What we learned last week:
“Smoky Mountain memories keep me strong, If I’ll keep looking to the Father, He’ll keep my head above water, While these Smoky Mountain memories keep me strong” – Dolly Parton, Smoky Mountain Memories, 1994
Wall Street turned to computer chip giant Nvidia last week and its CEO the Godfather of AI, Jensen Huang, for renewed strength in the Artificial Intelligence growth story. Their quarterly earnings results and growth outlook helped the three major indexes finish in the green last week, despite interest rate concerns pulling at stocks.
According to the JPMorgan Weekly Market Recap, only three of the 11 sectors finished the week in the green, the Tech sector leading with a 1.8% return. The major contributor to keeping stocks above water was Nvidia’s earnings event.
The AI mega trend found renewed momentum with Nvidia’s quarterly earnings report after-hours Wednesday. Nvidia shares rose 7% Thursday after the company guided investors towards a 70% growth rate in its next 12-months revenue. This strong growth outlook on top of reporting 106% revenue increase in the second quarter of this year ($96.2 billion) reassured investors that artificial intelligence demand should remain strong.
Nvidia CEO Jensen Huang said the company has “never forecasted” a year in advance, but the company has “a lot greater visibility now” across the supply chain to do so.
Tech companies in the software and cybersecurity industry also demonstrated sales growth as they learn to participate and profit in the AI economy.
The spotlight moved from Nvidia to Fed President Kevin Warsh and his Friday keynote speech at the Jackson Hole Economic Policy Symposium. Central bankers, finance ministers, academics, financial industry leaders, and journalists from all over the globe attend. This year’s discussion was centered around “Financial Innovation – Implications for Payments (tokenized finance) and Policy.
Ultimately, investors were looking for signals from the Fed Chair on the direction of interest rates.
In his keynote speech, Fed Chair Warsh outlined several key areas. He began with big picture Fed questions and purpose, the historical practice of the Fed providing forward guidance and its interaction with financial markets. He then presented key principles that he believes should guide the Fed on conducting monetary policy and lastly, he provided his assessment of the economy.
The market received his speech by positioning for a rate hike at the upcoming September Fed meeting. Shorter-term treasury yields rose, longer-term yields declined, and the dollar gained.
Finally, investors are keeping events in Iran in their peripherals. Goldman Sachs published an article last week that the number of barrels of oil moving through the Strait of Hormuz is estimated at 15 million to 16 million a day, well above the low of 5 million to 6 million barrels a day in March of this year.
This news stabilized oil prices, however over the weekend, the U.S. military hit Iranian targets in its first military action in a month, the renewed tensions have Brent oil futures jumping above $90 a barrel.
As the month of August comes to an end and we move into September, the week is traditionally quiet as we go into the Labor Day holiday. With Nvidia earnings event behind us, the August jobs data will have the spotlight as well as any positive or negative news out Iran, it could also be movement in treasury yields that contribute most to the final week of summer and back to school.
What’s ahead this week:
Economic Reports
- Monthly jobs reports will have the spotlight this week as investors weigh the health of the labor market and impacts of inflation
Earnings
- Technology remains in the spotlight with Dell, Broadcom, and Hewlett Packard Enterprise reporting earnings
- Cybersecurity company Palo Alto Network and other companies in the software industry report this week
- Global healthcare technology company Medtronic reports Tuesday morning
My goal is for you to feel educated and informed about variables we do and don’t have control over and find ourselves working within. I hope to do it in an informative and relatable way. As always, I value your relationship and planning objectives – my door is always open for conversation.
