This morning, we received a few reports on the U.S. economy, and they, along with some corporate earnings news (more below), are having a positive impact on trading. At 8:30 A.M. (EDT), the Commerce Department reported its second revision of the estimated second-quarter gross domestic product (GDP). The figure was revised higher, from 2.8% to 3.0%, and included increases in consumption and the price index. Overall, this does not change the narrative that the U.S. economy performed well during the three-month period. That, along with some better-than-expected July economic data, quelled some worries about the economy slowing notably during the second half of this year. Meanwhile, the Labor Department reported that initial jobless claims for the week ending August 24th totaled 231,000, which was down 2,000 from the prior-week’s revised tally. Overall, the equity futures, which were higher on corporate news, took another step up on the economic releases.
Today’s economic reports come ahead of tomorrow’s much-anticipated report on the Personal Consumption Expenditures (PCE) Price Index, which is the assessment of inflation most closely watched by the Federal Reserve. That report could be a market-moving event.
Turning to the corporate world, all eyes yesterday afternoon were on the latest quarterly results from NVIDIA (NVDA). That is because the NVIDIA results could have an impact on trading not only today but in future weeks. Specifically, the semiconductor giant reported adjusted earnings per share of $0.68, on a record (+122% year over year) increase in revenues. Those results outpaced Wall Street’s forecasts, but the earnings beat did narrow from previous quarters. The semiconductor company also raised its third-quarter revenue guidance, to $32.5 billion, but that would represent the smallest sequential increase in some time. NVIDIA shares are trading lower in what may be a case of Wall Street wanting even more than the impressive results the company produced.
The NVIDIA report has become the most important corporate earnings report for Wall Street, as it serves as a guide to the overall health of the semiconductor industry and the burgeoning artificial intelligence (AI) space. Some of the other prominent AI-focused semiconductor stocks are looking at modestly lower openings today on the NVIDIA news.
There were a few other noteworthy corporate reports released since yesterday’s closing bell. In particular, investors are cheering the latest quarterly results from Dow-30 component Salesforce (CRM), and that stock is lifting the fortunes of the Dow Jones Industrial Average The customer-management software developer reported better-than-expected adjusted earnings per share of $2.56, on a top-line increase of 8.0%. Salesforce reaffirmed its full-year guidance, but lowered its current quarter expectations. After today’s closing bell, we will receive the latest quarterly results from computer giant Dell Technologies (DELL), another report of interest on the technology industry. Fellow computer and printer maker HP Inc. (HPQ) reported disappointing results yesterday afternoon and its shares are down in pre-market action.
CrowdStrike (CRWD) and Affirm Holdings (AFRM) are on the radar of investors this morning after reporting financial results yesterday afternoon. CrowdStrike reported better-than-expected adjusted earnings per share of $1.04, on revenues of $964 million. The stock, which fell sharply on July 19th following news of an Internet outage connected to the company’s widely used software, is giving some more ground as the subscription growth impact from the outage is expected to continue in future quarters. Affirm Holdings, the provider of a payment network that empowers consumers and helps merchants drive growth, reported strong top-line results and a narrower-than-expected share loss. Its stock rallied notably in after-hours trading yesterday on prognostications that the company is close to delivering a quarterly profit. On the retailing front, Best Buy (BBY) reported better-than-expected revenue growth last quarter, and the stock is looking at a nicely higher opening today. Conversely, shares of Dollar General (DG) are tumbling after the discount retailer reported disappointing results and reduced its forward guidance.
Overall, the major equity averages have traded in a relatively tight band thus far this week ahead of the aforementioned NVIDIA report and the personal income and spending report. The indexes, though, remain on pace to break a two-week winning streak. The Labor Department report is very important to the Federal Reserve because, as noted, it includes the PCE Price Index. That data will show if more progress has been made on the inflation front and, if so, the central bank will be positioned to pivot on the monetary policy front and begin reducing the federal funds rate at next month’s Federal Open Market Committee (FOMC) meeting. The Wall Street consensus is that the PCE and the core PCE, which excludes the more-volatile food and energy components, rose 2.5% and 2.7%, respectively, on a 12-month basis in July. – William G. Ferguson
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
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