close
close

Nvidia’s collapse increases market uncertainty; Federal Reserve Inflation Index Ahead – The UBJ – United Business Journal

Posted on by darion

Market results and trends:
Last week, the stock market saw mixed movements in the main indices. The Dow Jones Industrial Average led with a gain of 1.45%, returning above its 50-day moving average and hitting a one-month high. In contrast, the S&P 500 posted a more modest gain of 0.6%, while the Nasdaq Composite ended the week with marginal gains.

In terms of sectors, the differences were noticeable. Semiconductor stocks, especially artificial intelligence (AI) stocks such as Nvidia, Broadcom, Taiwan Semiconductor and Micron, have been volatile. Nvidia, in particular, saw a reversal from record highs, pointing to potential profit-taking after significant recent gains. On the other hand, large-cap stocks such as Meta Platforms (formerly Facebook) and Amazon have shown strength, creating potential buying opportunities.

Upcoming earnings reports:
One of the key events of the coming week will be Micron Technology’s financial report on its third quarter financial results, scheduled for Wednesday. Analysts expect Micron to report earnings per share of 42 cents, a significant improvement after six straight quarters of negative earnings growth. The revenue forecast of $5.82 billion reflects solid growth of 58% from the prior quarter, driven by strong demand in the memory chip sector. Micron’s gains will not only weigh on its stock, but also provide insight into broader trends in the semiconductor industry, impacting related sectors such as chip equipment makers.

Additionally, companies like Carnival, FedEx and Nike are also expected to announce earnings. These reports are crucial because they provide insight into consumer spending trends and broader economic conditions. Investors will be watching these reports closely for signs of economic resilience or potential weaknesses.

Federal Reserve and Inflation Outlook:
Market attention will also focus on Friday’s release of the Commerce Department’s headline personal consumption expenditures (PCE) price index. The core PCE index is the Federal Reserve’s preferred measure of inflation. Economists forecast a relatively moderate reading in May. Current market expectations place the Fed at 65% likely to cut rates in September, with further cuts expected in 2024 if inflation remains low.

Technical market indicators:
Technically, the Nasdaq and S&P 500 remain near their all-time highs despite recent volatility. For example, the Nasdaq is currently trading about 6.7% above its 50-day moving average, up from 8.3% earlier in the week. This minor phase of pullback or consolidation, especially for AI and semiconductor stocks, could potentially be healthy for the market, allowing for a reset and a possible continuation of the uptrend.

Meanwhile, the 10-year Treasury yield rose four basis points to 4.26% last week, reflecting current market expectations and economic sentiment. U.S. crude oil futures also saw a significant gain of 3.4% to close at $80.73 a barrel on strong demand and geopolitical factors impacting energy markets.

Actions to watch:
Investors will be closely monitoring several key companies:

  • Nvidia (NVDA): Nvidia shares saw a 5% decline last week to $126.57, rebounding from a recent intraday high of $140.76. Despite this retreat, Nvidia remains well above its 50-day moving average, indicating the potential for consolidation or further price correction.
  • Metaplatforms (META): Meta Platforms, formerly known as Facebook, fell 1.9% to $494.78 last week. The company’s stock is currently forming a cup-and-handle pattern, with a potential buy point at $414.01 on a cup-and-handle base. Investors are closely watching a break above this level.
  • Amazon (AMZN): Amazon shares rose nearly 3% last week to $189.08, rebounding from their 50-day moving average. It is currently forming a flat base with a buy point at $191.70, which represents another potential entry opportunity.
  • Nu Holdings (NU): Nu Holdings rose 4.2% to $12.25, hitting a record close after weeks of tight trading. The Brazilian digital bank establishes a flat base with a buy point at $12.49, making this stock of interest for breakout potential.

Market strategy and conclusions:
In summary, while the overall market remains near record highs, investors should remain cautious given the current volatility and moves specific to the sector. This may not be an ideal time to significantly increase your exposure, barring carefully selected swing trades or breakout opportunities in specific stocks. Monitoring earnings reports, economic data releases and technical indicators will be crucial to making informed investment decisions in the week ahead. Staying up to date with analysis from reputable sources like Investors Business Daily (IBD) can provide valuable insights and tips on how to effectively navigate market uncertainty.