The Momentum in Stocks Continues With NVIDIA in the Spotlight

The stock market is approaching new all-time highs just days before Nvidia Corp. releases its highly anticipated earnings report. As the final member of the so-called "Magnificent Seven" tech companies to announce earnings, Nvidia’s performance is eagerly awaited by both Wall Street and the tech community. The company, which has been central to the artificial intelligence (AI) surge driving the current bull market, will reveal its earnings on Wednesday. Investors are particularly interested in the company’s figures and future guidance from CEO Jensen Huang, hoping these will reinforce confidence in the persistent demand for Nvidia’s chips.

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Jay Woods from Freedom Capital Markets emphasized the significance of Nvidia’s earnings, saying, “For the market to keep momentum this week it may come down to just one stock - Nvidia. Well, that’s not exactly true, but it sure feels like the hype for this earnings event will be the talk of trading desks and financial media all week.”

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As the S&P 500 neared its 24th record high this year, Nvidia saw a boost following a bullish analyst call. Other corporate highlights included JPMorgan Chase & Co. raising its forecast for net interest income, based on the expectation that the Federal Reserve will lower rates more gradually than previously anticipated.

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Several Federal Reserve officials are scheduled to speak in the coming days. However, the general sentiment is that any hawkish comments will be downplayed, especially after Fed Chair Jerome Powell indicated that another rate hike is unlikely. Meanwhile, Treasury 10-year yields increased by two basis points to 4.44%.

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Chris Larkin from E*Trade at Morgan Stanley posed a familiar question for the market: Can the bullish momentum continue? He noted, “Traders seemed to like the trend of last week’s economic numbers, which were solidly in the ‘Goldilocks’ zone. With a relatively light economic calendar this week, earnings are poised to drive the market discussion, with Nvidia headlining a solid list of tech and retail names.”

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The S&P 500 has set numerous records in 2024, propelled by a $12 trillion rally in US stocks since late October. This surge is partly due to optimism for a soft landing, where the economy remains robust while inflation eases, encouraging bets that the Fed will cut rates this year. Additionally, enthusiasm for AI technology has been a major driver. Nvidia alone accounts for approximately one-fourth of the S&P 500’s gains. Along with Microsoft Corp., Amazon.com Inc., Meta Platforms Inc., and Alphabet Inc. (Google’s parent company), these five stocks contribute roughly 53% of the benchmark’s rise.

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Nvidia, the world’s largest chipmaker by market value, has gained nearly 5% in the second quarter after soaring 82% in the first quarter of the year.

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As of Friday’s close, the options market was anticipating an 8.6% swing in Nvidia’s stock price following the earnings announcement. According to data from Citigroup Inc., such a significant move could impact the S&P 500 by 0.4%, representing the fourth-largest influence on the benchmark from a single earnings report in the past 12 years.

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In summary, Nvidia’s upcoming earnings report is pivotal for maintaining the stock market’s momentum. Investors are closely monitoring the company’s performance and future outlook, which could significantly impact the broader market, particularly given Nvidia’s substantial role in the current AI-driven bull market.

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