Stock Market Today: Stocks Erase Nvidia Gains Ahead of Powell Speech
All three main benchmarks opened solidly higher Thursday, but ended the session with notable losses.
It appeared early Thursday as if a positive reaction to Nvidia's (NVDA) blowout earnings was going to lift stocks across the board, with the main benchmarks climbing out of the gate. But the broad-market buying power fizzled mid-morning as investors turned their attention to disappointing economic data and the start of the Federal Reserve's annual economic symposium in Jackson Hole, Wyoming.
Last night, Nvidia reported jaw-dropping second-quarter earnings, with revenue for the three-month period doubling on a year-over-year basis amid surging demand for its chips that power artificial intelligence (AI) technology. Additionally, NVDA said it expects third-quarter revenue to reach $16.5 billion, well above analysts' estimate for $12.5 billion in sales.
Nvidia stock rose 0.1% today, bringing its year-to-date gain to sizzling 223%. And while the majority of folks on Wall Street think Nvidia is just getting started, David Trainer, CEO of investment research firm New Constructs, does not believe the company's results were good enough to justify its lofty valuation.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"While we recognize that artificial intelligence is an exciting technology and Nvidia is a great company, investors must pay attention to a company's valuation," Trainer says, adding that at current levels, "it makes absolutely no sense" to buy NVDA.
"Nvidia is the stock market's new Tesla (TSLA, -2.9%), where the market blindly assigns a ridiculously high and unrealistic valuation," the strategist adds. Instead of buying Nvidia, investors should "be discerning about how they allocate capital," and consider other AI stocks such as KLA Corp (KLAC, -3.6%) or Photronics (PLAB, -2.3%).
Dollar Tree is the latest retailer to warn of theft concerns
In other earnings news, Dollar Tree (DLTR) tumbled 12.9% after earnings. While the dollar-store chain reported higher-than-expected Q2 earnings of 91 cents per share on revenue of $7.3 billion, it lowered its full-year forecast due in part to excessive levels of "shrink," which encompasses many things, including theft.
In the company's conference call, Rick Dreiling, chairman and CEO of Dollar Tree, said the retailer is taking measures to control shrink, including moving some items behind the checkout stand and locking up or discontinuing other items.
Weekly jobless claims decline
While the main benchmarks were all higher to start the day, optimism deflated as a round of disappointing economic data hit ahead of tomorrow's speech from Fed Chair Jerome Powell. For one, initial jobless claims unexpectedly fell last week by 10,000 to 240,000 – a three-week low.
Additionally, durable goods fell by a wider-than-expected 5.2% in July, as aircraft orders normalized following a big surge in June. This represented the biggest decline in headline durable goods orders since April 2020. Core orders, which exclude defense and transportation and gives a better reading on the broader economy, were up 0.1% last month.
"On the eve of a pivotal Jackson Hole presentation by Federal Reserve Chairman Jerome Powell, unemployment claims continue to point to a business community that wants to continue expanding despite tighter monetary policy," says José Torres, senior economist at Interactive Brokers. "Equities were higher following stellar earnings from Nvidia, but they have violently reversed as market players recall last year's Jackson Hole nightmare." Not helping matters, the economist adds, are rising Treasury yields as investors increase the chances of another interest rate hike.
Indeed, at the close, the rate-sensitive Nasdaq Composite was down 1.9% to 13,463. The S&P 500 (-1.4% at 4,376) and the Dow Jones Industrial Average (-1.1% at 34,099) also finished with sizable losses.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Tesla Stock: Another Analyst Moves to the Sidelines After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Stock Market Today: Stocks Tumble on Disappointing Big Tech Earnings
Poorly received quarterly results from Alphabet and Tesla sparked a steep selloff in equities.
By Dan Burrows Last updated
-
Stock Market Today: Mega-Cap Tech Rallies to Drag Markets Higher
Markets focused on upcoming earnings from Magnificent 7 stocks rather than chaos in D.C.
By Dan Burrows Published
-
Stock Market Today: Stocks Tumble After Spectacular Global Internet Crash
Market participants rushed out of risk assets to end a wild week of trading.
By Dan Burrows Published
-
Stock Market Today: Dow Sinks 533 Points as Big Banks, Mega Caps Slump
Goldman Sachs and Apple were two of the worst-performing blue chip stocks on Thursday.
By Karee Venema Published
-
Stock Market Today: Semis Get Slammed and Blue Chips Bounce
The potential for more curbs on tech sales to China set off a rotation into blue chips.
By Dan Burrows Published
-
Stock Market Today: Dow Spikes 742 Points After UnitedHealth Earnings
The S&P 500 and Nasdaq also scored wins Tuesday albeit with much smaller gains than the blue chip Dow.
By Karee Venema Published
-
Stock Market Today: Dow Adds 210 Points as Apple, Goldman Hit New Highs
A big rally in blue chips and some dovish Fed speak boosted the equities market Monday.
By Karee Venema Published