Nasdaq leads stock-market gains ahead of Nvidia results

What’s driving markets

Stocks were boosted after bond yields in Europe and the U.S. fell in the wake of news that eurozone economic activity contracted more than expected to a 33-month trough. A sharp rise in Treasury yields, with the 10-year rate
BX:TMUBMUSD10Y
hitting a 16-year high on Monday, had been blamed for a broad, tech-led stock-market pullback.

The yield on the 10-year note was down nearly 11 basis points at 4.217% though Wednesday morning, extending the Europe-inspired decline after U.S. purchasing manager index readings came in weaker than expected.

The S&P flash U.S. PMI reading for August came in at 47, down from a July reading of 49. A reading below 50 indicates a contraction in activity. The services PMI reading fell to a six-month low of 51 from a previous reading of 52.3.

See: Stock-market slide — All S&P 500 sectors are down in August, on pace for a broad monthly drop not seen this year

However, much of the market’s focus Wednesday is on the results of Nvidia
NVDA,
+1.50%,
due after the closing bell.

With Nvidia’s shares up 212% this year — against the S&P 500’s 14.3% gain — the chip maker encapsulates the enthusiasm for big technology stocks and AI excitement that together helped drive equity indices higher for much of 2023. Shares were off 0.6% in recent action but are up more than 4% so far this week.

Read: On eve of Nvidia results, Cathie Wood sells more shares in the chip manufacturer

Analysts said it’s likely that the reception Nvidia’s numbers and forecasts are afforded will determine the broader market sentiment in the short term.

“If earnings are again stellar and guidance robust, it will help reignite the tech rally which has stalled in recent weeks. If they don’t, we expect short-term market volatility,” said Nigel Green, CEO of deVere Group, in emailed comments.

Pricing of Nvidia’s stock options show traders think the shares may move by roughly 10% over the course of the rest of the week.

“A jolt [of] volatility is set to be sparked by the chip giant’s numbers and outlook,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

See: Nvidia earnings: What Wall Street expects from the AI-chip giant

Green warned that hype around Nvidia and other megacap tech stocks, fueled by enthusiasm over AI, may be reaching dangerous levels “as it could lead investors to assume that these stocks are a silver bullet to build long-term wealth — and they are not, at least not on their own.”

In other economic data, U.S. new home sales rose 4.4% to an annual rate of 714,000 in July, from a revised 684,000 in the prior month, the Commerce Department reported Wednesday. 

Companies in focus

• United Parcel Services
  UPS,
  +0.82%
  shares added 1.1% after workers at the deliveries and logistics company voted for a new contract.

• AMC Entertainment
  AMC,
  -17.06%
  fell 7.1%, after an 18% drop on Tuesday. A reverse stock split is planned on Wednesday, to be followed by the conversion of the APE preferred shares.

• Peloton Interactive
  PTON,
  -20.39%
  fell 20.1% after the exercise vendor came up short with its revenue outlook for the latest quarter while disclosing that a bike recall has had a greater-than-expected impact on the business.

• Abercrombie & Fitch Co.’s
  ANF,
  +24.44%
  shares soared 20% Wednesday, after the teen clothing retailer blew past estimates for the second quarter and raised guidance. 

• Foot Locker
  FL,
  -33.73%
  slid 34% after the sporting goods retailer swung to a loss in the second-quarter, lowered its full-year guidance and said it’s suspending its quarterly dividend to conserve cash.