Focus on labor markets
After a jumpy week, hopefully more clarity is coming.
Quick summary:
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Despite a strong earnings report with significant year-over-year growth in revenue and profits, NVIDIA's stock fell due to the earnings beat being slightly lower than the earnings beats in the previous quarters.
The broader market remained bullish, rallying despite NVIDIA's decline, supported by positive macroeconomic data including revised GDP growth and a drop in PCE inflation, indicating continued economic strength.
This week, attention turns to key labor market data, with the August jobs report due on Friday. This report will provide critical insights for the Federal Reserve ahead of their September meeting, influencing potential monetary policy adjustments.
On Saturday, in the paid section, we’ll provide a more detailed overview of what to expect in the month(s) to come. Don’t miss it.
The competition
As we step into a week filled with pivotal labor market updates, the stakes on our leaderboard are as high as ever. Let’s stay focused and make the most of the upcoming data to solidify our positions or advance in the rankings during this critical phase.
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Last week’s performance
NVIDIA stunned with a knockout earnings report, posting an EPS of $0.68 versus the expected $0.64, and a revenue jump to $30 billion, well over the forecast of $28.7 billion. These figures represented a whopping 120% increase in revenue and a 168% rise in profits year-over-year, accompanied by an exciting announcement of a $50 billion stock buyback. Despite these outstanding numbers, NVIDIA’s stock paradoxically fell by 8% post-announcement, a result of the earnings beat being "only" 5.6% above expectations, modest compared to previous quarters' double-digit surpasses.
This was partially reflected in the broader market, as we got a very jumpy two days afterwards. Buyers stepped in fueled by favorable macroeconomic data (plus the Friday close was likely driven by end-of-month flows): a revised Q2 GDP growth of 3%, up significantly from 1.6% in Q1, alongside a drop in PCE inflation to 2.5%. But the sellers were also present, particularly on Thursday, even though they never broke below Wed’s lows.
In this type of environment, you may be aware by now that the BASON fails to perform, so we had to book a loss last week. No big deal, obviously. We carry on, happily looking towards to this week.
Overall, last week's markets highlighted a curious mix of an extraordinary earnings performance from NVIDIA that failed to excite the market, alongside a broader economic optimism that kept the market buoyant and forward-looking. The question now is not if, but how high the markets can climb, with eyes on a possible SPX rally to 6000 by year's end.
Markets will resume today, after yesterday’s Labor Day closure, as the focus shifts to key labor market data this week. The release of the August jobs report on Friday will be particularly noteworthy, providing the Federal Reserve and market watchers with critical insights ahead of the Fed's September meeting. Preliminary indicators such as Wednesday's job openings and Thursday’s ADP employment report will set the stage, offering early glimpses into employment trends that are pivotal following last month’s unexpected rise in the unemployment rate. This uptick has sparked discussions about the economic trajectory and potential shifts in monetary policy, maintaining the narrative of a vigilant but optimistic market outlook.
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