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Q2

• EPS: $0.68 versus $0.64 estimate. Last year $0.27 last year.
• Revenue: $30.04 billion s$28.5 billion estimate. Last year $13.51 billion
• Data center: $26.3 billion versus $25.08 billion estimate
• adjusted gross margins and 75.7% versus 75.5% expected
• R&D expenses $3.09 billion versus $3.08 billion expected
• Adjusted operating expenses $2.79 billion versus expected $2.81 billion
• Adjusted operating income $19.94 billion versus $18.85 billion expected

October-Quarter Forecast:

• EPS: Estimate $0.71. The actual four times estimate comes in at $x.xx
• Revenue Pre-release estimate $31.7 billion (about 77% annual growth) The actual forward guidance estimate comes in higher at $32.5 billion
• The gross margin next quarter is expected at 75.5%.. The company says that gross margins expected to be in the mid 70% range.
• Company says that fiscal year operating expenses expected to grow in the mid to upper 40% range

Nvidia announced a $50 billion repurchase of shares.

Shares are volatile with shares currently down -7%

This article was written by Greg Michalowski at www.forexlive.com.

• US sells 5-year notes at 3.645% vs 3.642% WI
• Italy plans to confirm it will bring deficit-to-GDP below 3% in 2026
• EIA weekly crude oil inventories -846K vs -2265K expected
• Eight things to look for in the Nvidia earnings report
• SEC notifies NFT marketplace OpenSea that it’s likely to sue for securities law violations

Markets:

• Gold down $17 to $2507
• WTI crude oil down $0.78 to $74.75
• US 10-year yields up 1 bp to 3.84%
• S&P 500 down 0.6%
• USD leads, EUR lags

Angst was the theme in markets today, similar to in the countdown to Powell’s Jackson Hole speech. That meant buying the dollar and selling equities today with the market in suspense ahead of Nvidia earnings.

Newsflow was very light with the only notable event being the five-year auction. It was a touch soft and that was even with a concession leading up to the results. That said, there was a decent drop in yields following yesterday’s strong 2-year sale so it’s tough to make the case that Treasury demand is softening, despite the eye-watering auction sizes.

There was some US dollar selling into the fix as we approach month end but it was reversed shortly afterwards. The dollar buying continued until late in the day and accelerated on some heavy stock market selling. But when stocks bounced, there was some relief in FX as well.

The result of today’s trading is less-oversold dollar and the next cue will come from NVDA earnings and tomorrow’s initial jobless claims report.

This article was written by Adam Button at www.forexlive.com.

The major US indices are ending the day lower. For the industrial average, it’ snapped a 2- day record closing. The NASDAQ index fell -1.12% ahead of Nvidia’s earnings to be released at 4:20 PM ET. Nvidia shares closed down $-2.69 or -2.10%.

The final numbers for the major indices are showing:

• Dow industrial average -159.08 points or -0.39% at 41091.41.
• S&P index -33.60 points or -0.60% at 5592.19
• NASDAQ index -198.79 points or -1.12% at 17556.03

The small-cap Russell 2000 felt -14.36 points or -0.65% at 2188.65

After the close Salesforce announced

• Earnings-per-share 2000 $0.56 versus $2.36 estimate
• Revenues came in at $9.33 billion versus $9.23 billion estimate
• There was some softness in the forward guidance
• Shares are trading up 1.85% and volatile trading at $264.

CrowdStrike is also announcing its earnings:

• EPS $1.04 adjusted versus $0.97 expected
• revenues $963.9 million versus 960 million estimate
• Shares are trading at $268 up 1.4%

This article was written by Greg Michalowski at www.forexlive.com.

The economic calendar in the Asian Pacific session is light once again.

• Fedspeak will have Fed’s Bostic speaking at 6 PM. On Friday, in interviews with Bloomberg TV and CNBC, Bostic stated that he estimates the long-run Federal Reserve rate at 3%. He emphasized that the Fed’s next steps will be data-dependent, noting that inflation has decreased faster than expected, though underlying inflation remains concerning. Bostic highlighted solid business conditions, allowing the Fed to be patient as it seeks a calm and orderly return to a normalized policy stance. He mentioned that while the economy is in a relatively good position, the Fed must remain cautious, especially considering labor market dynamics. Although Bostic had previously indicated only one rate cut on the dot plot, he now suggests that it may be appropriate to consider easing sooner if data continues to show positive trends.
• Later at 9:00 PM ET, the ANZ Business Confidence index in New Zealand will be released. Last month the index came in at 27.1
• At 9:30 PM, the Australia Private Captial expenditures for the 2Q are expected to rise 1.0% vs 1.0% pior. Buildig Capex came in at 00.9% prior and Plant/Machinery Capex came in at 3.3%

Also after the close Nvidia will report earning. Adam does a great preview here.

A summary:

Q2 Expectations:

• EPS: $0.64 (adjusted) versus $0.27 last year
• Revenue: $28.5 billion versus $13.51 billion last year

AI Boom: Nvidia is a major beneficiary, with its market value expanding over nine times since end-2022.

Revenue Growth: Expected to post fourth consecutive quarter of triple-digit revenue growth; however, growth may slow over the next seven quarters due to tougher year-over-year comparisons.

October-Quarter Forecast:

• EPS: $0.71
• Revenue: $31.7 billion (about 77% annual growth)
• The gross margin next quarter is expected at 75.5%.

Investor Focus:

• Sustained AI demand indications
• Launch timeline for next-gen Blackwell AI chips, amid potential delays
• Potential impact of Blackwell delay could shift revenue to future quarters, boosting Hopper H200 chip sales.

Also after the close CrowdStrike and Salesforce will announce earnings:

Crowdstrike:

• EPS estimate $0.97 versus $0.74 last year
• Revenues: 958.3M versus 731.6 million last year

Salesforce:

• EPS Est.: $2.35 versus $1.89 last year
• Revenues 9.126B vs 8.603 billion last year

This article was written by Greg Michalowski at www.forexlive.com.

It’s a rare moment in global financial markets when everything hangs on a single earnings report. It’s been similar for the past few quarters for Nvidia but this one lands at a particularly quiet moment for broader markets and has taken on extra significance.

Here are some of the numbers to look for today but I would warn that on virtually every metric, the market expects NVDA to beat the ‘consensus’ and guidance. That’s just the way the game is played with a high-flying stock like Nvidia.

1) Nine percent

That’s the up-or-down implied move in Nvidia shares in the options market. That implies a $300 billion move in either direction, which is the market cap of McDonald’s or Pepsico. It’s a reminder of just how big Nvidia has grown.

2) 0.64

That’s the consensus on earnings per share. At an annualized rate, that puts the P/E at 49x, which isn’t a crazy valuation for a company that’s so hot.

3) $28.48 billion (guidance was $28 billion plus-or-minus 2%)

That’s the consensus revenue forecast. This is where it gets a bit tougher to justify the valuation. The company is operating at incredible margins but that’s a run rate of $114 billion per year. That has the company trading at 26x sales at a time when we don’t know how much competition is coming and how sustainable the investment from megacap tech will be. 75% margins are hard to sustain, especially when you’re not the one manufacturing the chips.

4) Full guidance

Here is what NVDA said in terms of guidance in the prior quarterly report:

Outlook
NVIDIA’s outlook for the second quarter of fiscal 2025 is as follows:

• Revenue is expected to be $28.0 billion, plus or minus 2%.
• GAAP and non-GAAP gross margins are expected to be 74.8% and 75.5%,
  respectively, plus or minus 50 basis points. For the full year, gross
  margins are expected to be in the mid-70% range.
• GAAP and non-GAAP operating expenses are expected to be
  approximately $4.0 billion and $2.8 billion, respectively. Full-year
  operating expenses are expected to grow in the low-40% range.
• GAAP and non-GAAP other income and expense are expected to be an
  income of approximately $300 million, excluding gains and losses from
  non-affiliated investments.
• GAAP and non-GAAP tax rates are expected to be 17%, plus or minus 1%, excluding any discrete items.

4) $31.69 billion

That’s the consensus for revenue in the subsequent quarterly report. I’d emphasize that matching this isn’t likely to be enough, it will need to be beaten substantially to generate further momentum in NVDA shares. The gross margin next quarter is expected at 75.5%.

5) $126

That’s the share price going into the report. That’s a nice bounce from the $90 level in early August. At the time, there was fear that megacap tech companies would indicate slower spending on chips but that never came to pass and shares have since rebounded, but not to the $140.76 high. Notably, it would take an 11% rally tomorrow to break the high.

6) $121.10 billion

That’s the current consensus for FY2025 and while we aren’t likely to get any guidance in that direction, the market will be scouring the report and comments from management on how likely that number is to be met or beat.

7) 76.4%

That’s the gross margin consensus for next year, which is somehow even higher than this year as Nvidia transitions to Blackwell chips. It’s possible they could beat that because they’re currently so far ahead of the competition and have incredible pricing power.

8) Timing

There are question about the delay of Blackwell deliveries and that could be a huge market movers. A slow rollout would substantially hurt the January and April quarters as customers wait for the new chip.

This article was written by Adam Button at www.forexlive.com.

The non-fungible token boom-and-bust is likely to go down in history as one of the all-time manias to go along with tulip bulbs and the dot-com bubble. It’s probably the single-most stark example of the post-pandemic excess and the base for it all was OpenSea, which was the main NFT marketplace.

Today, the SEC gave OpenSea a Wells notice that it will likely sue for securities law violations.

“By targeting NFTs, the SEC is diving into new, uncharted waters, with potentially harmful consequences for consumers, creators, and entrepreneurs alike,” OpenSea CEO Devin Finzer wrote in a blog post about the warning.

It does seem a bit rich to target this market place but the whole thing is a mess and there was obviously some money laundering going on.

This article was written by Adam Button at www.forexlive.com.

The Nasdaq is lagging, down about 1.6% as we wait for Nvidia earnings.

Chipmakers are near the bottom of the charts as they will trade in-line with NVDA tomorrow but Starbucks, Netflix and Tesla are also notable laggards.

One that’s worth highlighting in Costco, which hit an all-time high yesterday but is down nearly 3% today.

I don’t love the look at that chart and the company is trading at 50x earnings in a sign of some of the frothiness that’s out there.

The consensus earnings growth for the S&P 500 is 16% by year end 2025 to go along with 3% H2 growth and solid GDP in 2025. There is a lot that can go wrong with that considering stocks are already priced at 21x earnings.

The case for higher multiples is based on cost-savings due to AI and I can get on board with that thinking but if/when there are questions about the timeline, there could be some more pain. Moreover, September is a poor seasonal month so it’s tough to chase here.

Another worrisome sign for Nvidia is that we’ve seen other megacap stocks pullback in earnings season after meeting, or even beating, estimates. I suspect some of that was the macro backdrop in early August but it’s worth keeping in mind. As we’ve seen before the ‘consensus’ on NVDA is never what’s priced in.

Bob Elliott, formerly or Bridgewater, summarizes the outlook:

Long stocks today is not just a bet on a soft landing to come (that is already priced into the bond market and then some), but for an extraordinary growth outcome in the short-term and long-term.

Given these lofty expectations it’s not too hard to see disappointment ahead.

This article was written by Adam Button at www.forexlive.com.

It’s been a sensational run for the pound over the past three weeks, culminating in a two-year high yesterday. Profit taking is the theme today with GBP/USD down 80 pips to 1.3174.

Kier Starmer yesterday highlighted ‘painful’ choices that need to be made in the October 30 budget and that could have put a chill into the pound but it’s mostly tracked the risk trade. Today the Nasdaq is down 1.2% on angst ahead of Nvidia’s earnings.

The US dollar is also broadly weaker as the ‘US exceptionalism’ theme comes under pressure on signs that Fed will ease even with solid GDP growth.

This article was written by Adam Button at www.forexlive.com.

• Prior was 4.121%
• Bid to cover 2.41 vs 2.40 prior

The results are a tad worse than expected in the when-issued market but not meaningfully so. There was something of a concession in the past few hours but I still think you get a sign of relief here, though I’ll be watching closely.

This article was written by Adam Button at www.forexlive.com.

MUFG highlights that the Bank of Japan (BoJ) continues to signal potential rate hikes despite recent yen strength, with rising front-end yields expected to limit yen selling appetite.

Key Points:

• BoJ’s Stance: The BoJ has not shifted its monetary policy outlook despite recent market volatility and a significant drop in USD/JPY. Deputy Governor Himino reiterated that more rate hikes will be needed if economic conditions align with the BoJ’s forecasts.
• Market Reactions: The recent plunge in USD/JPY has not significantly altered the BoJ’s messaging. The 2-year Japanese Government Bond (JGB) yield remains below its highs from earlier in the year, suggesting potential for further yield increases.
• Rate Hike Expectations: With only 15 basis points of hikes priced in by March next year, MUFG considers this too low. A soft landing for the US economy could support one or two rate hikes by the BoJ, which could limit yen selling.

Conclusion:

MUFG believes the BoJ will likely maintain its rate hike trajectory despite recent yen strength, with rising front-end yields expected to curb further yen depreciation. The BoJ’s current communications are likely to reinforce this stance, maintaining a cautious but forward-looking approach to monetary policy.

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This article was written by Adam Button at www.forexlive.com.

Today we get the second in a trilogy of Treasury auctions this week. It’s a $70 billion sales of five-year year notes due at the top of the hour.

Yesterday the market was anxious about a two-year sale but it went surprisingly well and there was a big follow-through of bids afterwards. That led to broad USD selling and a bump in risk appetite.

The stakes appear to be lower today with the whole curve trading flat after an earlier decline in yields. Again though, the market will be tested with cash trading at 3.66%, or nearly 50 bps below the July auction level of 4.121%.

“One could argue the magnitude of the recent rally
necessitates a bit of a concession this afternoon,” writes BMO ahead of the sale. “Although the repricing to a
lower yield plateau certainly hasn’t been without fundamental backing, and is
consistent with the cyclical shift the market has long anticipated.”

They suggest a bias for a tail and highlight that only two auctions of 5s have stopped through this year while five have tailed by an average of 1.1 bps.

This article was written by Adam Button at www.forexlive.com.