Stock market today: US stocks hold near record highs with Nvidia front of mind
05/21/2024 19:04
Investors biding their time for Nvidia results looked to retail earnings and Fedspeak for clues to the economy.
US stocks held steady near record highs on Tuesday, as investors biding their time for Nvidia (NVDA) results looked to retail earnings and Fedspeak for clues to the economy.
S&P 500 futures (ES=F) were little changed after the benchmark closed just a hair short of the all-time high it scored last week. Futures on the Dow Jones Industrial Average (YM=F) and the tech-heavy Nasdaq 100 (NQ=F) also hugged the flatline.
Investors are looking to corporates for a cue in the absence of top-level economic data releases.
The focus is firmly on Nvidia's heavily anticipated earnings report on Wednesday, which is expected to spur a big move in its share price and jumpstart stocks more broadly. A gain in the AI chipmaker's price helped lift the Nasdaq Composite (^IXIC) to a record high on Monday.
In the meantime, investors get a wave of quarterly reports from retailers to scrutinize for a steer on consumer spending and the health of the economy.
Lowe's (LOW) sales dropped less than expected as cash-strapped Americans continued to spend on small repairs, while Macy's (M) shares gained after the department store chain's earnings beat a low bar. AutoZone (AZO) and Urban Outfitters (URBN) are also on the docket.
Investors are also listening closely to speeches from Federal Reserve officials as a dearth of economic releases starves the rate-cut debate of fuel. Tuesday's line-up brings Cleveland Fed president Christopher Waller, among others.
Read more: How does the labor market affect inflation?
In recent days, policymakers have doubled down on the message that inflation may not yet be reliably cool enough to lower rates from their current historic highs. More insight — and a key test of optimism for cuts — will come in Wednesday's release of Fed meeting minutes from May.
Live3 updates
The read-through on Macy's quarter
Macy's (M) shares are getting a pop after its earnings report this morning, as the company didn't warn for the full year and said sales at its 50 best stores rose.
In fact, the EPS guidance range was generally left alone.
And that surprises me, given the first quarter challenges in the credit card business (sales fell) and merchandise margins (also fell).
While investors are choosing to embrace the positive on Macy's, I caution not to overlook the negatives. One of them being that sales are declining at hundreds of other Macy's stores that will likely be closed over the next few years. You have to evaluate the entire company, not just 50 stores as the company's earnings release language would like for one to do.
Further, the company's commentary on the consumer wasn't exactly confidence-inspiring as to how the back-to-school shopping period will shake out.
Yahoo Finance's Brooke DiPalma has the earnings breakdown here.
Good valuation point on Nvidia from EvercoreISI
An interesting phenomenon on Nvidia (NVDA) has appeared.
The stock of the AI chip king may actually be cheap, suggests EvercoreISI in a note this morning.
"The combination of decelerating revenue growth and increased concerns about competition has driven Nvidia's relative P/E ratio to the lower-end of the 10-yr range, creating a scenario where a healthy beat-and-raise [on earnings Wednesday] will lead to near-term upside to the stock … and we expect a healthy beat-and-raise," says analyst Mark Lipacis.
His chart below to put a finer point on it.
I will note that Nvidia's stock isn't actually super cheap from a pure valuation perspective. It trades on close to 40 times estimated forward earnings P/E ratio ... the S&P 500 trades at about 20.7 times.
All the key valuation metrics on Nvidia from Yahoo Finance can be found here.
Nvidia's stock takes a valuation expansion breather. (EvercoreISI) Nvidia's dominance in one chart
Nvidia (NVDA) is having a week, and it hasn't even reported earnings yet (that's Wednesday evening).
CEO Jensen Huang seemingly wowed at Dell's (DELL) Las Vegas conference yesterday, with Dell himself hinting a potential move into CPUs by Nvidia.
As you continue your homework on Nvidia ahead of tomorrow's report, a new chart from Goldman Sachs offers perspective on the AI chip darling.
Nvidia's dominance, in one chart. (Goldman Sachs)
