Nasdaq, S&P 500 Futures Defy Nvidia Weakness: What's Going On - Invesco QQQ Trust, Series 1 (NASDAQ:QQQ), SPDR S&P 500 (ARCA:SPY) (2024)

After dilly-dallying in recent sessions amid anticipation ahead of Nvidia Corp.’s NVDA earnings, market mood is settling in. The index futures were higher in early trading. Nvidia shares have clawed part of their losses seen early in the premarket session and could recover when sell-side analysis starts coming in. Some strong tech earnings could provide the offsetting impact.

The preliminary GDP data due ahead of the market will be parsed by traders for cues on growth and inflation. A speech by a Federal Reserve official is also on traders’ radar. More importantly, Friday’s consumer price expenditure index data called the Fed’s favorite inflation gauge, could keep the market on tenterhook. The Labor Day holiday on Monday could dampen trading volume, and this could impart volatility, although traders do not attach much significance to low-volume moves.

In premarket trading on Thursday,the SPDR S&P 500 ETF Trust SPY rose 0.20% to $559.41, and theInvesco QQQ ETF QQQ gained 0.25% to $472.53, according toBenzinga Pro data.

Cues From Last Session

Caution ahead of Nvidia’s earnings and a sharp pullback in the shares of Super Micro Computer, Inc. SMCI weighed down on the tech space on Wednesday, which in turn dragged the major averages on Wednesday lower. After a lackluster start, stocks moved sideways in early trading, and subsequently, they moved lower before recouping some of the losses in late afternoon trading.

The tech-heavy Nasdaq Composite settled at its lowest in about two weeks and the Dow Jones Industrial Average retreated from its all-time closing high.

All but two S&P 500 sector classes retreated on Wednesday, and IT, communication services, consumer discretionary and energy stocks bore the brunt of the selling pressure.

Insights From Analysts:

As the presidential election campaign heads into the final sprint, Michael Zezas, Managing Director, Head of U.S. Public Policy Research & Municipal Credit Strategy at Morgan Stanley, said before the election, not the ups and downs of the campaign but the business cycle will probably affect the markets. “We don't think investors' near-term strategies will focus on the election,” he said.

Following the election, Zezas said he expects the election impact to be more pronounced in specific sectors. A Democratic win may be negative for energy and telecom stocks but positive for clean-energy stocks, he said.

“The outcome of the election could affect the U.S. Treasury yield curve, which plots bond yields against maturity dates, as well as the U.S. dollar,” he said. Trump’s insinuation of higher tariffs will likely weigh on economic growth and lead to a steeper yield curve but it would be positive for the dollar, he added.

LPL Financial Chief Economist Jeffrey Roachsaid should the economy worsen, the equity market could see volatility. The August payroll report, due on Sept. 6, or the upcoming months’ reports could show some underlying weakness in the broader hiring trends. He also noted caution among consumers who may not splurge on big-ticket items as the economy progresses into late-cycle dynamics.

LPL said it maintained its investment perspective of being modestly overweight on fixed income, funded from cash. This, the firm said, can help buffer against equity market volatility should economic conditions worsen, while also providing attractive income.

Upcoming Economic Data

• The Labor Department will release the weekly jobless claims report at 8:30 a.m. EDT. The number of individuals claiming unemployment benefits may come in at 230,000 for the week ended Aug. 24, down slightly from 232,000 in the previous week.
• The Bureau of Economic Analysis is due to release the preliminary (second read) GDP data for the second quarter at 8:30 a.m. EDT. Economists, on average, expect the annualized pace of quarter-over-quarter growth to be left unrevised at 2.8% compared to the first quarter’s 1.4% growth. Traders may also focus on the personal consumption expenditure index and the GDP price deflator, which are considered as inflation measures.
• The National Association of Realtors is scheduled to release its pending home sales index for July at 10 a.m. EDT, with the consensus calling for a 0.2% month-over-month increase compared to June’s 4.8% growth.
• The Treasury will auction four- and eight-week bills at 11:30 a.m. EDT and seven-year notes at 1 p.m. EDT.
• Atlanta Fed President Raphael Bostic will make a public appearance at 3:30 p.m. EDT.

See also: Best Futures Trading Software

Stocks In Focus:

• Nvidia fell 1.77% in premarket trading as traders pushed down the stock following the company’s quarterly results. Other chipmakers also moved in sympathy.
• Other stocks moving on earnings are Affirm Holdings, Inc. AFRM (up over 22%), Cooper Companies, Inc. COO (up over 4.70%), CrowdStrike Holdings, Inc. CRWD (down over 2%), Five Below, Inc. FIVE, HP Inc. HPQ (up over 7%), Nutanix, Inc. NTNX (up over 17%), NetApp, Inc. NTAP (down over 2.7%), Okta, Inc. OKTA (down over 10.50%), Pure Storage, Inc. PSTG (down over 13%), Salesforce, Inc. CRM (up over 5%) and Victoria’s Secret & Co. VSCO (up over 5%).
• American Eagle Outfitters, Inc. AEO, Best Buy Co., Inc. BBY, Burlington Stores, Inc. BURL, Campbell Soup Company CPB, Dollar General Corporation DG and Ollie’s Bargain Outlet Holdings, Inc. OLLI are among the key companies reporting their earnings ahead of the market open.
• Those reporting after the close include Autodesk, Inc. ADSK, Dell Technologies Inc. DELL, Gap, Inc. GPS, Lululemon Athletica Inc. LULU, Marvell Technology, Inc. MRVL, MongoDB, Inc. MDB and Ulta Beauty, Inc. ULTA.

Commodities, Bonds And Global Equity Markets:

Crude oil and gold futures were rebounding after a two-session slide and Bitcoin BTC/USD traded below the $60K level. The yield on the 10-year Treasury note fell 1.4 basis points to 3.827%.

Most Asian markets retreated on Thursday. following Wall Street’s weakness overnight and the negative reaction to Nvidia’s earnings, while European stocks traded higher early in the session.

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