Upbeat Nvidia Earnings May Contribute To Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to regain ground after pulling back sharply over the two previous sessions.

The Nasdaq 100 futures are surging by 2.2 percent, suggesting tech stocks are likely to lead an early rebound on Wall Street.

The upward momentum for tech stocks comes amid a surge by shares of Nvidia (NVDA), with the chipmaker soaring by 29.6 percent in pre-market trading.

Nvidia is spiking after reporting better than expected fiscal fourth quarter results and forecasting fiscal second quarter revenue well above analyst estimates.

Meanwhile, traders are likely to keep an eye on any developments in the U.S. debt ceiling negotiations amid lingering concerns about a potential default.

Reflecting the default concerns, Fitch Ratings along with Moody’s and S&P placed the United States “AAA” credit on “rating watch negative,” signaling downside risks to U.S. creditworthiness.

Following the steep drop seen in Tuesday’s session, stocks saw further downside during trading on Wednesday. The major averages all moved lower, with the tech-heavy Nasdaq pulling back further off the nine-month closing high set on Monday.

The major averages fluctuated in the final hour of trading but remained in negative territory. The Dow slid 255.59 points or 0.8 percent to 32,799.92, the Nasdaq fell 76.08 points or 0.6 percent to 12,484.16 and the S&P 500 dropped 30.34 points or 0.7 percent to 4,115.24.

Lingering concerns about lawmakers’ ability to reach an agreement on increasing the U.S. debt ceiling continued to weigh on Wall Street.

While negotiations have continued this week, traders remain worried about reports suggesting a lack of progress towards a deal.

House Speaker Kevin McCarthy, R-Calif., told reporters the two sides remain “far apart,” with ongoing talks hitting a snag over Republicans’ demand for spending cuts.

“House Speaker McCarthy did not provide Wall Street any optimism that a deal is nearing,” said Edward Moya, senior market analyst at OANDA. “McCarthy said that there are a number of places we are still far apart on debt talks and that they still have differences over spending.”

He added, “Everyone has seen this movie before and now we are finally starting to see some market stress as debt-ceiling talks remains at an impasse.”

Traders were also digesting the minutes of the Federal Reserve’s May monetary policy meeting, which indicated uncertainty about the outlook for interest rates.

The minutes revealed participants generally agreed that in light of the lagged effects of cumulative tightening in monetary policy and the potential effects on the economy of a further tightening in credit conditions, the extent to which additional rate hikes may be appropriate had become “less certain.”

Some participants felt additional rate increases would likely to be warranted at future meetings due to expectations that progress in returning inflation to 2 percent could continue to be unacceptably slow.

Meanwhile, several others noted that if the economy evolved along the lines of their current outlooks, then further rate hikes may not be necessary.

“In light of the prominent risks to the Committee’s objectives with respect to both maximum employment and price stability, participants generally noted the importance of closely monitoring incoming information and its implications for the economic outlook,” the Fed said.

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 2.2 percent to a two-month closing low. The weakness among gold stocks came amid a decrease by the price of the precious metal.

Considerable weakness was also visible among steel stocks, as reflected by the 2.2 percent slump by the NYSE Arca Steel Index. The index tumbled to its lowest closing level in five months.

Commercial real estate, telecom and banking stocks also saw significant weakness on the day, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are slumping $1.14 to $73.20 a barrel after jumping $1.43 to $74.34 a barrel on Wednesday. Meanwhile, after falling $9.90 to $1,964.60 ounce in the previous session, gold futures are sliding $16 to $1,948.60 an ounce.

On the currency front, the U.S. dollar is trading at 139.68 yen versus the 139.47 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0716 compared to yesterday’s $1.0750.

Asia

Asian stocks hit two-month lows on Thursday and the dollar rose on safe-haven demand as the impasse in negotiations to raise the U.S. debt ceiling and warnings of a possible U.S. credit rating downgrade spooked investors.

Traders remained wary of a possible catastrophic default, with U.S. Treasury Secretary Janet Yellen maintaining early June as a deadline.

Chinese shares edged down slightly amid U.S. debt ceiling jitters and after reports of a new COVID wave in the country. The benchmark Shanghai Composite Index slipped 0.1 percent to 3,201.26 ahead of a long holiday weekend.

Hong Kong’s Hang Seng Index tumbled 1.9 percent to 18,746.92 following disappointing earnings from electric-vehicle maker XPeng Inc.

Japanese shares eked out modest gains as encouraging earnings results from chip giant Nvidia boosted tech stocks. The Nikkei 225 Index rose 0.4 percent to 30,801.13, while the broader Topix Index closed 0.3 percent lower at 2,146.15.

Advantest soared 16.2 percent, Tokyo Electron rallied 3 percent and Screen Holdings surged 4.4 percent. A weaker yen lifted export-oriented firms, with Honda Motor and Canon rising 1-2 percent.

Seoul stocks ended down for a second day running, with the Kospi finishing half a percent lower at 2,554.69 on U.S. debt ceiling woes and concerns about the future policy path of the Federal Reserve. SK Hynix jumped 5.9 percent after Nvidia’s earnings.

Earlier today, the Bank of Korea held interest rates steady at 3.5 percent as widely expected and cut this year’s growth estimate amid the global economic slowdown.

Australian markets fell for a fourth straight session on interest rate and U.S. debt ceiling worries. The benchmark S&P/ASX 200 Index fell 1.1 percent to 7,138.20, with miners and financials pacing the declines. The broader All Ordinaries Index closed 1.0 percent lower at 7,316.70.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index settled 0.1 percent lower at 11,959.85.

Europe

European stocks are broadly lower on Thursday amid doubts about China’s economic recovery and lingering uncertainty surrounding the possibility of a U.S. default.

Fitch Ratings along with Moody’s and S&P placed the United States “AAA” credit on “rating watch negative,” signaling downside risks to U.S. creditworthiness.

Traders remain wary of a possible catastrophic default, with U.S. Treasury Secretary Janet Yellen maintaining early June as a debt ceiling deadline.

Growth concerns also resurfaced after official data showed the German economy entered a technical recession in the first quarter of this year.

German GDP declined a seasonally and calendar adjusted 0.3 percent from the fourth quarter of last year as household consumption slumped amid the rising cost of living that is fueled by high inflation, revised data from the statistical office Destatis showed.

“After growth entered negative territory at the end of 2022, the German economy has now recorded two consecutive negative quarters,” Destatis President Ruth Brand said. Two consecutive quarters of output contraction is defined as a technical recession.

While the U.K.’s FTSE 100 Index has slipped by 0.3 percent, the French CAC 40 Index and the German DAX Index are both down by 0.2 percent.

Renewi, a waste-to-product services provider, has moved sharply lower in London after reporting lower earnings for the year 2023 due to cost inflation and volatility in recyclate prices.

Pets At Home has also declined after its pre-tax profit fell in fiscal 2023. Chemicals group Johnson Matthey has also fallen after reporting a decrease in annual profits.

Deutsche Boerse shares have also slid. The German company published the offer document pursuant to which the company makes an all-cash voluntary recommended public takeover offer to acquire all shares, excluding treasury shares, in SimCorp A/S at a price of 735.0 Danish kroner per share.

Meanwhile, infrastructure firm Hill & Smith has rallied after it delivered a record trading performance in the four months to April 30.

U.S. Economic Reports

Economic growth in the U.S. slowed less than previously estimated in the first three month of 2023, according to revised data released by the Commerce Department on Thursday.

The Commerce Department said gross domestic product climbed by 1.3 percent in the first quarter compared to the previously estimated 1.1 percent increase. Economists had expected the pace of GDP growth to be unrevised.

Despite the upward revision, the GDP growth in the first quarter still reflects a slowdown from the 2.6 percent jump seen in the fourth quarter of 2022.

A separate report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended May 20th.

The Labor Department said initial jobless claims crept up to 229,000, an increase of 4,000 from the previous week’s revised level of 225,000.

Economists had expected jobless claims to inch up to 245,000 from the 242,000 originally reported for the previous week.

At 9:50 am ET, Richmond Federal Reserve President Thomas Barkin is scheduled to speak on the state of the region at the Southwest Virginia Economic Forum.

The National Association of Realtors is due to release its report on pending home sales in the month of April at 10 am ET. Pending home sales are expected to jump by 1.0 percent in April after plunging by 5.2 percent in March.

At 10:30 am ET, Boston Federal Reserve President Susan Collins is scheduled to share remarks and participate in a fireside chat Q&A with students and staff of the Community College of Rhode Island.

The Treasury Department is due to announce the results of this month’s auction of $35 billion worth of seven-year notes at 7 pm ET.

Stocks In Focus

Shares of American Eagle Outfitters (AEO) are seeing substantial pre-market weakness after the retailer forecast a decrease in second quarter revenue.

Cloud computing company Snowflake (SNOW) is also likely to come under pressure after reporting better than expected fiscal first quarter results but providing disappointing revenue guidance for the current quarter.

On the other hand, shares of Best Buy (BBY) are moving notably higher in pre-market trading after the consumer electronics retailer reported better than expected fiscal first quarter earnings.

Cruise operator Carnival (CCL) may also move to the upside after Citi upgraded its rating on the company’s stock to Buy from Neutral.