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Nvidia earnings, Fed minutes, UK inflation - what's moving markets

Published 05/22/2024, 03:58 AM
Updated 05/22/2024, 04:14 AM
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Investing.com -- Earnings from tech giant Nvidia are in the spotlight Wednesday, as investors look to see whether the stock's elevated valuation can be justified The minutes from the last Federal Reserve meeting also loom large, while U.K. inflation fell by less than was expected in April. 

1. Nvidia earnings in spotlight

The day’s highlight is the long-awaited earnings report from semiconductor bellwether Nvidia (NASDAQ:NVDA) after the close Wednesday, with these numbers widely seen as a barometer for the burgeoning artificial intelligence industry.

Investor enthusiasm over all-things AI has helped the tech-heavy Nasdaq Composite index climb close to its all-time high, up more than 12% this year.

Nvidia’s earnings are likely to impact the share prices of AI-related companies - such as Super Micro Computer (NASDAQ:SMCI), Advanced Micro Devices (NASDAQ:AMD), Arm Holdings (NASDAQ:ARM) and Palantir Technologies (NYSE:PLTR) - but will also have an outsized influence over broader markets given it is now the third-biggest U.S. company by market value, trailing only Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL).

Robust earnings from Nvidia could help justify stock market valuations that have grown stretched in recent months. 

“We expect NVIDIA to beat and raise in the April quarter, albeit not reaching the levels of the January quarter, due to improved supply and anticipated year-over-year deceleration from tougher comparisons,” said analysts at Rosenblatt, in a note dated May 20.

“We expect volatility into this week’s print but are nonetheless positively biased on a story that is increasingly resonating with the best secular idea in all of technology.”

2. Fed minutes to offer interest rate clues

Minutes from the Federal Open Markets Committee's most recent meeting are due to be released later in the session, and they will be parsed for clues regarding timing and extent of policy-easing this year.

Last week’s cooler-than-expected U.S. CPI release has calmed nerves about the Federal Reserve keeping rates higher for longer, but this release followed the Fed meeting that these minutes represent.

Fed officials have continued to warn about inflation risks, creating a degree of uncertainty over when the Fed will start cutting this year, if at all.

Fed Governor Christopher Waller on Tuesday said recent economic data indicates the Fed's restrictive policy is working as directed, while Atlanta Fed Chair Raphael Bostic said the central bank needs to exercise caution ahead of its first rate cut to lead to pent-up spending and send inflation "bouncing around."

3. Futures little changed ahead of Fed minutes

U.S. stock futures traded largely unchanged Wednesday, amid caution ahead of the release of the minutes from the Federal Reserve’s last meeting as well as results from market favorite Nvidia. 

By 04:05 ET (08:05 GMT), the Dow futures contract was 13 points, or 0.1%, lower, S&P 500 futures dropped 2 points, or 0.1%, while Nasdaq 100 futures rose by 6 points, or 0.1%.

The main Wall Street indices close higher on Tuesday, with the S&P 500 and the NASDAQ Composite registering new record-setting closes.

In the corporate sector, Nvidia’s numbers will be the highlight, and earnings are also due from the likes of Target (NYSE:TGT), Analog Devices (NASDAQ:ADI), TJX (NYSE:TJX) and Raymond James (NYSE:RJF). 

Elsewhere, Urban Outfitters (NASDAQ:URBN) stock rose over 6% after the clothing retailer beat expectations on the top and bottom line in its latest quarter, while homebuilder Toll Brothers (NYSE:TOL) gained 1% after raising its full-year delivery guidance.

4. UK inflation falls by less than expected

Inflation in Britain fell by less than expected in April, disappointing investors who were looking for the Bank of England to cut interest rates next month and suggesting that global inflationary pressures may prove tricky to tame.

Consumer prices rose by an annual 2.3%, down sharply from a 3.2% increase in March and its lowest since July 2021 when it stood at 2.0%, the Office for National Statistics said. But still above the 2.1% forecast.

Services inflation - a key gauge of domestically generated price pressure for the BoE - was much higher than expected, at 5.9% from 6.0% in March, above the expected reading of 5.5%.

Economists had widely expected a sharper drop in inflation, citing a 12% drop in regulated household energy tariffs that took effect last month.

After Wednesday's inflation figures for April, there will be a set of official labor market data and May's inflation release before the BoE's next scheduled policy announcement on June 20.

The Bank of England is widely expected to cut interest rates this summer, but August is more favored as the start of the cutting cycle, rather than June.

5. Crude fell after US inventories build

Crude prices fell Wednesday, retreating for the third straight session on U.S. interest rates jitters as well as an unexpected build in U.S. inventories.

By 04:05 ET, the U.S. crude futures traded 1.2% lower at $77.74 a barrel, while the Brent contract dropped 1.1% to $81.94 per barrel.

Data from the American Petroleum Institute showed on Tuesday that U.S. oil inventories unexpectedly grew by 2.5 million barrels last week, raising some concerns over sluggish U.S. oil demand, with the upcoming Memorial Day holiday marking the traditional start of the travel-heavy summer season.

Official inventory data from the Energy Information Agency are due later in the session. 

A string of cautious statements from Federal Reserve officials this week also weighed on sentiment, as markets feared that high-for-longer U.S. rates will eat into demand this year. 

 

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