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Econ Data Cools Ahead of NVIDIA Earnings Next Week

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Friday, May 17th, 2024

In an eventful week for the markets, this morning we take a break. Aside from Leading Economic Indicators in the U.S. for April (expected to be down -0.3%, same as the previous month), we’ll hear from Fed Governor Christopher Waller after today’s open. But neither of these is expected to move markets on their own, or even collectively. We know this because the biggest news of the week — Wednesday’s Consumer Price Index (CPI) report — has already sent market levels toward near-record highs.

Yesterday, we closed lower on the major indices. However, this was after two pronounced higher closes on Tuesday — ahead of the CPI report — and Wednesday — afterward. Obviously, CPI showed slimming inflation figures month over month and over a multi-year read, which brought market participants to conclude that inflation is indeed being curbed. After a couple months of higher-than-expected inflation metrics — likely a wrinkle in the longer-term downward trajectory — there was finally some certainty regarding inflation levels.

You didn’t have to tell traders and investors twice. The moment the “soft landing” narrative resurfaced, bullish sentiment in the stock market commenced. This was backed by a lowering of bond yields, particularly on the 10-year (its lowest level in a month) and 2-year rates, which helped fuel the rally further. The Dow is up +1% from the start of the week, the S&P 500 +1.5%, the Nasdaq nearly +2% and the small-cap Russell 2000 +1.75%. Though yesterday was down a tad, we remain near all-time highs on all four indices.

The final “Magnificent 7” stock to report earnings happens next Wednesday, when NVIDIA (NVDA - Free Report) reports fiscal Q1 earnings. Despite the +95% growth year to date in the stock (and 200%+ from a year ago), NVIDIA remains a Zacks Rank #1 (Strong Buy), albeit with a Value score of F. This speaks directly to the pending ubiquity of AI technology, of which NVIDIA is positioned expertly — especially in terms of visual graphics, which is next-level AI. If you had bought NVIDIA five years ago — a year before peak pandemic — you’d be up +2300% right now. This is a common reason your financial advisor has a big smile on their face.

Aside from NVIDIA earnings next week, we’ll see New and Existing Home Sales numbers, S&P flash PMI Services and Manufacturing, Durable Goods and Weekly Jobless Claims. It’s clearly a slower time, as Q1 earnings season otherwise lowers to simmer.

We don’t get a new Fed meeting for another five weeks — so lower inflation metrics have that much time to shrink to levels sufficient for interest rates to lower — and even the next Jobs Week is three weeks away. The question now is: have market participants spent all their ammo driving indices higher, or will there be some other perceived good news to ingest before the summer months are upon us?

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