US futures
Dow futures -0.16%, S&P futures -0.03% & Nasdaq futures 0.16%
In Europe
FTSE -0.39% & DAX 0.10%
- US Q1 GDP and jobless claims beat forecasts
- Fed rate cut expectations are unchanged
- Nvidia falls despite beating estimates
- Oil slips after 1% gains yesterday
US Q2 GDP & Jobless beat forecasts
US stocks have opened flat as investors weigh Nvidia's results and stronger-than-expected US data.
While Nvidia beat expectations and concerns over the AI trade were alleviated, the share price slipped due to concerns over China and a data centre revenue miss. AI chip stocks traded mixed at the open, and broader sentiment was holding up.
The market mood was buoyed by an upward revision to Q2 GDP, which showed the US economy expanding 3.3% in the April-June quarter, driven by stronger-than-expected growth and an outsized boost from trade. The rebound in Q2 GDP followed a first-quarter contraction, which was the deepest since 2022, as companies increased imports ahead of Trump's tariffs.
Jobless claims were better than expected, falling by 5,000 to 229,000 in the week ending August 23, slightly below expectations or declining to 230,000. Businesses have been reluctant to lay off staff on a large scale; instead, they have pulled back from hiring. Meanwhile, the elevated number of recovering applications suggests that it's taking longer for people who are out of work to find a job.
The data hasn't changed Federal Reserve rate cut expectations for September, with the markets pricing in an 87% probability that the Fed will cut rates by 25 basis points next month. Attention will now turn to US core PCE data tomorrow, the Fed’s preferred gauge for inflation, which is expected to tick higher to 2.9%.
Corporate news
Nvidia is falling over 1.5% after reporting earnings that exceeded forecasts but failed to impress investors. The AI bellwether posted EPS of $1.05, versus the estimated $1.01, on revenues of $46.74 billion, versus $4.06 billion forecast.
Nvidia’s earnings were the first test for investor appetite since the AI stock selloff earlier in the month, when tech stocks tumbled amid growing questions over AI companies being overvalued and after OpenAI CEO Sam Altman raised fears of an AI bubble. However, a $60 billion share buyback plan and CEO Huang’s comments about strong demand calmed worries over the AI trade.
Nvidia also forecast sales growth in Q3 ahead of expectations at $54 billion, although this figure doesn’t assume any H20 shipments to China. The H20 processor, which was custom-built for sales to China, is not expected to get a US license to ship, costing the chip giant $4.5 billion in write-downs.
In addition to the China issue, another point of concern for investors was data centre revenue, which missed estimates for a second straight quarter at $41.1 billion, versus $41.34 billion expected.
Nvidia, which trades up 35% YTD and tripled in value in 2024, trades lower post results. Given the high valuation heading into the earnings report, anything less than perfect would be punished by investors.
Nasdaq 100 forecast – technical analysis
The Nasdaq 100 trades within a rising channel dating back to early May. The price recently found support on the 50 SMA and the lower band of the channel, recovering higher. However, the RSI suggests that bullish momentum has been fading. Should momentum pick up, buyers will look towards 24k and fresh record highs. Support is at 23k, the 50 SMA and the lower band of the rising channel. A break below here creates a lower low.
FX markets – USD rises, EUR/USD falls
The USD is falling despite an upward revision to US GDP data and better-than-expected jobless claims. The data hasn’t changed Fed rate cut expectations. The mood is cautious ahead of tomorrow's core PCE data, which could provide further clues over the Fed's path for rates.
The EUR/USD is rising despite weaker-than-expected eurozone economic sentiment, which fell to 95.2 in August, down from 95.7 in July. Meanwhile, the minutes of the latest ECB meeting showed that policymakers were split over the outlook for inflation. While some argued that risks tilted to the downside owing to weaker growth prospects due to US tariffs, others warned risks could still be to the upside given uncertainties surrounding energy and currency movements.
The GBP/USD is rising, supported by fading expectations of a BoE rate cut. Yesterday, PPI data showed factory-level inflation rose at the fastest pace in two years in June. This comes after hotter-than-expected CPI data last week, adding to evidence that the central bank may not cut rates until February next year.
Oil slips after rising 1% yesterday
Oil prices are inching lower after gains of 1% in the previous session, weighed down by expectations of lower US fuel demand as the end of the summer driving season approaches and amid the restart of Russian supply to Hungary and Slovakia.
Crude oil prices rose almost 1% yesterday after data showed US crude inventories fell by 2.4 million barrels in the week ending August 22, compared to expectations for a 1.9 million barrel draw.
However, this coming weekend, Labour Day long weekend, is the unofficial end of the summer driving season ahead of lower US gasoline demand.
