The recent stock market rally came under pressure from some disappointing earnings reports (Footlocker / Peloton) ahead of Nvidia's highly anticipated earnings report. Investors hoped that Nvidia was able to buck the trend and rather weak sales of other chipmakers, and that the company remains highly optimistic about future revenues from demand for its market-leading AI chips.
European stocks benefited from worse-than-expected economic data, which made it clear that the eurozone economies and the U.K. economy are slipping into or remain in recession. The poor data fueled hopes that the ECB and BoE will not raise interest rates further and instead remain on a wait-and-see basis, knowing that an economy in recession has less consumer spending, which often leads to falling prices.
The U.S. economy remains more resilient – at least according to recent economic data. Investors still expect a more hawkish tone from Fed officials at the economic policy symposium in Jackson Hole, which begins Friday.
Nvidia has been the biggest positive driver for both the S&P 500 and Nasdaq 100 this year, and a further uptick in revenue guidance could lead to further gains for Nvidia and other AI stocks. However, after Nvidia's massive gains this year – hitting new all-time highs yesterday – Nvidia is already priced very expensively. Still, more optimism from CEO Jensen Huang could lead to even more buying in Nvidia. We see Nvidia near 1% in pre-market trading.
In Asia, Chinese mainland stocks were again under pressure, despite fresh signs of a profit rebound among the country's tech giants – such as Baidu.
The EUR and GBP fell sharply after very weak PMI data – the sell-off in EUR and GBP may continue as rate hike expectations continue to fall. Weakness in the EUR and GBP helped the JPY in particular, but also the USD.
The stronger USD put pressure on commodity prices. Oil prices fell to a 4-week low – also due to recession fears.
Weaker economic data, which is usually bad for economies and markets, could be positive in the medium term as deteriorating economic activity would signal the beginning of the end of monetary tightening.
We expect mixed markets today. Nvidia is likely to see additional buying before the release of results later today.
👁 ROB'S MARKET OVERVIEW:
August 23, 2023
🇺🇸 US Markets ↕️
Cyclical Stocks ↕️
Tech/Growth Stocks ↕️/↗️ (mixed; but Nvidia may continue to see buying – also helping other chip/AI stocks)
Financial Stocks ➡️/↘️
Defensive Stocks ➡️/↗️
Energy Stocks ↘️/➡️ (early losses, but downside limited – recovery)
Materials Stocks ➡️/↗️
JPY, USD ↗️
EUR, AUD ➡️/↘️
⚒ Commodity Markets ↕️
Oil prices ↘️/➡️/↗️ (range $78 – $80 for WTI)
Natural Gas prices ↕️
Metal prices ➡️/↗️
Precious Metal prices ➡️ (hovering near $1,900, potentially slightly higher)
⚡️Cryptos ➡️ (confidence in cryptos remains negative after recent losses)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)