All roads lead to Nvidia today, as the GPU manufacturer whose chips are driving the AI revolution is expected to report Q2 earnings after markets close this evening. In recent quarters Nvidia has blown past consensus forecasts and guided higher on revenues, which explains its 689% stock price gains over the last two years.
This quarter could be different amid concerns that production delays of the firm’s new Blackwell chips could hamper guidance. However, many brokers remain upbeat, as demonstrated by this quote from a recent Goldman Sachs note on the stock:
“While the reported delay in Blackwell (ie next-generation GPU architecture) could lead to short-term volatility in fundamentals, we expect management commentary coupled with supply-chain data points over the coming weeks to lead to higher conviction as it pertains to Nvidia’s earnings power in CY2025.”
The information technology sector was the best performer in the US yesterday, adding 0.63% on the session, followed by the real estate and financials sectors which were up by 0.25% and 0.49% respectively. The recent strength in financials is hard to reconcile with a market orthodoxy that suggests that banks and other lenders do better when interest rates are high and rising as they can earn higher margins under these conditions, but US rates aren't rising anymore. Despite this, S&P 500 banking ETF KBE is up by 14.25% over the last three months, while KRE, the S&P regional banking ETF, has added more than 16% in that time.
At a stock level, some consumer discretionary names gained yesterday, with Royal Caribbean and Norwegian Cruise Lines up by 4.3% and 3.6%. Southwest Airlines flew up by 3.23% and Starbucks, which recently enjoyed an outsized run recently on the appointment of a new CEO, rallied by 3.11%, and is now up by 33% over the last month.
Troubled pharmacy group Walgreens Boots Alliance fell by 8.96% as drug maker Pfizer unveiled a direct-to-consumer platform aimed at streamlining patient care and access to drugs. Pfizer’s initiative follows a similar rollout from Eli Lilly earlier in the year.
In Europe, Latin markets led the way with the Italian MIB up by 0.6% and the oft-overlooked Portuguese PSI 20 up by 0.5%, alongside its neighbour the Spanish IBEX. The biggest gainer among the Euro Stoxx 50 was Spanish bank Santander, which was up by 2.5% on the day. Other notable gainers included Adidas AG, which added 2.2%, and Munich Re, which added 1.4%.
Moving in the other direction were luxury goods group LVMH, which fell by 1.8%, and cosmetics and beauty products maker L’Oreal, which lost 1.5%.
In early European trade today, commodities such as oil and gold were largely unchanged. US 10-year yields are fractionally higher, while equity indices such as the DAX have opened up.
On the foreign exchanges sterling paused for breath against the US dollar, with the greenback rallying by 0.16% versus the pound. However, the pound is up by almost 2.9% when compared to the US currency over the last month, as traders warm to idea that interest rates will fall faster stateside than they will in London.
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