The Nasdaq 100 increased roughly 1.5%, with Tesla Inc. rising to its highest level since March, while the S&P 500 stopped a four-day decline. Nvidia Corp. increased by more than 8%, contributing to the artificial intelligence craze that has propelled this year’s equities advance. According to figures collated by Bloomberg, the chipmaker’s revenue is expected to increase 65% from a year ago when results are due on Wednesday.
Ed Moya, senior market analyst for the Americas at Oanda, stated that “this is a big week for tech stocks” and that there is growing expectation that Nvidia will post strong financial performance. Will Nvidia’s earnings rekindle the AI trade and give tech stocks the much-needed relief they require?
Late in the evening, the semiconductor division of SoftBank Group Corp., Arm, filed for what is expected to be the biggest US IPO of the year. A bullish prognosis caused Zoom Video Communications Inc. to increase. In its most recent effort to appease investors, Charles Schwab Corp. plans to reduce yearly labour, professional services, and real estate expenditures by at least $500 million.
Bonds started to decline again as wagers on still-high rates gained support from positive economic indicators. For the first time since 2009, the yield on 10-year inflation-protected Treasury bonds surpassed 2%. The yield on 10-year notes without that protection quickly rose to a level last seen in late 2007.
According to Bespoke Investment Group, the situation for equities isn’t always awful just because real yields have increased. The analysts noted that since 1997, average forward returns for stocks when real rates reached 52-week highs were only marginally poorer than all other times. Additionally, they observed that pockets of stronger earnings-per-share growth frequently follow new highs for real yields overall.
According to Bespoke strategists, “that is consistent with the view that high real yields represent a stronger economy, even if that has some adverse implications for asset price valuation.”
Following the Kansas City Fed’s decision to raise interest rates to a range of 5.25% to 5.5% last month—the highest level in 22 years—Powell will talk on Friday at the Jackson Hole Economic Policy Symposium. The meeting’s minutes revealed that policymakers continued to see a lot of dangers that inflation would continue to be higher than expected, which might keep rates high.
At this week’s Jackson Hole conference, traders will be listening carefully to every word Jerome Powell says in order to decipher the Fed’s intentions, according to Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley. Some investors might have concentrated on the possibility that the Fed’s higher-for-longer stance on interest rates could be extended by this economic resiliency.
In fact, according to 602 participants in Bloomberg’s most recent Markets Live Pulse survey, the Fed has not yet successfully combatted inflation. Additionally, more than 80% of those polled believed Powell’s statement in Jackson Hole would strengthen the case for a hawkish hold.
According to Katie Nixon, chief investment officer for the wealth management division at Northern Trust, “The Fed and investors will soon pivot from a focus on how high the policy rate will go to a concern about how long they will stay at that level — and what the implications are for a “higher for longer” scenario.” In our opinion, Powell will want to stick to his stance and fight back against the rising market consensus that rate reduction will occur in 2024.
Pattern of Jackson Hole
Since the start of the millennium, the Jackson Hole conference speeches by Fed chairmen have typically boosted equities, with the S&P 500 up 0.4% on average the following week, according to data compiled by Bloomberg Intelligence.
Equities fell 3.2% in the week following Powell’s remarks, according to BI, as he warned of maintaining restrictive policies to combat inflation. However, last year’s appearance is still vivid in traders’ memories.
While the argument over whether the economy will avert a recession rages, two of Wall Street’s top strategists are at odds on the prognosis for US equities following a three-week losing streak.
While stalwart equity bear Michael Wilson of Morgan Stanley predicts that sentiment will deteriorate further if investors begin to “question the sustainability of the economic resiliency,” David Kostin of Goldman Sachs Group Inc. believes there is still room for investors to increase exposure if the economy continues to be headed for a soft landing.
A rough August is still on track to put a stop to stocks’ five-month gain streak. However, there haven’t been many overtly bearish indicators throughout the current slump.
According to the most recent batch of Commodity Futures Trading Commission data released on Friday, hedge funds and other large speculators reduced their net-short positions in S&P 500 futures to the smallest in 14 months. Furthermore, according to analysts, this month’s decline may be a nice diversion from the sharp price increases that have elevated valuations.
Other Business News
Palo Alto Networks Inc., a cybersecurity company, soared after predicting higher annual billings than Wall Street expected, allaying concerns that a downturn in demand may negatively affect results.
SentinelOne Inc. increased after a news article claimed that the business has been considering options, including a sale.
More investors expressed interest in the split-off of Johnson & Johnson’s $40 billion investment in Kenvue Inc. than some on Wall Street had anticipated.
The UK’s antitrust authority approved Broadcom Inc.’s $61 billion acquisition of VMware Inc., clearing the way for one of the biggest-ever tech transactions.
A motion to prevent the conversion of AMC Entertainment Holdings Inc. stock while an appeal is ongoing was denied by the Delaware Supreme Court, so the conversion may go forward this week.
After the manufacturer of electric big rigs indicated it might not meet its full-year delivery target due to the consequences from previous battery accidents, Nikola Corp. lost value.
This week’s major events:
Tuesday’s US existing house sales
Tuesday’s speech by Austan Goolsbee of the Chicago Fed
Wednesday’s S&P Global Services & Manufacturing PMI for the eurozone measures consumer confidence.
Wednesday’s S&P Global / CIPS UK Manufacturing PMI
Wednesday’s S&P Global Manufacturing PMI and US new home sales
Thursday: US first unemployment claims and durable goods
The annual Jackson Hole conference on economic policy for the Kansas City Fed gets underway on Thursday.
Japan, Friday Tokyo CPI
US University of Michigan’s Friday survey of consumer sentiment
ECB President Christine Lagarde and Fed Chair Jerome Powell will speak at the Jackson Hole conference on Friday.
Several significant market changes include:
Stocks
Up 0.7% as of 4 p.m. New York time, the S&P 500
Nasdaq 100 increased by 1.6%.
The Dow Jones Industrial Average dropped by 0.1 percent.
MSCI World index increased by 0.4%.
Currencies
Little changed in the Bloomberg Dollar Spot Index.
To $1.0896, the euro increased by 0.2%.
To $1.2759, the British pound gained 0.2%.
Japanese yen decreased by 0.6% to 146.22 per dollar.
Cryptocurrencies
To $26,124.17, bitcoin decreased by 0.4%.
To $1,673.25 ether dropped 1%.
Bonds
The 10-year Treasury yield increased by eight basis points to 4.34%.
The 10-year yield in Germany increased by eight basis points to 2.70 %.
The 10-year yield in Britain increased by five basis points to 4.73%.
Commodities
To $80.80 per barrel, West Texas Intermediate crude decreased by 0.6%.
At $1,923.70 per ounce, gold futures increased by 0.4%.
Bloomberg Automation provided assistance in the creation of this article.
With help from Heather Burke, Brett Miller, Tassia Sipahutar, John Viljoen, Sagarika Jaisinghani, and Isabelle Lee.
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