Mixed Market Outcome: Nvidia Soars Ahead of Earnings While Dow Drops
The S&P 500 Index ($SPX) (SPY) closed up +0.40% on Tuesday, while the Dow Jones Industrials Index ($DOWI) (DIA) fell -0.28%. The Nasdaq 100 Index ($IUXX) (QQQ), however, ended the day up +0.71%.
Recovery Efforts Despite Global Tensions
Stocks showed a rebound on Tuesday, recovering from early losses and leaving the market with mixed results. The Dow Jones Industrials hit a 1-and-a-half week low. Nvidia led the charge with a +4% increase in anticipation of a strong earnings report scheduled after the market close on Wednesday. Analysts expect Nvidia to post record Q3 revenue of $33.25 billion, with a forward-looking 2025 revenue forecast of $126.58 billion. Additionally, positive momentum from the “Magnificent Seven” tech stocks contributed to the recovery. Walmart also provided a boost, rising +3% after it reported a stronger-than-expected adjusted EPS for Q3 and lifted its full-year adjusted EPS forecast.
Geopolitical Tensions Increase Market Volatility
The markets opened lower on Tuesday due to heightened risks from the Ukraine-Russian conflict, leading to a wave of selling. Reports emerged that Ukraine had executed missile strikes in Russia with Western weapons, further escalating the situation. Russian President Putin has expanded nuclear use conditions, intensifying concerns and prompting a flight to safe assets, which caused the 10-year Treasury note yield to dip to a one-week low. Gold prices also surged to a weekly high amid increased demand for safe-haven assets.
Housing Data Disappoints Investors
Adding to negative sentiment, US housing data fell short of expectations. Housing starts for October dropped -3.1% month-over-month to 1.311 million, missing the expected figure of 1.334 million. Building permits also fell unexpectedly, decreasing -0.6% to 1.416 million compared to a forecast of 1.435 million.
Corporate Earnings Mixed but Generally Positive
Out of the 90% of S&P 500 companies that have reported Q3 earnings so far, 75% outperformed estimates, slightly below the three-year average. According to Bloomberg Intelligence, these companies have shown an average year-over-year earnings increase of +8.5% in Q3, which is more than double what was predicted at the beginning of the season.
Market Anticipates Interest Rate Changes
Currently, markets are pricing in a 56% likelihood of a -25 basis point cut at the Federal Reserve’s meeting on December 17-18.
Overseas Markets Reflect Mixed Sentiment
Internationally, stock markets were also mixed. The Euro Stoxx 50 fell -0.82%, marking a three-month low, while China’s Shanghai Composite Index gained +0.67% after recovering from a two-week low. Japan’s Nikkei Stock 225 Index rose +0.51%.
Interest Rates and Bonds Trends
December 10-year T-notes (ZNZ24) ended Tuesday’s session up +7 ticks, while the yield on 10-year Treasury notes fell -3.2 basis points to 4.382%. T-notes rallied to a one-week high due to positive trends in European government bonds and increased demand driven by the escalation in the Ukraine-Russian conflict. These bonds saw additional gains after the disappointing US housing reports.
In Europe, government bond yields fell. The 10-year German bund yield declined to a three-week low of 2.269%, while the 10-year UK gilt yield dropped to a two-week low of 4.386%.
European Central Bank Policy Shifts
ECB Governing Council member Panetta commented that “Restrictive monetary conditions are no longer necessary,” suggesting a shift toward normalizing monetary policy. Similarly, Council member Muller indicated likely interest rate reductions by a quarter-point at the ECB’s meeting on December 18-19, with swaps signaling a 100% certainty of a -25 basis point cut on December 12.
Strong Performers and Key Movers in the US Markets
Super Micro Computer (SMCI) surged more than +31%, leading gains in the S&P 500 and Nasdaq 100 after appointing a new auditor and outlining compliance plans with Nasdaq listing requirements. Nvidia (NVDA) also led the Dow’s gain with an increase of over +4% after Stifel raised its price target to $180 from $165.
Walmart (WMT) reported Q3 adjusted EPS of 58 cents, beating estimates of 53 cents, prompting a +3% rise in its stock price. Strength from the Magnificent Seven technology stocks positively impacted the market, with Netflix (NFLX) and Tesla (TSLA) both up more than +2%, while Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META) closed up more than +1%.
GE Vernova (GEV) gained over +4% after announcing an acquisition of Woodward’s gas turbine components business. Similarly, United Airlines Holdings (UAL) rose by more than +4% following a price target increase from TD Cowen to $125 from $100.
Symbotic (SYM) climbed over +27% after reporting Q4 total revenue of $576.8 million, surpassing consensus expectations. BioNTech (BNTX) rose over +4% after receiving a buy recommendation with a price target of $130 from Berenberg.
Declines in Specific Sectors
On the downside, Incyte Corp (INCY) fell over -8% after announcing a pause in a Phase 2 study due to preclinical toxicology findings. Companies in the tax preparation sector such as H&R Block (HRB) and Intuit (INTU) also saw declines following reports on free tax-filing proposals from the administration’s leaders, with declines of more than -8% and -5%, respectively. Lowe’s (LOW) dropped more than -4% after its Q3 gross margin fell below expectations.
Medtronic Plc (MDT) declined by more than -3% as it lowered its EPS forecast, while Stellantis NV (STLA) saw a drop of over -2% on news of increased auto inventory days. Additionally, STMicroelectronics NV (STM) lost over -1% amid concerns of losing market share in China, and Kraft Heinz (KHC) fell after a downgrade from Piper Sandler.
Upcoming Earnings Reports
Earnings reports expected on November 20, 2024, include NVIDIA Corp (NVDA), Palo Alto Networks Inc (PANW), Snowflake Inc (SNOW), Target Corp (TGT), TJX Cos Inc/The (TJX), and Williams-Sonoma Inc (WSM).
On the date of publication, Rich Asplund did not hold positions in any securities mentioned in this article. All data and information in this article serve only informational purposes. For further details, please refer to the Barchart Disclosure Policy here.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
