what to know this week

At the end of the trading week, shares have once again made new records.

Signs of easing inflation prompted markets to become more optimistic about the likelihood of a Federal Reserve interest rate cut and stocks rallied as a result, with all three major averages hitting record highs on Wednesday.

For the week, the Nasdaq Composite (^IXIC) rose more than 2% while the S&P 500 (^GSPC) rose more than 1.5%. The Dow Jones Industrial Average (^DJI) rose more than 1% to close above 40,000 for the first time on Friday.

In the coming week, Nvidia’s (NVDA) highly anticipated earnings results are expected to be a major catalyst for the markets. Investors will also keep an eye on results from Target (TGT), Palo Alto Networks (PANW), and Lowe’s (LOW).

This week is expected to be quiet on the economic front, with updates on activity in the manufacturing and services sectors as well as final readings of consumer sentiment for May also on tap. The minutes of the Fed’s May meeting are also expected on Wednesday afternoon.

April’s reading of the consumer price index showed that core prices, which remove the more volatile costs of food and gas, rose 3.6% from a year earlier – the lowest annual increase in three years. That prompted investors to look for two full interest rate cuts this year for the first time since early April.

The move brings the market in line with the Fed’s expectations of two or three interest rate cuts sometime this year. Brian Belsky, chief investment strategist at BMO Capital Markets, listed investors’ rapprochement with the Fed on interest rate cuts as a reason he supports his call for the S&P 500 to end 2024 at 5,600, which comes Friday. That’s an increase of less than 7% from the close.

For investors, the main question will be whether this bullish story is sustainable or whether the market will once again overshoot the Fed as it did in early 2024 when investors anticipated about seven interest rate cuts based on positive economic data. Was done. The first test will come on Wednesday with the release of minutes from the May meeting of the Federal Open Market Committee, which will provide an in-depth look at the discussions among officials.

“The minutes of the May FOMC meeting should sound more hawkish than Chair Powell’s press conference,” Michael Gapen, U.S. economist at Bank of America, wrote in a note to clients. “Although Powell indicated that the rate limit is high and that tapering is the appropriate response to preventing deflation, others on the committee were more concerned about whether the policy was doing enough.”

US Federal Reserve Chairman Jerome Powell holds a press conference at the end of the Federal Open Market Committee (FOMC) meeting in Washington, DC on May 1, 2024.  The Federal Reserve kept interest rates steady for the sixth consecutive meeting on May 1.  Keeping the level at a 23-year high to fight steep price rises.  At the end of the two-day meeting, the Fed kept the benchmark lending rate unchanged at 5.25-5.50 percent, citing

Fed Chairman Jerome Powell holds a press conference at the end of the Federal Open Market Committee meeting in Washington, DC on May 1, 2024. (SAUL LOEB/AFP via Getty Images) (Saul Loeb via Getty Images)

Belsky raised another forecast target on Friday after raising his year-end target. Binky Chadha, chief equity strategist at Deutsche Bank, raised her year-end target for the benchmark to 5,500 from 5,100. Citing strong earnings growth and improving macroeconomic outlook, Chadha said stocks may continue to rise.

“We see considerable progress being made across the earnings cycle,” Chadha said. “While all the growth may not be possible this year, we see market confidence in a sustained recovery through the end of the year, which “Supports equity multiples.”

AI leader Nvidia is set to report earnings after the closing bell on Wednesday, outdoing reports from the US tech giants. Expectations are once again skyrocketing for the chip maker. Analysts expect Nvidia’s earnings to surge more than 400% last quarter, while revenue is up 242%, according to Bloomberg consensus data.

For the second quarter, analysts are projecting earnings growth of more than 120% and revenue growth of nearly 100%.

“We leave enough room for NVDA to potentially post FQ1E (April) revenues up to $26B (Data Center ~$22-23B) and guide total revenues up to ~$27-28B (Data Center ~$25-26B) Let’s see — both are good “In our view, that’s enough to keep the stock higher,” UBS analyst Timothy Arcuri wrote in a note to clients previewing the earnings release.

The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California on February 11, 2015.  Nvidia Corp posted high quarterly results on Wednesday that beat Wall Street expectations, sending its shares soaring as the graphics chip maker tried to focus its attention on higher.  -End Automobile.  Nvidia is trying to expand its graphics technology beyond the sluggish personal computer industry with its Tegra line of chips for mobile devices and for cars.  Reuters/Robert Galbraith (United States - Tags: science technology business logo)The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California on February 11, 2015.  Nvidia Corp posted high quarterly results on Wednesday that beat Wall Street expectations, sending its shares soaring as the graphics chip maker tried to focus its attention on higher.  -End Automobile.  Nvidia is trying to expand its graphics technology beyond the sluggish personal computer industry with its Tegra line of chips for mobile devices and for cars.  Reuters/Robert Galbraith (United States - Tags: science technology business logo)

The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California on February 11, 2015. (Reuters/Robert Galbraith) (Reuters/Reuters)

The stock is up more than 86% in 2024 and up more than 200% in the past year as Nvidia kicked off the AI ​​hype train with its stellar earnings report in May 2023. Given how Nvidia’s stock has fared other potential AI plays and the broader market as a whole, all eyes will be on whether the company can once again live up to the hype.

“If [Nvidia] “Their deep, remarkable streak of beating estimates, raising guidance, and then raising guidance again next quarter could continue, meaning it could continue,” Steve Sosnik, chief strategist at Interactive Brokers, wrote in a research note Thursday. AI business can and will advance rapidly.” However, if there is even the slightest sign of weakness, the losses would be much greater than that stock alone.”

Nvidia’s update on its emerging technology demand comes at a critical time for the overall AI story. Increasingly, new companies across sectors are getting involved in AI trades.

Just last week, Dell shares rose nearly 10% as analysts at Morgan Stanley and Evercore ISI revealed bullish research on the company’s AI prospects.

The AI ​​business is already headed by popular names like Nvidia, Microsoft (MSFT), Alphabet (GOOGL), and Meta (META). Energy and utilities have been two of the best-performing sectors in the S&P 500 this year, both contributing more than 13%. While strategists have pointed to an uptick in trading in utilities (XLU), AI has also been a driver of enthusiasm. The same can be said for the Energi (XLE).

Research from Goldman Sachs’ equity strategy team led by David Kostin shows that mentions of AI increased in the first quarter amid “expanding AI business”. More than 66% of companies in the energy sector mentioned AI during their earnings calls this quarter, up from 19.1% last quarter.

Jack Manley, global markets strategist at JPMorgan Asset Management, said whether the AI ​​story has legs “may be one of the more important questions we have to ask.”

“Is this AI stuff the real deal or is it a flash in the plan?”. Manley told Yahoo Finance. “And I mean, frankly, the jury’s still out on whether this will fundamentally change the world or not.”

He added, “If the markets wake up to say, ‘Hey, maybe we got a little bit overexcited about this and maybe we pulled some of these earnings forward a little bit, and that’s reflected in those valuations.’ I think that’s where you’re likely to have a little bit of a volatile path.”

Earning: Palo Alto Networks (PANW), Trip.com (TRIP), Zoom (ZM)

Economic News: No notable economic news.

Tuesday

Earning: AutoZone (AZO), Macy’s (M), Xpeng (XPEV), Toll Brothers (TOL), Urban Outfitters (URBN)

Economic News: Philadelphia Fed non-manufacturing activity, May (-12.4 earlier)

Wednesday

Income: Nvidia (NVDA), Elf Beauty (ELF), Petco (WOOF), Snowflake (SNOW), Target (TGT), TJX (TJX), Williams-Sonoma (WSM),

Economic News: MBA mortgage applications, May 17 (+0.5% earlier); Month-on-month existing home sales, April (0% expected, -4.3% earlier); FOMC meeting minutes

Thursday

Earning: BJ’s (BJ), Deckers Brands (DECK), Intuit (INTU), Polestar (PSNY), Ralph Lauren (RL), Ross Stores (ROST), TD Bank (TD), Workday (WDAY)

Economic News: Chicago Fed Net Activity Index, April (0.15 earlier); Initial jobless claims, week ending May 18 (222,000 first); S&P Global US Manufacturing PMI, May preliminary (50 first); S&P Global US Services PMI, May preliminary (51.3 earlier); S&P Global US Composite PMI, May preliminary (51.3 earlier); Month-on-Month Existing Home Sales, January (5.0% expected, -1% earlier)

Income: No notable earnings.

Economic News: Durable goods orders, preliminary April (0% expected, 0.9% pre); University of Michigan Consumer Sentiment, May Final (67.6 Expected, 67.4 Earlier)

Josh Schafer is a reporter for Yahoo Finance. follow him on x @_joshschafer,

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