Finally, Nvidia fell back last week.
Perhaps it’s just as well. The chip giant’s rise from last fall has been stunning, but, markets being markets, the latest runup was going to end. And it did: Nvidia closed down 4% for the week and 10% from its high on Thursday into Friday’s close.
Nvidia (NVDA) may fall further this week. It hasn’t been invincible. The shares fell nearly 20% between March 25 and April 22, losing around $390 billion in market capitalization. (That caused CNBC’s Jim Cramer to declaim, the stock had gone from “Star of the show to goat of the game.”)
Then, Nvidia rebounded, jumping 71% over the next two months, gaining $1.35 trillion in market cap (to $3.34 trillion). For a day, Nvidia even surpassed Microsoft (MSFT) and Apple (AAPL) as the world’s most valuable company.
Related: Nvidia company history & timeline: From GPU maker to AI leader
So, we will see what happens in a market that will offer investors plenty of other things in the week ahead to think about. Here are four of the most important:
A key inflation report that the Federal Reserve will study closely. Several reports that reveal more about the health of the housing market. Earnings from FedEx (FDX) , chipmaker Micron Technology (MU) and athletic-equipment giant Nike (NKE) . The big debate Thursday evening between President Joe Biden and former President Donald Trump.
Tech stocks rule the quarter
As of Friday, it’s been a great quarter for tech stocks, especially Nvidia (even with last week’s ending), Apple and Arm Holdings (ARM) , plus footwear maker Birkenstock BIRK, used-car dealer Carvana (CVNA) and meme stock GameStop (GME) .
But it’s been less exciting for most other S&P 500 sectors. Energy is off 5.7%. Crude oil is down 5.6% so far in June.
The S&P 500 is up 4% for the quarter, with the Nasdaq Composite up 8% and the Nasdaq-100 Index up 9%.
The Dow Jones Industrial Average is a bit of a laggard, off 1.7% for the quarter, but up 2.3% for June. It’s been 23 days since it closed above 40,000 for the first time.
Related: Top analyst revisits Apple stock price target following AI push
The big question now is whether an Nvidia-led downturn means trouble for the entire market. Perhaps if only because the S&P 500’s top 10 stocks by market cap include seven tech stocks, including Nvidia, Microsoft and Apple.
In May, according to S&P and Dow Jones indices, the 10 represented 34% of the total market capitalization of the S&P 500. If one gets into trouble, it could become contagious.
But remember: The Federal Reserve still has its key rate at 5.25% to 5.5%. In real trouble, the Fed would surely step in.
More Economic Analysis:
Stocks’ record setting rally may be on fumesConsumers tapping out amid sticky inflation and slowing job marketEven Greats Like Druckenmiller Make Mistakes. So Learn From Them.
Micron may be the week’s earnings star
Micron Technologies is likely to excite Wall Street the most this week. The chip company has evolved into a player in artificial intelligence. One of its new chips is being used in Nvidia’s H200 graphical processing units. Micron’s earnings for the fiscal third quarter are estimated at 38 cents a share, up from a loss of $1.57 a year ago. Revenue of $6.7 billion would be a gain of nearly 79%. The stock is up 53.7% in 2024.
Workers in a clean room at Micron Technology headquarters in Boise, Idaho.
FedEx, the global shipping company, depends on a healthy world economy, shorn of wars, strife and inflation. Earnings are expected at $5.36, up from $4.94 a year ago. The revenue estimate, however, is $22.1 billion, flat from a year ago. The stock is up 0.3% for the year.
Nike is expected to produce a 27% increase in earnings. But revenue may not grow much — if at all with the estimate at $12.86 billion. The stock is down 10.5%. That reflects unhappiness with the apparel/sports equipment world. On the positive side, the Boston Celtics wore Nike-designed uniforms in their run to this year’s NBA championship, and their equipment will be ubiquitous at the Paris Olympics.
Related: Fed rate-cut timing shifts after retail sales data
Big inflation report comes out Friday
For most of the year, Wall Street has been obsessed with when the Fed will start to cut interest rates.
Most economic reports this week suggested inflationary pressures are becoming relatively benign. Short of a crisis, the Fed is not likely to cut rates at its next meeting in July.
On Friday, however, the month’s last trading day, the Commerce Department will release its Personal Consumption Expenditures Report for May.
This is the report the Fed watches more closely than any other.
It measures changes in the prices of goods and services that consumers purchase, even if they substitute cheaper products.
The expectations are for the PCE year-to-year change may come at 3%, maybe as low as 2.6%. The April report put the annual number at 2.7%.
Also due this week:
The Conference Board’s Consumer Confidence report for May, due on Tuesday. The Fed’s “stress test” report, designed to show which banks are healthiest, due on Wednesday. The University of Michigan’s Consumer Sentiment Index, due on Friday.
The big housing reports
Housing has been strained for several years because of mortgage rates still at their highest levels in more than 20 years.
Plus, inventories of homes for sale or rent have been extremely tight in part because owners haven’t wanted to get rid of low-rate mortgages. The result: surging home prices.
Mortgage rates, however, have been dropping slowly since last fall, though rates are still far above levels seen in 2020 and 2021.
Mortgage News Daily’s latest estimate was 7.01% on a 30-year mortgage as of Friday. Freddie Mac’s weekly mortgage-rate survey, out Thursday, put the rate at 6.87%. Rates were as high as 7.5% in March and 8% last October.
On a $300,000 home with a $240,000 mortgage, a 7% loan produces a monthly principal-and-interest payment of $1,596. At 8%, the the payment would be $1761. Plus taxes and insurance.
The housing reports are:
The S&P CoreLogic Case-Shiller Home Price Indices on Tuesday.The Commerce Department’s report on New Home Sales on Wednesday.The National Association of Home Builders’ Pending Homes Sales Index on Thursday.
The first breaks down house sales and prices. The second measures sales of new homes. The last is really a measure of builder confidence.
The reports may show some optimism because of the lower rates. The National Association of Realtors’ May report on existing-home sales showed falling sales nationally.
The seasonally adjusted annual rate was 4.11 million, down slightly from April. But sales are down more than a third since 2021.
Changes in new residential construction from April to May 2024.
census.gov
Will the debate suck up everyone’s attention?
President Joe Biden and former President Donald Trump will participate in the first of two debates on Thursday evening.
The last time Democrat Biden and Republican Trump debated was in the fall of 2020.
It was basically a verbal food fight, and the former President is still angry about not winning that election.
Neither man is young. Biden is 81. Trump just turned 78. Neither wants to lose.
Expect a lot of interruptions at the least. Then, watch to see how markets react.
Related: Veteran fund manager picks favorite stocks for 2024
