

NetApp (NTAP) closed down more than -9% after forecasting Q2 net revenue of $1.57 billion-$1.72 billion versus the consensus of $1.62 billion.

Bath & Body Works (BBWI) closed down by -4% after UBS cut its price target on the stock to $38 from $52.

Okta (OKTA) closed down more than -17% after Bank of America downgraded the stock to underperform from buy with its price target cut to $75, citing headwinds to Okta’s outlook for current remaining performance obligation. 

Pure Storage (PSTG) closed down more than -15% after forecasting 2025 adjusted operating income of $532 million, below the consensus of $541.6 million.

Campbell Soup (CPB) closed down more than -1% after reporting Q4 net sales of $2.29 billion, below the consensus of $2.31 billion, and forecast 2025 adjusted EPS of $3.12-$3.22, weaker than the consensus of $3.23.

Earnings Reports (8/30/2024)

None.

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