Markets Wait for NVIDIA Profits; TGT, WSM Report for the first quarter – May 22, 2024

Wednesday, May 22, 2024

Before the market opens, futures contracts are slightly in red at this time. While we’ve seen significant gains in all major indexes since the beginning of the month – the Dow +5%, the S&P 500 +5.3%, the small-cap Russell 2000 +5.7% and the Nasdaq +7% – it appears to be leveling off. has dropped slightly over the past week. The Nasdaq and S&P seem to be separating somewhat from the rest of the week-ago levels, but these big market gains seem to have stopped recently.

It is unlikely that we will see much impact on the market before today’s close. True, Fed Minutes from the last FOMC meeting on May 1 will be published today at 2:00 p.m., but based simply on the fact that the Fed has kept the funds rate unchanged at 5.25-5.50% for the last 10 months (and still rising), it should not expect that a very wide range of opinions will appear in the minutes. It is expected that the Fed will not present us with another schedule of possible interest rate cuts before the June meeting (19-20).

One thing we observed during this meeting was a measurable decline in securities holdings. From June, these amounts will increase from -$60 billion per month to -$25 billion per month. This process has reduced the Fed’s balance sheet from $8.95 trillion two years ago to $7.30 trillion today. (That’s still $3.2 trillion above pre-pandemic levels). The allowable retirement of mortgage-backed securities remains at -$35 billion per month.

We will find out after today’s opening Existing Home Sales numbers for April. Growth is expected to slow slightly to 4.21 million seasonally adjusted annual units from 4.19 million recorded in March. This figure was somewhat of a disappointment for the housing market, however, as February’s high of 4.38 million units seemed to have brought us out of a year-long slump. However, persistently high mortgage rates are holding back the growth of this market until rates start to fall.

NVIDIA (NVDA – Free Report) releases earnings after today’s close. Not only is it the most anticipated earnings report of the week, it’s also one of the most watched (and most talked about) reports of the entire earnings season each quarter, appearing prominently at the end of the reporting cycle. You’ve probably already heard about the massive profits and sales growth the company is expected to deliver (+400% profits, +230% revenues), which goes a long way to explaining the company’s still high valuation even after the share price has gone up 200% over the last year. But the proof is in the ass, as they say: we’ll be paying close attention to the results this afternoon.

Objective (plane ticket – Free Report reported a slight error in its first quarter results this morning. Earnings of $2.03 per share were 2 cents below the consensus estimate (representing $2.05 per share in the year-ago quarter), while revenue was in line with expectations at $24.53 billion. The company cited a recent theme among retailers: aversion to high consumer spending on food and household products.

We’ve seen price drops at places like Walmart (WMT – Free Report) and Costco (COST – Free Report), which is intended to strengthen Target’s future prospects. The stock had lost its total year-to-date gains at this time, -9% pre-market. For more information on TGT earnings, click here.

Williams-Sonoma (WSM – Free Report), however, shattered earnings estimates for the first quarter. Earnings of $4.07 per share were around the Zacks Consensus Estimate of $2.78, while revenue was in line with estimates of $1.66 billion. Same-store sales fell -4.9% in the quarter (see note on consumer spending in the target paragraph above), but were expected to decline -6.2%.

Full-year guidance has been confirmed for the parent company of Pottery Barn at West Elm, etc., and the company is currently on a six-quarter streak of earnings surprises. Shares are up +8% on this news, up 54% year-to-date.

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