Stocks Mixed Ahead of Nvidia’s Earnings and Outlook

The S&P 500 Index ($SPX) (SPY) today is down -0.02%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.11%. 

US stock indexes today are mixed, with the Nasdaq 100 climbing to a new record high.  Rising global bond yields are weighing on the broader market today.  UK and German 10-year yields rose to 2-1/2 week highs after consumer prices in the UK slowed less than expected last month, raising questions about when the Bank of England can start cutting interest rates. Also, Q1 wages rose more than expected in Germany, prompting the Bundesbank to warn about persistent price pressures in the service sector.

However, a +7% rally in Analog Devices today is leading chip stocks higher and helped push the Nasdaq 100 to a new all-time high.  The markets are eagerly awaiting earnings results from Nvidia after the close today and its outlook to gauge if demand for the company’s AI chips will remain robust.

The markets are looking ahead to today’s April 30-May 1 FOMC meeting minutes to see how close the Fed is to cutting interest rates. 

Generally positive Q1 earnings results are supportive of stocks.  Q1 earnings are expected to climb +7.1% y/y, well above the pre-earnings season estimate of +3.8%.  According to data compiled by Bloomberg Intelligence, about 81% of reporting S&P 500 companies have beaten Q1 earnings estimates. 

US weekly MBA mortgage applications rose +1.9% in the week ended May 17.  The mortgage purchase sub-index fell -1.2%, and the refinancing mortgage sub-index rose +7.4%.  The average 30-year fixed rate mortgage fell -0.07 bp to 7.01% from 7.08% in the prior week.

US Apr existing home sales unexpectedly fell -1.9% m/m to 4.14 million, versus expectations of an increase to 4.23 million.

The markets are discounting the chances for a -25 bp rate cut at 5% for the June 11-12 FOMC meeting and 23% for the following meeting on July 30-31.

Overseas stock markets today are mixed.  The Euro Stoxx 50 fell to a 1-1/2 week low and is down -0.50%. China's Shanghai Composite closed up +0.02%.  Japan's Nikkei Stock Index closed down -0.85%. 

Interest Rates

June 10-year T-notes (ZNM24) today are down -4 ticks.  The 10-year T-note yield is up +1.2 bp to 4.424%.  June T-notes today fell to a 1-week low, and the 10-year T-note yield climbed to a 1-week high of 4.459%.  Today’s economic news shows sticky UK consumer prices and rising wage pressures in Germany, which has pushed European government bond yields higher and is weighing on T-note prices.  Also, supply pressures are undercutting T-notes as the Treasury will auction $16 billion of 20-year T-bonds later today.  T-notes recovered from their worst levels after US Apr existing home sales unexpectedly declined, a dovish factor for Fed policy. 

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 2-1/2 week high of 2.565% and is up +2.6 bp to 2.525%.  The 10-year UK gilt yield rose to a 2-1/2 week high of 4.253% and is up +10.6 bp to 4.237%.

Eurozone Apr new car registrations rose +13.7% y/y to 914,000, the largest increase in 6 months.

UK Apr core CPI eased to +3.9% y/y from +4.2% y/y in Mar, higher than expectations of +3.6% y/y.  Also, the UK Apr services CPI eased to +5.9% y/y from +6.0% y/y in March, which was higher than the expectations of +5.4% y/y.

In its monthly report released today, the Bundesbank reported negotiated Q1 pay raises in Germany rose +6.2%, well above expectations of +4.8%. The Bundesbank said, " As a result, still-high price pressure on services could persist for longer.”

ECB President Lagarde said there's a "strong likelihood" of an ECB interest rate cut on June 6, saying, "I'm really confident that we have inflation under control.

ECB Governing Council member and Bundesbank President Nagel said, "Even if the ECB lowers rates for the first time in June, that does not mean we will cut rates further" in subsequent meetings.

US Stock Movers

Target (TGT) is down more than -7% to lead losers in the S&P 500 after reporting Q1 adjusted EPS of $2.03, weaker than the consensus of $2.05, and forecasting Q2 adjusted EPS of $1.95-$2.35, the midpoint below the consensus of $2.19. 

Lululemon Athletica (LULU) is down more than -7% to lead losers in the Nasdaq 100 after announcing chief product officer Sun Choe was leaving, prompting Raymond James to say the departure adds to the company’s “wall of worry” in the near term. 

Garmin Ltd (GRMN) is down more than -5% after Bank of America downgraded the stock to underperform from neutral with a price target of $150.

Homebuilding stocks are moving lower today after US Apr existing home sales unexpectedly declined.  Toll Brothers (TOL) is down more than -7%.  Also, Lennar (LEN) and PulteGroup (PHM) are down more than -3%.  In addition, DR Horton (DHI) is down more than -2%.

Tesla (TSLA) is down more than -2% after the European Automobile Manufacturers’ Association reported Tesla’s Apr Eurozone registrations fell -2.3% to 13,951 vehicles, a 15-month low. 

Viasat (VSAT) is down more than -13% after reporting an unexpected Q4 loss of -24 cents EPS versus expectations of a +48 cent EPS profit. 

Modine Manufacturing (MOD) is down more than -8% after reporting Q4 net sales of $603.5 million, below the consensus of $605.6 million, and forecasting 2025 adjusted EPS of $3.55-$3.85, the midpoint weaker than the consensus of $3.80.

Analog Devices (ADI) is up more than +7% to lead gainers in the Nasdaq 100 after reporting Q2 revenue of $2.16 billion, higher than the consensus of $2.11 billion, and forecasting Q3 revenue of $2.26 billion-$2.28 billion, stronger than the consensus of $2.17 billion. 

Dycom Industries (DY) is up more than +8% after reporting Q1 adjusted Ebitda of $130.9 million, stronger than the consensus of $123.8 million.

TJX Cos (TJX) is up more than +6% after reporting Q1 net sales of $12.50 billion, better than the consensus of $12.46 billion, and raising its full-year EPS forecast to $4.03-$4.09 from a previous estimate of $3.94-$4.02. 

Electronic Arts (EA) is up more than +3% after Bloomberg Intelligence said the company’s 2025 bookings could top consensus expectations on robust game EA Sports FC 24 sales and live-services spending.

Ametek (AME) is up more than +2% after Oppenheimer upgraded the stock to outperform from market perform with a price target of $200.

Stryker (SYK) is up more than +1% after Needham & Co upgraded the stock to buy from hold with a price target of $392.

Prudential Financial (PRU) is up more than +1% after Jeffries upgraded the stock to buy from hold.

Earnings Reports (5/22/2024)

Analog Devices Inc (ADI), NVIDIA Corp (NVDA), Petco Health & Wellness Co Inc (WOOF), Snowflake Inc (SNOW), Synopsys Inc (SNPS), Target Corp (TGT), TJX Cos Inc/The (TJX), VF Corp (VFC), Williams-Sonoma Inc (WSM).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.