The stock market seems to have gotten over the hump of Hump Day, which happened to include the biggest hump of all: NVIDIA’s (NVDA) Q3 earnings report.
That report, which is being discussed and dissected every which way, was a report most, if not all, companies would die to share. Operating income increased 110% year-over-year, revenues were up 94%, and non-GAAP diluted earnings per share jumped 103%. The company’s fiscal Q4 revenue guidance computes to 70% year-over-year growth at the midpoint. For added measure, NVIDIA said the demand for its Blackwell chip is “staggering” and that it is on track to exceed its previous Blackwell revenue estimate of several billion dollars in Q4.
Following the report, NVIDIA’s stock declined more than 5.0%. The initial takeaway was that there was some disappointment that NVIDIA’s revenue growth rates are decelerating (e.g., Q3 revenue growth was up 122% yr/yr), implying its best growth days are behind it and that a whole lot of good growth news had already been factored into its stock price.
That was the knee-jerk reaction. As we write this, NVIDIA is up 1.8% in pre-market trading, presumably because investors recognize there is still a lot of impressive growth ahead for this company, which clearly continues to run ahead of its competition. With a market cap approaching $4 trillion, however, there will always be an assertion that NVIDIA can’t possibly continue to exceed impossibly high expectations, leaving its stock vulnerable to a material decline when it does face added competition.
That’s why the glide path NVIDIA’s stock has been on could prove to be bumpier moving forward. Be that as it may, the turnaround from the knee-jerk selling has been uplifting for the broader market along with the animal spirits driving Bitcoin, which is pushing $100,000, and the 24% gain in Snowflake (SNOW) following its better-than-expected results.
Currently, the S&P 500 futures are up 25 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 96 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 164 points and are trading 0.3% above fair value.
It is helping matters, too, that Treasury yields are on the calmer side of things this morning. The 2-yr note yield is down one basis point to 4.30% and the 10-yr note yield is down one basis point to 4.40%.
Those moves follow reports that Russia fired an intercontinental ballistic missile into Ukraine for the first time and some mixed economic data.
Initial jobless claims for the week ending November 16 decreased by 6,000 to 213,000 (Briefing.com consensus 221,000). Continuing jobless claims for the week ending November 9 increased by 36,000 to 1.908 million. That is the first reading above 1.900 million since November 2021.
The key takeaway from the report is that the rising trend for continuing jobless claims connotes a softening labor market whereby it has become more challenging to find a new job after being laid off.
Separately, the Philadelphia Fed Index checked in at -5.5 for November (Briefing.com consensus 7.0) following a 10.3 reading for October. The dividing line between expansion and contraction is 0.0, so the November reading suggests manufacturing activity in the Philadelphia Fed region contracted in November.
The October Existing Home Sales Report (Briefing.com consensus 3.90 million; prior 3.84 million) and the October Leading Indicators Report (Briefing.com consensus -0.3%; prior -0.5%) will be released at 10:00 a.m. ET.
In the meantime, the major indices will be released to higher levels when the cash session begins.
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Originally Posted November 21, 2024 – NVIDIA turns things around
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