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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free 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
-
JPMorgan's Drop Drags on the Dow: Stock Market TodaySmall-cap stocks outperformed Tuesday on expectations that the Fed will cut interest rates on Wednesday.
-
Why Playing It Safe in Retirement Is a Big RiskFear of losing money could actually cost you in retirement. Find out why being too conservative with your life savings can hurt you and how to stop that from happening.
-
Tax Refund Alert: House GOP Predicts 'Average' $1,000 Payouts in 2026Tax Refunds Here's how the IRS tax refund outlook for 2026 is changing and what steps you can take now to prepare.
-
JPMorgan's Drop Drags on the Dow: Stock Market Today
Small-cap stocks outperformed Tuesday on expectations that the Fed will cut interest rates on Wednesday.
-
Crypto Trends to Watch in 2026Cryptocurrency is still less than 20 years old, but it remains a fast-moving (and also maturing) market. Here are the crypto trends to watch for in 2026.
-
Stocks Bounce Back With Tech-Led Gains: Stock Market TodayEarnings and guidance from tech stocks and an old-school industrial lifted all three main U.S. equity indexes back into positive territory.
-
Dow Slides 427 Points to Open December: Stock Market TodayThe final month of 2025 begins on a negative note after stocks ended November with a startling rally.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
Stocks Extend Win Streak on Black Friday: Stock Market TodayThe main indexes notched wins in Friday's shortened session, with the blue-chip Dow Jones Industrial Average closing higher on the month.
-
Dow Adds 314 Points to Thanksgiving Rally: Stock Market TodayInvestors, traders and speculators enjoy the best Thanksgiving Week gains for the major stock market indexes in more than a decade.
