General Market Analysis – 28/08/24

Markets Consolidate Ahead of Inflation Data and Nvidia Earnings – Nasdaq Up 0.16%

Global financial markets consolidated around recent levels yesterday as investors awaited upcoming US inflation data and key Nvidia earnings results later today. The three major US indices all edged higher, with the Nasdaq and S&P 500 both gaining 0.16%, while the Dow managed a modest 0.02% rise. US Treasury yields were mixed; the 2-year yield fell by 2.9 basis points to 3.905%, while the 10-year yield added 1.3 basis points, closing at 3.831%. The US dollar continued to decline, nearing annual lows, with the DXY closing at 100.55 in New York. Oil prices remained volatile, with Brent crude dropping 2.3% and WTI falling 2.4%, closing at $79.55 and $75.53 per barrel, respectively. Gold stayed close to record levels, inching 0.3% higher to close at $2,525 per ounce.

Nvidia in Focus for US Markets Today

While the upcoming US PCE data will undoubtedly influence markets later this week, there is no doubt that Nvidia’s earnings report today will significantly impact stock sentiment. The ‘magnificent seven’ tech giants have faced a challenging earnings season, especially given the high expectations. With Nvidia being the last of these to report, investors are bracing for volatility around the announcement. Options pricing suggests that traders are anticipating a potential 10% movement in Nvidia’s share price tomorrow. Given Nvidia’s current market cap of $3.1 trillion, this could result in a $305 billion swing. Considering that Nvidia now contributes nearly 5% to the S&P 500’s earnings and 7% of its market cap, the broader market impact could be substantial.

Inflation Data and Nvidia Earnings in Focus

Today’s macroeconomic calendar features two key updates that could drive market movements. Early in the trading day, the focus will be on the Australian markets as they receive the latest inflation data from the ABS. The expectation is for the CPI to show a 3.4% year-on-year increase, and any figure exceeding this could lead to renewed speculation about a potential rate hike from the RBA, potentially driving the Australian dollar higher. Later in the Asian session, FOMC member Christopher Waller is scheduled to speak during a visit to India, though most investors will be eyeing the US session, particularly the release of US Crude Oil inventories and Nvidia’s earnings report, which is set to follow shortly after the Wall Street closing bell.

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