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Markets Flat Ahead of Solid Q4 from NVIDIA

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Markets awaited the release of the latest Fed minutes today buoyed in the green across the board, but sank into the red over the following hour of trading. In the final minutes before the closing bell, indices came back from session lows. The Dow finished -83 points, -0.25%, while the S&P 500 closed -0.15%. On the other side, the Nasdaq gained +0.13% on the day, the Russell 2000 +0.07%. We’ll call this a flat trading day.

Minutes of the most recent Federal Open Market Committee (FOMC) meeting January 31-February 1 offered few surprises; although the Fed opted to lower its rate hike level to 25 bps, there were a “few” members advocating a 50 bps hike. The Fed also fully intends to continue raising rates until “substantially more evidence of progress across a broader range” of metrics is sustained. Nothing in these minutes pops out as much of a surprise, and we’re no longer looking at a “scary” Fed that treats the equities market as some sort of enemy.

The next opportunity to change this trajectory from the Fed comes this Friday, when Personal Consumption Expenditures (PCE) reports January results. Last time around, we saw core PCE year over year hit +4.4%, still more than double the Fed’s well-publicized optimal inflation level of +2%. This +4.4% number, by the way, came down 30 bps from the previous month’s figure, which happened to be the slowest decrease in more than a year. We should be able to tell whether this “mid-4%” is a true resistance level or a mere hiccup on the way down.

Beyond that, the opportunities that stick out ahead of the March 21-22 FOMC meeting are monthly jobs numbers from the Bureau of Labor Statistics on March 10th — a week later that normal — and Consumer Price Index (CPI) and Producer Price Index (PPI) results the following week. These numbers can remain stubbornly sticky or they could run (or be somewhere in between); either way, they have the potential to impact the Fed’s next decision to raise interest rates 25 bps (to 4.75-5.00%) or 50 bps (to 5.00-5.25%) one month from today.

After the market close, NVIDIA (NVDA - Free Report) reported Q4 earnings results that outpaced expectations on both top and bottom lines: earnings of 88 cents per share were 7 cents ahead of the Zacks consensus (though still down -33% from year-ago levels) while $6.05 in quarterly sales edged out the $6.01 billion expected. Its Data Center segment grew a higher-than-expected +11% in the quarter to $3.62 billion. Shares are up +7% in late trading, adding to their already astounding +42% gains year to date.

NVIDIA, which created the graphic processing unit (GPU) used in everything from video games to crypto, is also a major player in burgeoning Artificial Intelligence (A.I.), of which CEO Jensen Huang said today is at an “inflection point,” with “accelerated interest” going forward. For a time in 2022, NVIDIA shares were well off their normal, extremely high valuation levels; that window looks to be shut once again, with shares having doubled since October of last year.

Etsy (ETSY - Free Report) shares surged +5% immediately upon release of its Q4 results after the closing bell, even though the company broke its 10-quarter positive earnings surprise streak to 70 cents per share, from 82 cents expected and the $1.11 per share reported in the yer-ago quarter. Revenues came in well ahead of projections, however: $807 million from $754 million anticipated. The company did announce New Buyer Acquisitions +60% from pre-pandemic levels. Shares had already grown +13% year to date, and have modified to +4% in the after market.

eBay (EBAY - Free Report) also posted its Q4 earnings release this afternoon: earnings of $1.07 per share beat the Zacks consensus by 2 cents, while $2.51 billion in quarterly sales outpaced the $2.46 billion analysts were expecting. The company also guides earnings per share next quarter with the high end of the range 3 cents above the $1.06 per share analyst were predicting. Gross Merchandise Volume of $18.2 billion in the quarter was ahead of the $17.9 billion estimated. However, after experiencing a 2+% bump in late trading, shares are now -4% on the earnings news.

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