Morning Reads

Morning reads

Todays Open Interest Change



A lot is riding on Nvidia's (NVDA) earnings this afternoon, which will come after the U.S. stock rally hit some turbulence in recent weeks. Shares of the chip heavyweight have tripled in 2023 on the potential of artificial intelligence, helping inject optimism into megacap tech stocks and the overall market. Nvidia's results will give investors another peek into evaluating that storyline, and whether it will bring the much-touted productivity gains and strong growth to the broader economy.

AI bellwether: Nvidia stunned Wall Street back in May, when its shocking guidance sent the stock up 24% in one day. The company forecast revenue of about $11B for the fiscal second quarter, which was billions of dollars higher than estimates, and above its previous quarterly revenue record of $8.3B. It's now showtime to see if Nvidia can make good on those projections, or even blow it out of the park again, giving investors renewed faith in its position as a beneficiary of ChatGPT, as well as the general AI story.

Whatever the results may be, traders are bracing for big swings and volatility, according to the options market. Over the past eight quarters, Nvidia's stock has swung an average of 8.6% post-earnings, while shares hit a new all-time high yesterday (before paring the gains) to take their year-to-date gain to around 220%. Nvidia is also the fifth-biggest weight in the S&P 500 (SP500) and Nasdaq 100 (NDX), so big swings by the stock could influence movement and sentiment surrounding the major indices.

Commentary: Seeking Alpha analysts are speaking out before the prime-time earnings, with the bulls and the bears taking firm positions. Also check out the Wall Street Lunch podcast, which discussed "The Godfather of AI" - as the stock was named by analyst Dan Ives - and whether the party will keep going. Morgan Stanley notes that the ability to identify stocks that could command an artificial intelligence edge is becoming increasingly important for investors in all sectors, listing five metrics for AI trendspotting. (26 comments)

No place like home

Property sales have fallen for the fourth time in five months, weighed by high mortgage rates and limited inventory that's driving prices higher. Existing home sales in July were down 2.2% M/M to 4.07M, less than the 4.150M expected, while on a Y/Y basis, existing home sales dropped another 16.6%, compared to an 18.9% drop in June. "Existing home sales were a little slower than expected in July, but the median sale price rose from a year earlier for the first time since January," said Bill Adams, chief economist, Comerica Bank. "House price declines are probably over in most U.S. markets, and prices are likely to rise modestly in the next few years." (14 comments)

Inventory shrink

A string of top executives at major retailers have recently pointed to a rise in crime as a factor in reduced earnings. High-ranking officials at Dick’s Sporting Goods (DKS), Lowe’s (LOW), Target (TGT) and Macy’s (M) have all cited higher rates of theft - called shrink or shrinkage in the industry - for eroding results. In 2022, retail shrink was called a “rapidly ballooning issue,” and a nearly $100B problem for the sector, according to a National Retail Federation survey. Retailers are now taking measures to curb shrinkage by theft, including radio frequency identification, while others are calling for more legal support. (160 comments)

More transparency

As China continues to grapple with an economic meltdown that could spell trouble for global growth, U.S. national security adviser Jake Sullivan has called on the nation to be more transparent about its economy. He said Beijing’s decision to stop releasing youth unemployment figures as well as its crackdown on corporate due diligence are not “responsible steps.” "For global confidence, predictability and the capacity of the rest of the world to make sound economic decisions, it's important for China to maintain a level of transparency in the publication of its data,” he declared. Sullivan's statements come a week before U.S. Commerce Secretary Gina Raimondo's visit to the country as Washington seeks to thaw ties with Beijing. (6 comments)

Today's Markets

In Asia, Japan +0.5%. Hong Kong +0.3%. China -1.3%. India +0.3%.
In Europe, at midday, London +0.7%. Paris -0.2%. Frankfurt -0.1%.
Futures at 7:00, Dow +0.2%. S&P +0.2%. Nasdaq +0.1%. Crude -1.4% to $78.49. Gold +0.3% to $1,932. Bitcoin -0.4% to $25,929.
Ten-year Treasury Yield -7 bps to 4.26%.

Today's Economic Calendar

7:00 MBA Mortgage Applications
9:45 PMI Composite Flash
10:00 New Home Sales
10:30 EIA Petroleum Inventories
11:30 Results of $24B, 2-Year FRN Note Auction
1:00 PM Results of $16B, 20-Year Bond Auction

Companies reporting earnings today »

What else is happening...

UPS (UPS) workers approve new five-year labor deal in historic vote.

Microsoft's (MSFT) Activision (ATVI) acquisition may close in early October.

Sports shocker: Guidance cut at Dick's (DKS) rattles sporting goods sector.

Meta (META) unveils all-in-one AI model for speech and text translations.

Cleveland-Cliffs (CLF) demands U.S. Steel (X) reveal all third-party offers.

Macy's (M) tumbles after taking cautious approach to the U.S. consumer.

Charles Schwab (SCHW) files preliminary prospectus for debt offering.

Lowe's (LOW) shoots higher on surprising strength with Pro sales.

Deep FTC probe of Qualcomm (QCOM) auto-chip deal on deck.

Manchester United (MANU) sale likely to be announced next month.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)