This morning brought three noteworthy reports on the U.S. economy, with the headline release coming from the Commerce Department at 8:30 A.M. (EST) when we got the first revision to the fourth-quarter 2024 gross domestic product (GDP) estimate. The figure was unchanged, showing that output still expanded by an estimated annualized rate of 2.3% during the final three months of 2024. The reading also showed that the Personal Consumption Expenditures (PCE) Price Index rose by 2.4% (revised upward from the prior +2.2% reading), which was another indicator that inflation reaccelerated during the late fall/early winter months.
In a separate release, the Commerce Department reported that durable goods orders rose 3.1% last month, which was a big improvement over the 2.2% decline recorded in December. Finally, the Labor Department said that weekly jobless claims for the week ending February 22nd totaled 242,000, which was up 22,000 from the previous week’s revised tally and the highest level since last October. We will also get monetary and economic commentary from a number of Federal Reserve senior officials today. The equity futures, which were higher heading to the economic releases on fourth-quarter earnings data from Corporate America (see below), are still presaging a positive opening for the U.S. stock market when trading kicks off stateside. The Treasury yields did not move much on the data.
Since the close of trading last night, the attention of Wall Street has been on the latest quarterly release from semiconductor giant NVIDIA (NVDA), as it was expected to give insight into the state of the chip-making industry and whether the hyper-scaling technology companies focused on artificial intelligence (AI) are continuing to spend big on AI infrastructure buildouts, platforms, and products. On that front the quarterly report was favorably received. Specifically, NVIDIA reported that revenues and adjusted earnings per share rose 78% and 82%, respectively, to $39.33 billion and $0.89 during the fiscal fourth quarter (ended January 26th). Of note, data center revenues exceeded expectations ($35.6 billion versus $33.65 billion estimate), but the company issued lighter-than-expected gross margin guidance for fiscal 2025. Overall, the quarterly report contained bullish commentary from CEO Jensen Huang, especially with regard to the company’s ramp up of its Blackwell architecture. Mr. Huang said that AI is progressing at “light speed”.
NVIDIA was not the only prominent company to report results yesterday afternoon. Dow-30 member Salesforce (CRM) posted adjusted earnings per share of $2.78, which beat the consensus estimate of $2.62. However, revenues of $9.99 billion fell short of the consensus forecast of $10.04 billion, and the stock is lower in extended-hours trading. Likewise, shares of eBay (EBAY) are weaker after the online auction company beat earnings prognostications, but issued disappointing near-term guidance. Conversely shares of Snowflake (SNOW) are sharply higher in pre-market action after the cloud-based data warehouse provider handily beat expectations on both the revenue and earnings lines and announced a partnership with technology behemoth Microsoft (MSFT) that allows greater access to the OpenAI platform.
Outside of the technology space, Paramount Global (PARA) disappointed on both the top and bottom lines, and shares of the entertainment company are looking at a modestly lower start to the trading session. Fellow entertainment and video streaming company Warner Bros Discovery (WBD) also reported weak quarterly results, including a bottom-line loss of $0.20 a share. WBD stock, though, is looking at a nominally higher opening this morning.
In general, we have seen a pickup in stock market volatility this month, with uncertainty about near-term fiscal and monetary policies unnerving investors. This was on display again yesterday, with the major averages succumbing to some selling into the closing bell. The Dow Jones Industrial Average finished 188 points lower, while the NASDAQ Composite and the broader S&P 500 Index managed to hold narrow gains on the day.
With the Federal Reserve looking like it will remain cautious on the interest-rate front, as it further assesses the U.S. inflation situation, and the White House potentially implementing a series of reciprocal tariffs against several trading partners in the coming months, the selling has picked up in recent days. Over the last fortnight, the technology-heavy NASDAQ has been under pressure on these concerns, with many of the “Magnificent Seven” stocks in correction territory. Within that select group, which powered much of the stock market’s gains the last few years, the stock of electric vehicle maker Tesla (TSLA) has been the biggest laggard. Tomorrow morning, we will get a big reading on inflation when the Department of Labor releases its January data on personal income and spending. Within that report, Wall Street will be paying close attention to the latest PCE Price Index reading, which is the assessment of inflation most closely tracked by the Federal Reserve. –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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