Welcome to Michael Kramer’s pick of the top three market events to look out for in the week beginning Monday 19 February.
Although it will be a holiday-shortened trading week in the US due to President's Day on Monday, the coming days will be filled with market-moving events. The key events kick off on Wednesday, with the Fed minutes and Nvidia’s Q4 earnings after US markets close. Then, on Thursday, we’ll get data on US jobless claims.
US Federal Reserve minutes
Wednesday 21 February: While the minutes from the US Federal Reserve’s 30-31 January meeting aren’t likely to deliver any shock revelations, they could shed some light on what conditions the Fed may be looking for before starting the rate-cutting process.
The recent US inflation report – which showed that consumer prices grew 3.1% in the year to January, above forecasts for a drop to 2.9% – has altered market bets on rate cuts. In short, the likelihood of a rate cut in May has diminished. However, the Fed minutes will likely strike a patient tone, conveying a sense that the Fed would like to wait until later in the year to cut rates. The minutes may also give traders clues about the possible timing for the tapering of quantitative tightening, and an indication of what the Fed thinks about the reverse repurchase facility.
The two-year Treasury yield, which is the most sensitive to changes in Fed policy, rose sharply following the CPI report on Tuesday. It has broken an important downtrend and, more importantly, it appears to have cleared the neckline of an inverse head-and-shoulders pattern. If the two-year Treasury yield can clear resistance at 4.70%, it could have room to run back up to 4.85%.
Nvidia Q4 results
Wednesday 21 February: Nvidia is expected to report fourth-quarter earnings of $4.56 a share, on revenue of $20.2bn and with an adjusted gross margin of 75.5%. The big number everyone will be watching is the data centre revenue segment, which is forecast to come in at $16.8bn. For the fiscal first quarter, analysts forecast earnings of $4.85 a share, on revenue of $21.6bn, with an adjusted gross margin of 75.5%.
To say that the options market is very bullish on Nvidia at present is an understatement. The 35 delta calls for expiration on 23 February currently have an implied volatility of 107.7%, while the 35 delta puts have an implied volatility of 102.5%. That means the company will need to post Meta-like results on Wednesday because, once the report is released, implied volatility will come down sharply, causing both the puts and the calls to lose value.
Nvidia shares have gained 50% so far this year, closing on Thursday at $727. If the stock fails to surpass $750 following the results, it could slip back to $700 or lower. That could potentially trigger a large sell-off.
US initial jobless claims
Thursday 22 February: Jobless claims may not be uppermost in most traders’ minds, but these weekly numbers have become must-watch. In the week to 9 February, the number of people initiating a claim for unemployment benefits in the US fell to 212,000, down from 220,000 the week before. If initial jobless claims remain as low as they have been, and continuing claims stay range-bound, then it will start to build a case that the US labour market is not cooling fast enough for the Fed to reach its objectives on inflation and interest rates.
Anything that suggests a strong job market is not only a positive for rates staying high, but also a positive for the dollar moving higher, mostly against the euro. EUR/USD has been trending lower in recent weeks but has managed to hold on to support at $1.074. However, a break of support to around $1.053 is possible as the euro continues to move lower, pushed by its 10-day exponential moving average (EMA). So, if the euro does not move meaningfully above the EMA for more than a day or two, the euro’s downtrend is likely to persist.
Key economic and company events
Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:
Monday
• UK: February Rightmove house price index
Tuesday
• Australia: RBA meeting minutes
• China: People’s Bank of China interest rate decision
• Canada: January consumer price index (CPI) inflation rate data
• Results: Barclays (FY), Home Depot (Q4), InterContinental Hotels Group (FY), Walmart (Q4)
Wednesday
• US: Fed minutes
• Results: BAE Systems (FY), Glencore (FY), HSBC (FY), Nvidia (Q4), Rio Tinto (FY)
Thursday
• Eurozone: January CPI inflation rate data
• France, Germany, eurozone, UK, US: February flash PMI data
• Results: Hargreaves Lansdown (HY), Lloyds Banking Group (FY), Rolls-Royce (FY)
Friday
• Germany: February IFO business climate index
• UK: February consumer confidence index
• US: Initial jobless claims to 16 February
Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.
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