Nvidia takes breather despite another beat

On Tuesday, US equities experienced a slight decline, with the S&P 500 slipping 0.2% and the Dow Jones losing 62.75 points. The subdued market environment was attributed to a light news day and a holiday-shortened week, following Monday’s robust gains. Weaker-than-expected quarterly results from major retailers, such as Kohl’s and Lowe’s, raised concerns about consumer spending, contributing to a pullback in the S&P 500 and Nasdaq Composite, which both dropped for the first time in six days. European equity markets also showed limited movement, staying close to recent highs.

Summary for 22.11.2023

Asian equities displayed mixed performance on Wednesday as the US Federal Reserve’s indication of maintaining restrictive monetary policy without signalling imminent interest rate cuts led to caution. Japanese equities rebounded from a two-day decline, while technology shares faced losses in other markets, particularly those connected to Nvidia Corporation, which warned of a substantial revenue drop in China, impacting suppliers across the region.

European shares are poised for a muted opening after underwhelming results from chipmaker Nvidia weigh on US equity futures, impacting global tech shares.

Oil markets remained steady this morning as the market awaited news on the supply front. The OPEC+ producers' group is expected to discuss potential output cuts on Sunday, while concerns loom over a significant build-up in US crude stocks.

The Israeli government agreed to a four-day cease-fire in Gaza if Hamas releases 50 hostages captured last month, with Israel offering to exchange around 150 Palestinian prisoners. The deal, mediated by Hamas and Qatar, awaits enactment pending potential legal challenges to the prisoner release, and during the cease-fire, fighting would stop, Israeli troops would maintain their positions, and certain restrictions on surveillance and civilian movement in Gaza would be observed.

Minutes from the last FOMC meeting concluded on November 1 revealed unanimous agreement among participants that the Fed should proceed cautiously, with policy decisions contingent on incoming information and its impact on the economic outlook. The minutes highlighted a readiness for further tightening if progress toward the inflation objective was inadequate, acknowledging that inflation remained well above the 2% longer-run target.

Nvidia Corporation reported strong quarterly earnings, but its warning of a severe downturn in Chinese revenue due to US curbs on chip exports led to losses in technology shares across Asia. Despite the overall slip, Nvidia shares beat expectations, and the company forecasted December quarter revenue above market expectations, citing increased demand from artificial intelligence development, which partially offset concerns about its China exposure. Shares fell 1.7% in post-market trading.

Sam Altman, members of the OpenAI board and the company’s interim chief executive officer have opened negotiations aimed at a possible reinstatement of the ousted CEO at the artificial intelligence startup he co-founded.

Lowe’s shares slipped 3.1% on Tuesday as the company reduced its annual same-store sales projection, citing a greater-than-expected pullback in DIY discretionary spending amid inflation concerns. Despite a third-quarter profit beat driven by easing supply chain costs, Lowe’s trimmed its annual earnings target, emphasising its vulnerability to a cautious consumer approach to big home remodelling and discretionary projects.

Kohl’s shares dropped 8.6% yesterday after the department store chain reported third-quarter results, with same-store sales and net sales missing Wall Street expectations. The market reaction reflects concerns about the company’s near-term topline performance, despite a better-than-expected EPS beat driven by improved gross margin and expense control.

UBS increased its price target on Ferrari from $380 to $417, indicating over a 16% potential return, citing the luxury carmaker’s strong defensive position in the face of economic uncertainty and downturns in the luxury market. The optimistic outlook is supported by Ferrari’s deep customer connections, a robust order book extending into fiscal year 2025, and confidence in the company’s ability to outperform despite economic challenges.

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