With little in the way of corporate earnings or economic news to guide them, stocks kicked off the trading week initially searching for direction. A fresh batch of worries out of China’s fixed income and real estate markets weighed on the major indexes early Monday, but strength in key tech stocks – and one mega-cap name in particular – helped equities build strength through the session.
China’s Fixed Income and Real Estate Worries Weigh on Stocks to Start the Week
Monday started on a sour note with reports that China’s banking regulator would set up a task force to investigate risks at Zhongzhi Enterprise Group after the private-wealth manager missed payments on investment products sold to high-net-worth clients. Market participants were additionally alarmed by news that Country Garden Holdings – formerly China’s largest property developer – is looking to extend the maturity on one of its bonds.
Retail Earnings and Consumer Spending in Focus as Major Retailers Report
The earnings calendar, for example, features a host of major retailers in the days ahead, including Home Depot (HD), Walmart (WMT) and Target (TGT). Traders and investors will mine retailer earnings for information about the health of consumer spending, which economists expect to slow in the months ahead. And as Buy-rated Dow Jones stocks, Home Depot, the nation’s largest home improvement chain, and Walmart, the world’s largest company by revenue, will be in particular focus.
Analysts Await Federal Reserve Meeting Minutes for Insight on Interest Rates
In upcoming economic news, on Wednesday market participants will perform exegesis on the minutes from the Federal Reserve’s July meeting, an event which concluded with a quarter-point rate hike. As of August 14, interest rate traders assigned an 89% probability to the Federal Open Market Committee (FOMC) leaving interest rates unchanged at the next Fed meeting.
“Although most forecasters still predict a recession, we think the runway for a soft landing is in sight,” Jan Hatzius, chief economist at Goldman Sachs, wrote in a note to clients on Monday. “U.S. economic activity remains resilient, the labor market rebalancing is making progress, and the recent CPI and PCE data suggest that disinflation may now be running slightly ahead of schedule.”
Nvidia Stock Soars, Adding $72 Billion in Market Value in a Single Day
Markets may have gotten off to a slow start Monday, but one massive tech stock took off and never looked back. Shares in Nvidia (NVDA) soared 7.1% to close at $437.53, adding $72 billion in market value in the process. That’s a sum greater than the entire market capitalizations of PayPal (PYPL) or FedEx (FDX). The semiconductor firm specializing in chips that power generative artificial intelligence (AI) ended the session with a market cap of $1.081 trillion.
Morgan Stanley analyst Joseph Moore sparked Monday’s rally in NVDA stock, telling clients that recent weakness offered a classic opportunity to buy the dip. Moore rates NVDA stock at Overweight (the equivalent of Buy), and calls it a top pick heading into earnings. Nvidia is slated to report quarterly results after the bell on August 23.
NVDA has nearly tripled on a price basis so far this year, adding to its luster as one of the best stocks of the past 30 years. Indeed, a mere $1,000 invested in Nvidia stock two decades ago would be worth a small fortune today.
S&P 500 and Nasdaq Composite Rebound with Help from Semiconductor Stocks
Thanks to help from Nvidia and semiconductor stocks more broadly, the S&P 500 (+0.6% at 4,489) and the Nasdaq Composite (+1.1% at 13,788) closed higher – a welcome change of pace after both benchmarks posted back-to-back weekly losses. The blue-chip Dow Jones Industrial Average (+0.07% at 35,307) rallied into the close to finish essentially unchanged.
Overall, Monday’s trading session started with concerns about China’s fixed income and real estate markets, but the market found strength as major retailers prepared to report their earnings and as market participants anticipated the release of the Federal Reserve’s meeting minutes later in the week. Nvidia stock stole the show, soaring in value and adding billions to its market cap. The broader market also rebounded with the help of semiconductor stocks, leaving investors hopeful for the rest of the trading week.
Analyst comment
Positive: Nvidia stock soars, adding $72 billion in market value in a single day. Overall, the market rebounded with the help of semiconductor stocks.
Analyst view: The market is likely to continue its upward momentum as major retailers report their earnings, the Federal Reserve meeting minutes are released, and semiconductor stocks continue to perform well.
