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“There is nothing more frightful than ignorance in action.” – Johann Wolfgang von Goethe
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s another quiet morning in the markets despite what has been a busy overnight session for earnings. Of the 33 companies that reported since the close yesterday, just six missed EPS forecasts. On the geo-political front, there have been some ripples as Mexico announced that it will increase tariffs on Chinese imports, while Japan’s trade representative has cancelled a planned trip to the US, which will further delay trade negotiations. Regarding the Fed, the only speaker on the calendar today is Governor Waller after the close.
The economic calendar is busy this morning. Q2 revised GDP came in at 3.3% vs forecasts for 3.1% while Personal Consumption and the GDP Price Index were right in line with forecasts. Initial Jobless Claims came in at 229K, which was 1K lower than estimates. Continuing Claims, which have been drifting higher lately, also came in lower than expected at 1.954 million versus forecasts for 1.966 million.
We made it through NVDA’s earnings report. The world’s largest publicly traded company released an uneventful earnings report last night, and while results were better than expected, that hasn’t been enough this earnings season to provide a meaningful boost to a stock’s price. In pre-market trading, NVDA is trading down less than 2%, which is basically a rounding error relative to the stock’s historical reaction to earnings. Over the last 25 years, NVDA’s average one-day reaction to earnings has been a gain or loss of just under 8%. Since the launch of ChatGPT, there have only been two other quarters out of 11 where the stock gapped up or down less than 2% in reaction to earnings, and today will likely be the third time in the last 12. For more than a week, all we heard about was the importance of NVDA’s earnings report and what it would mean for the market. Well, NVDA earnings came, and NVDA earnings went, and the most hyped earnings report in weeks has ended up being a non-event.
NVDA came into last night’s earnings report in a bit of a holding pattern after hitting record highs a couple of weeks ago. The stock has been gradually trending lower in the short term, but remains above its 50-DMA, so provided the stock doesn’t experience a significant move during the trading session, today’s action and last night’s report will have no impact on the stock’s technical picture.
There’s been a lot of talk over the last several weeks regarding rotation within the market, but strength at the top has been consistent. The ten largest stocks in the S&P 500 are up an average of 3.94% (median: 3.64%) so far this month, and just three are in the red. On a YTD basis, the ten stocks are up an average of 12.40% (median: 9.48%), and only two are down.
At the other end of the market cap spectrum within the S&P 500, the ten smallest stocks in the index are slightly underperforming the ten largest stocks this month on an average basis but outperforming on a median basis. Where the big discrepancy shows up is in the YTD column, where the average performance has been a decline of 13.75%, or a performance gap of more than 26 percentage points!
