Stocks ended on an up note Tuesday, with both the Nasdaq and S&P 500 closing at record highs, as investors looked ahead to AI chip giant Nvidia's first quarter earnings.
The S&P 500 rose 0.25% to 5,321.41, while the tech-heavy Nasdaq gained 0.22% at 16,832.62. The Dow Jones Industrial Average finished up 66 points, or 0.17%, to 39,872.99.
Meanwhile, Nvidia is scheduled to report first quarter earnings after the close of trading Wednesday.
Bespoke Investment Group said that if Nvidia meets its $24.7 billion sales estimates, year-over-year sales growth for the first quarter will more than 243% since the company only had sales of $7.2 billion a year ago.
"Sales growth of 243% is part of the reason why NVDA has a $2+ trillion market cap!" the firm said.
Bespoke said investor should "expect fireworks regardless of where the earnings numbers come in."
"Historically, NVDA shares have seen an average absolute move of +/-8.97% on Q1 earnings reaction days," the firm said. "If that "average" is met, NVDA will see its market cap swing by +/-$200 billion or so on Thursday."
Updated at 12:31 PM EDT
Tesla revs
Tesla (TSLA) shares jumped nearly 4% in mid-day trading after Morgan Stanley analyst Adam Jonas published a new report on the carmaker that argues Elon Musk "needs Tesla more than ever before.”
Jonas said Musk's AI-related ambitions, tied to the host of companies he runs, will increasingly rely on lower-cost capital that can only come from a successful Tesla.
“In addition to the cost of capital, we believe on a fundamental level that the data, infrastructure built and path to monetization within Tesla is critical to Musk’s seemingly ‘adjacent’ AI efforts," Jonas wrote.
Tesla shares were last marked 3.94% higher in afternoon trading and changing hands at $181.85 each.
Morgan Stanley reiterates their "overweight" rating on $TSLA. It's our #CallOfTheDay. Shareholder Bryn Talkington explains what she's looking for from the upcoming shareholder vote. pic.twitter.com/bwVU8cntES
— CNBC Halftime Report (@HalftimeReport) May 21, 2024
Updated at 10:25 AM EDT
New Blue
IBM (IBM) shares jumped 2.1% in early trading, extending their six-month gain to around 13%, after the cloud-focused tech group unveiled a deal with Saudi Arabia to train a new Arabic-language AI system.
IBM also opened its 'Granite' suite of AI models to company-specific customizing, providing a contrast to the closely-held systems of rival Microsoft MSFT.
7/ IBM is releasing its "Granite" family of AI models as open-source software.
— Lumida Wealth Management (@LumidaWealth) May 21, 2024
> $IBM will also help train the "ALLaM" Arabic language model for the Saudi Data and Artificial Intelligence Authorityhttps://t.co/b4eEtiSfdc
Updated at 9:38 AM EDT
Flat open
The S&P 500 was marked 5 points lower, or 0.09%, in the opening minutes of trading, with the Nasdaq falling 43 points, or 0.26%.
The Dow, meanwhile, was essentially unchanged from last night's 39,812 points close.
S&P 500 Opening Bell Heatmap (May 21, 2024)$SPY -0.12% 🟥$QQQ -0.36% 🟥$DJI +0.05% 🟩$IWM -0.26% 🟥 pic.twitter.com/73qhs3g10T
— Wall St Engine (@wallstengine) May 21, 2024
Updated at 9:10 AM EDT
Progress?
Federal Reserve Governor Christopher Waller told an event in Washington that the recent easing of inflation pressures suggests "further increases in the policy rate are probably unnecessary."
"The economy now seems to be evolving closer to what the Committee expected," Waller said. "Nevertheless, in the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy."
Fed's Waller:
— David Song (@DavidJSong) May 21, 2024
'The economy now seems to be evolving closer to what the Committee expected.
Nevertheless, in the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in…
Check back for updates throughout the trading day
Stocks were mixed at the close of trading Tuesday as well, with the Dow ending nearly 200 points lower and recording its worst day of the month following a 4.5% decline in shares of JPMorgan (JPM) .
Still, the market's key volatility gauge, the CBOE Group's VIX index, is trading near the lowest levels since the pandemic, suggesting little concern for geopolitical risks or major economic releases over the coming weeks.
The VIX index was last marked 4% higher in the overnight session at $12.47, a level that suggests traders are expecting daily swings of 0.78%, or 41 points, for the S&P 500 over the next month.
Nvidia's (NVDA) first quarter earnings, due after the close of trading Wednesday, could alter that dynamic, as Wall Street analysts continue to nudge their profit and outlook forecasts heading into the release.
"With investor expectations becoming ever more optimistic, any signs of cracks appearing in the demand profile could serve to cause an outsized upset in market performance whilst a continued bullish message could see US markets attain new highs," said Lindsay James, investment strategist at London-based Quilter Investors.
Tuesday's session, however, looks set for a muted open with futures contracts tied to the S&P 500 indicating a modest 5 point opening bell gain and those linked to the Dow Jones Industrial Average priced for a 28 point advance.
The tech-focused Nasdaq, meanwhile, is called 2 points lower following last night's 109 point gain.
Related: Analysts race to revamp Nvidia price targets ahead of earnings
Palo Alton Networks (PANW) were a notable early mover, falling nearly 8% in premarket trading, after the cybersecurity group issued a downbeat forecast that clouded its third-quarter earnings beat.
Lowe's Companies (LOW) rose 2.3% after the Home Depot (HD) rival posted stronger-than-expected fiscal-first-quarter earnings, despite a 4.1% decline in same-store sales and stuck to its full-year profit forecasts.
Macy's (M) tumbled 6.8% after the retailer posted stronger-than-expected fiscal-first-quarter profit but noted a 3.7% slide in overall sales and issued a muted near-term forecast.
Bitcoin prices were also on the move, rising to $71,700 each in the early session, amid speculation that opposition to an ether spot ETF from U.S. regulators is easing.
"The chance of approval remains low - just 10% by June, although year-end probabilities have ticked higher following a Coinbase analyst writing that the market may be 'underestimating the timing and odds of a potential approval," according to the Wintermute OTC Trading Desk.
In the bond market, benchmark 10-year Treasury note yields edged modestly higher in overnight dealing to change hands at 4.428% while 2-year notes held at 4.831%. The moves come ahead of the Philadelphia Fed activity index release at 8:30 a.m. U.S. Eastern Time.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.07% lower at 104.495.
More Wall Street Analysts:
- Analyst unveils new Nike price target ahead of big summer for sports
- Analysts weigh in on Google-parent Alphabet’s stock after cloud event
- Analysts revamp Disney stock price target after proxy fight
In overseas markets, Europe's Stoxx 600 was marked 0.46% lower in early Frankfurt trading, while Britain's FTSE 100 fell 0.4% in London.
Overnight in Asia, Japan's Nikkei 225 gave back earlier session gains to close 0.31% lower in Tokyo, while the regionwide MSCI ex-Japan benchmark fell 0.87% into the close of trading.
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