This morning, the focus of Wall Street is on the technology sector and in particular industry behemoth NVIDIA (NVDA), which released its latest quarterly results after the close of trading yesterday afternoon. The semiconductor company reported adjusted fiscal third-quarter earnings per share of $0.81, on revenues of $35.08 billion. Wall Street was looking for earnings of $0.75 a share and revenues of $33.16 billion. The company also issued better-than-expected fourth-quarter guidance of $37.5 billion and in-line gross margin expectations. Management said demand for Blackwell, a graphics processing unit (GPU) microarchitecture developed by the company for artificial intelligence (AI) deployments at hyper scale, is robust, but the production and engineering costs of the chips will weigh on profit margins. NVIDIA also assured investors that its new product lineup can maintain the company’s AI-fueled growth run.
Shares of NVIDIA were initially down modestly on the report, but have since turned positive in pre-market action. This, along with the release of some economic reports (more below), is having a positive impact on the overall market, with equity futures firming as we head closer to the start of trading stateside.
We also heard from fellow tech companies Palo Alto Networks (PANW) and Snowflake (SNOW), and the reaction to those reports differed. Shares of Palo Alto are down in pre-market action after the technology company beat expectations on both the top and bottom lines, but the revenue beat was only modest and guidance was disappointing. The company also announced a two-for-one stock split, effective after the close of trading on December 13th. Conversely, Snowflake shares are surging in extended-hours trading, as the company handily beat forecasts for both revenue and profits. Investors also are reacting positively to news of Snowflake’s partnership with privately held Anthropic, which should enhance its capabilities.
Meanwhile, the economic schedule was rather light today. At 8:30 A.M., the Philadelphia Fed said that manufacturing activity in the greater Philadelphia area fell 5.5% last month, coming in far below the expectation calling for a gain of 8.2%. The Labor Department also reported that initial jobless claims for the week ending November 16th totaled 213,000, which was the lowest level since late April. The unemployment insurance figures, which did, however, show a rise in continuing claims, still suggest that the labor market is tight, despite monthly employment readings hinting at some signs of softness. The employment data, especially the upcoming November report, is likely going to play a big role in whether the Federal Reserve cuts the benchmark short-term interest rate by a quarter-point at the December Federal Open Market Committee (FOMC) meeting, which concludes on December 18th. The recent inflation data suggest some reacceleration in price growth, which could give the Fed some pause with regard to loosening the monetary reins, but Fed futures still predict a 25-basis-point reduction will occur next month.
Yesterday, Federal Reserve Governor Michelle Bowman said that the central bank’s progress on inflation has stalled, and that headline was a bit unsettling for the higher-growth stocks, with the NASDAQ Composite finishing nominally lower. The Dow Jones Industrial Average and broader S&P 500 Index, though, did record modest gains during yesterday’s choppy trading session. There was interest in the healthcare, materials, and energy groups. The energy sector got a boost from rising crude prices, which moved higher on geopolitical concerns intensifying in Eastern Europe, particularly on news of Ukraine firing U.S.-made long-range missiles into Russia. This brought some crude supply worries.
Later this morning, we will get the latest reading on existing home sales. The performance of the existing homes market has been hurt by a short supply of available homes for sale and stubbornly high mortgage rates. The recent concerns that inflation may reaccelerate, exacerbated by stronger than expected readings on October consumer and producer prices, is putting upward pressure on Treasury yields and this is keeping mortgage rates higher despite the Federal Reserve reducing the federal funds rate by three quarters of a percentage point this fall, to a range of 4.50% to 4.75%. We will hear more about monetary policy today, as we will get commentary from Cleveland President Beth Hammack and Kansas City President Jeffrey Schmid. – William G. Ferguson
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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